There are more worrying signals than comforting news in the Chinese energy industry, I’m afraid.
We added a “Geopolitics” section this week to reflect some of these signals, impacted by the escalating US-China tension has gradually shown its teeth to the renewable market. Some of the concerning signs include:
- The Pentagon enlists 11 Chinese companies in the “PLA-Controlled” entity list: the new members include China Three Gorges and CCCC and. Previously, China General Nuclear and CSIC were already on the list. (CGN is already in the “entity” list.) Many of the companies either have a massive renewable portfolio or their subsidiaries are playing critical roles in the renewable market. So far, the potential sanction measures or their impacts are still unknown.
- China’s Ministry of Commerce adds several energy technologies as restricted to export: there is no technology related to renewable yet.
- Two offshore wind projects are delayed due to “military reasons” off Guangdong: the marine area of the province is the South China Sea.
- Renewable curtailment issue is poised to come back, as more GW-level renewable complex construction schemes unveiled: adding energy storage units may not solve the whole situation.
On a brighter note, Beijing last week unleashed a critical policy draft that could help to cement the position of energy storage in the power sector. It is a positive signal to the battery maker and various storage solution providers, including green hydrogen.
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The Trump administration has determined that another 11 Chinese firms, including construction giant China Communications Construction Company, are owned or controlled by the Chinese military, the Pentagon said on Friday, laying the groundwork for new sanctions.
The Department of Defense earlier this year designated 20 top Chinese firms as Chinese military companies operating directly or indirectly in the United States, including those “owned or controlled” by the People’s Liberation Army that provide commercial services, manufacture, produce or export.
Energy Iceberg Note: already several Chinese energy companies active in the renewable market are in the list. The impact of the potential sanction remain unclear, but the escalating tension is certainly bad news.
The RE-related Chinese companies in the pentagon list include:
- CCCC: subsidiaries Longyuan Zhenhua, ZPMC, and CCCC Third Harbor are major offshore wind contractors
- China Three Gorges: a key offshore wind developer in China
- China Shipbuilding Industry Corp (CSIC, now CSSC): subsidiary CSIC Haizhuang is a top-5 offshore wind turbine maker
- China General Nuclear (CGN): a key offshore wind developer in China
- China National Nuclear Corp (CNNC): a nuclear and a wind power developer
China announced new restrictions on technology exports that could further complicate the sale of TikTok’s U.S. operations, while intensifying the tech battle between the world’s two largest economies.
Energy Iceberg Note: Ministry of Commerce last week revised the “Export-Prohibited Technology List.” Though most believe the policy is aimed at the TikTok sales talk. The new list included technology in the energy industry. The most shocking one is the third-generation nuclear reactor technology–what China is keen to export previously (to UK..etc). So far, there appears to have no impact on the renewable market. But we should take a close look at future development.
China’s energy regulators NDRC and NEA last week unleashed a critical policy guideline (feedback-inviting version) that will benefit the energy storage sector.
The guideline encourages the development of :
- Integrated (hybrid) power bases combining wind, solar, hydro, thermal and battery storage projects.
- Energy solutions that coordinate the operation among “power generation, grid transmission, load dispatch, and energy storage”.
These two policy concepts aim to: improve the coordination of various power sources, increase the utilization of clean power. The policy highlighted the role of energy storage. It emphasized that power developers and grid operators should build up matching energy storage facilities to improve the coordination of various power sources and increase clean power consumption.
China’s northwestern provinces –the largest wind power production centre in the country–has revamped constructions of giant onshore wind farms.
According to the recent Woodmac report on the Chinese wind market:
- The total capacity of wind projects under construction exceeds 100 GW.
- The total capacity of these “constructing and pipeline” projects is almost 50% of the total capacity of existing operating wind units–which is a result of over 15 years of development.
National Energy Administration filing shows that:
- By the end of June this year, China’s cumulative installed capacity of wind power was 217 GW.
- China has more than 25 onshore wind power base projects under planning and construction, with a total capacity of more than 100 GW.
- All but one wind bases under construction are all located in the Northern China region, of which more than 45% are in Inner Mongolia.
Energy Iceberg Note: Industry experts widely concern that the construction scale is much larger than the grid capacity. The market is poised to witness another wave of wind curtailment in 1-2 years.
The Fifth Global Offshore Wind Summit was held in Shandong Province last week. Yi Yuechun, deputy chief of General Institute of Water Resources and Hydropower Planning and Design, stated on the Summit:
- By the end of this year, the cumulative installed capacity of offshore wind in China will reach 8.3 GW.
- The 2020 installed wind figure will be far beyond the 5 GW OW target set in the “13th Five-Year Plan.”
- China’s total approved OW wind capacity so far, based on provincial planning policies, has reached 35.877GW, of which about 7 GW have completed grid connection.
Due to disapproval from the “military side,” State Power Investment Corp’s (SPIC) 150MW Jinghai and 400MW Shenquan offshore wind farm projects have failed to secure approvals for sea utilization and environmental review approval. The two projects are, thus, delayed.
The two offshore wind projects are located in South China Sea regions off Guangdong province.
Energy Iceberg Note: OW developers should pay great attention to the escalating tension in the South China Sea and, potentially, in the Taiwan Strait. Scenario planning and risk control measures are necessary, as the confrontations grow.
Hydrogen Storage & Fuel Cells
A subsidiary of Baowu Steel Group (Baowu), one of the world’s largest steel manufacturers, recently revealed its hydrogen energy development strategy.
The steel giant is to promote hydrogen energy application via “One Park, One Pipe, Five Stations, and (A) Thousand Vehicles” projects:
- One Park: to construct Wusong Hydrogen Energy Industrial Park, in which a hydrogen-based combined cooling, heating and power (CHP) projects will be built for the business centre of Baoshan Headquarters of Baowu.
- One Pipe: to establish a y hydrogen supply pipeline network by the reconstruction of the gas corridor owned by Baowu.
- Five Stations: to construct five hydrogen refuelling stations in Shanghai
- A Thousand Vehicles: to apply hydrogen fuel cell vehicles in Shanghai Baoshan Heavy-duty Logistics Base.
Chairman of Sungrow Power Supply Co. (Sungrow), Cao Renxian, recently revealed in an interview that：
- The cost of photovoltaic, electrolysis-based hydrogen cost could go down to ¥5/kg soon, as PV generation cost has been sharply decreasing year by year and the cost of power generation of photovoltaic during noontime could be as low as zero.
- The fuel-cell-based power cost could be as low as ¥0.5/kWh if the noontime PV power is storage by green hydrogen.
- Korea has already seen the first fuel-cell based power generation plant up and running this year. At the same time, Sungrow will launch a similar 500kW hydrogen power station soon.
China’s recent policies signify the strategic importance of hydrogen fuel cell vehicles and are reminiscent of earlier support for electric vehicles.
EV & Battery
Jiangsu Kunshan Energy Storage Power Station by Pinggao Group last week successfully connected to the grid. The station is the world’s largest grid-side electrochemical energy storage power station.
- The capacity of Kunshan Energy Storage Power Station is 110.88MW/193.6MWh, built up in a total area of 31.4 acres.
- It has a total of 88 sets of prefabricated cabin energy storage batteries, each of them has a capacity of 1.26MW/2.2MWh.
- The project embarks a lithium iron phosphate (LFP) battery.
China’s Northwest Qinghai Province started a hundred-day clean energy initiative since early May this year.
The State Grid Qinghai Electric Power Company last week announced that the province has succeeded in the mission and was using 100% green power from July 1st to 31st.
Energy Iceberg Note: although the 100% green power for a month sets a record in China in terms of utilizing renewable power. The success is mainly attributed to the hydropower production during July. Notably, Qinhhai is the largest solar power production region in China. It is also actively seeking to become China’s “clean energy demonstrative province.” The emphasis is to develop PV and wind plus energy storage in the region.