The keyword of last week’s Chinese energy industry is the “Two Sessions” (两会), China’s National People’s Congress and People’s Consultative Conference. Every year, representatives of the energy industries in the Two Sessions deliver proposals that might influence Beijing’s energy decision and policymaking. Like always, last week the news pages are fraught with different policy advisories, on which Energy Iceberg will provide a review in the this Thursday’s analytical report.
Besides the various energy proposals, some potentially “game-changing” projects or reforms emerged last week. To name a few:
- WIND: a tender document of Guodian of China Energy Investment Corp (CEIC) last week reveals the firm preparing to set foot into China’s 57GW “deepwater” offshore wind market
- HYDROGEN: State Power Investment Corp (SPIC) announces a first-of-this-kind smart energy complex with an integrated H2 value chain (production, storage, refueling, cell making, FCV making, and H2 transportation) as well as renewable power and battery storage; Chinese steelmakers collectively look into H2 utilisation.
- POWER: Beijing kicks off the grand scheme to consolidate the Big-5’s coal-fired power assets. And some suspect the asset restructuring may eventually involve renewable projects.
Scroll down for the 12 updates. Hope they could bring some new ideas for your week.
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Several members of China’s National People’s Congress (NPC) and of National Committee of People’s Consultative Conference (CPPCC), last week proposed in the annual ‘Two Sessions’ that the Beijing’s regulators should extend national subsidy deadlines for wind power projects–by at least 6 months for onshore and by 12 months for offshore wind.
These members include Zhang Chuanwei, an NPC member and the chairman of Ming Yang Smart Energy and Wu Gang, a CPPCC member and the chairman of Goldwind. The proposals reflect the current views from China’s wind power industry that the extension is necessary to ensure the sustainable development of the industry.
Energy Iceberg Note: The “Two Sessions” refer to China’s plenary National People’s Congress Conference and National People’s Consultative Conference, which are the most critical legislative activity of the nation. Top executives of China’s energy companies–both state-owned enterprises and privates– are often members of the two organization. The proposal from industry-background NPC and CPPCC members often reflect specific industry interest. Thus, proposals like these would not necessarily determine Beijing’s decisions and the policymaking.
Last year, China’s energy regulator National Development and Reform Commission (NDRC) stipulated that wind projects under construction are qualified for the national subsidy–only if “all of their units” could complete grid connection before the end of 2020 (applied to onshore projects) and 2021 (applied to offshore projects).
Energy Iceberg’s opinion remains that Beijing is unlikely to change that decision or to provide an extension for the grid-connection deadline for the subsidy. Thus, the majority of the wind projects may risk losing the 20-year subsidy guarantee.
More about this complicated subsidy set up: https://energyiceberg.com/china-renewable-power-price/
Guodian Power of China Energy Investment Corporation (China Energy) last week announced a tender to solicit research contractors to investigate the investment feasibility of Shantou Phase 1 Offshore Wind project in Guangdong.
Energy Iceberg Note: Guangdong province in China has previously planned to develop 9.85GW near-shore shallow-water offshore wind projects and also reserved “deep-water” sites totaling 57GW for future development. Guodian’s tender suggests the first commercial activities regarding deep-water projects.
However, notably, Guangdong currently has only installed less than 500MW offshore turbine, with 1.9GW under construction and 8GW pipeline approved. That means any deep-water projects are unlikely to move ahead in the coming 2-3 years. The move reflects CEIC’s low market share in Guangdong.
China’s Offshore Wind Market Provincial Breakdown: https://energyiceberg.com/china-offshore-wind-province-breakdown-1/
State Grid Corporation of China (State Grid) announced last week that the firm would add 68.5GW grid-connection capacity for renewables, of which 29.45GW is for wind and 39.05GW for solar.
Hydrogen Storage & Fuel Cells
State Power Investment Corp (SPIC) earlier this month disclosed a new energy industrial base construction plan in Zhuzhou City, Hunan Province. With a total investment of ¥3.6bn, the new energy industrial base will be the first smart energy demo project integrating hydrogen supply chain construction (with production, storage, refueling, FCV production) with renewable generation and energy storage.
The scope of the new energy applications in the project is impressive:
- Phase I plan: invest ¥600 mn in constructing an iron-chromium flow battery production line, a natural gas reforming H2 production facility, H2 and oil combined refueling station demonstration, as well as a pilot H2 transportation project.
- Phase II plan: invest ¥3 bn to build a fuel cell stake production facility with in-house technology developed by SPIC Hydrogen Energy Company; develop a hydrogen energy forklift vehicle manufacturing facility; meanwhile, build a combined hear-cool-gas-water smart energy system, and build wind power plus battery, solar power plus battery storage projects.
- The grand project is expected to complete construction by 2025.
Energy Iceberg Note: SPIC has shown consistent interest and investment capacity into new energy sectors including solar, storage, offshore wind, and hydrogen value chain. It is certainly an interesting company to pay attention to.
Jointo Energy Investment Co. (Jointo) recently kicked off engineering and design tender for its Guyuan wind power and H2 utilization demonstration project (Phase II of Hydrogen Production Station). This is the first domestic wind-to-hydrogen industrial project in China. The phase II wind-to-gas production facility is set to start construction in June this year.
China’s steelmakers have taken active steps to explore hydrogen substitute since last year. Here is a summary of the recent activities:
- Central Iron and Steel Research Institute and Rizhao Steel Holding Group Co. secured a cooperation agreement of an annual output of 500,000 tons of hydrogen metallurgy and high-value-added steel manufacturing project in early May.
- Jiuquan Iron & Steel Group is building a coal-based hydrogen metallurgy pilot production, which has completed e thermal load test run. The company is also developing a supporting dry grinding and dry-selection pilot plant. Both facilities could start operation in Oct. this year.
- Hesteel Group and Italy Tenova Group signed an MOU in Nov. 2019 that the two companies would carry out in-depth cooperation in hydrogen metallurgy technology to build the world’s first hydrogen metallurgy demonstration project with a capacity of 1.2 million tons.
- Beijing Jianlong Heavy Industry Group announces to invest ¥1.09 bn in setting up a smelting reduction method high-purity casting pig iron project of an annual output of 300,000 tons. Test operation is scheduled to take place by Sep. this year.
Coke producer Shanxi Meijin Energy Group (Meijin Energy) plans to spin off subsidiary Foshan Feichi Auto Manufacturing (Feichi) and set off an initial public offering (IPO) of the affiliate on Shenzhen Stock Exchange’s ChiNext board. The move would help the car-making unit to raise money for hydrogen fuel cell vehicles.
Meijin Energy currently controls a majority 51.2% of the automaking affiliate, and it will remain the controlling mother company of the auto affiliate after the IPO.
Feichi is poised to become the first FCV company listed in ChiNext Board if the plan moves ahead successfully.
Battery and Energy Storage
Tesla is seeking Chinese government approval to build Model3 vehicles in the country equipped with lithium iron phosphate (LFP) batteries, according to the Ministry of Industry and Information Technology’s (MIIT’s) catalogue of new energy vehicles.
Pingan Securities last week released an analysis regarding the model:
- The catalogue information did not specify battery supplier of the made-in-China Model3. But the supplier is most likely to be Contemporary Amperex Technology (CATL). The new Model 3 battery will embark CATL’S CTP technology.
- Cost of the LFP version of the Model3 battery will be reduced by 15% -20% from the current NCM versions. The earliest delivery time of the model is estimated this Aug.-Sep.
- According to Tesla’s plan, the localization rate will reach 70% -80% at that time, leading to cost reduction. It is expected the sales price would be less than ¥250,000 (after subsidized).
The power consumption of China’s public piles is getting back to normal range, said brokerage Sinolink Securities last week. However, affected by the Corona crisis, the new construction of public charging piles is still below average level. The brokerage predicted that the construction speed would resume and soar significantly in 2020H2.
Data shows that:
- By the end of April 2020, China has 1,287,000 EV charging piles, of which there are public charging piles 547,000 and private 740,000 units.
- In Apr., incremental public charging pile were 5,000 units, compared to 8,000 units in last Apr–a 37% YoY decrease.
- The number of incremental private charging pile in Apr. was 15,000, a 40% decrease from 25,000 in 2019 Apr.
- However, power consumption from the public charging piles was 440 GWh that month, an increase of 52.9% from the previous month and an increase of 24.2% from the same period last year, showing a decreased impact of COVID-19.
Hainan Province, China’s southmost island province, recently unleashed a financial stimulus to reward new energy vehicle consumers. For users of new energy vehicles whose purchase and initial registration date is from Apr. 30, 2020 to Dec. 31, 2020, the government will reward a bonus of ¥10,000 for each vehicle. The government plans to provide subsidy for in-total 15,000 of new energy vehicles.
Clean Energy Related
The Chinese power industry has set off a long-expected reform and restructuring of coal-fired power asset. Last week, State-owned Assets Supervision and Administration Commission (SASAC) issued a new regulation to China’s five largest power generation utilities China Energy Investment Corp. (CEIC), China Huaneng, State Power Investment Corp (SPIC). China Datang Corp., and China Huadian Corp, which marks the beginning of that reform.
The regulation sets to restructure the coal-fired power assets of the five players. Part of their coal-fired power plans in Gansu, Shaanxi, Xinjiang, Qinghai and Ningxia will be stripped off and consolidated into five provincial coal-fired firms– one integrated coal-fired power company in each province.
The first-batch assets to be consolidated involve 48 power plants, totaling 32.629 GW capacity.
Energy Iceberg Note: this is only the first baby step of a grand coal-fired power restructuring. More coal-fired power plants will be stripped off from the Big-5 to merge into the provincial coal firms. The pilot heralds is a significant change of game player in China’s power market.
About the Big-5 power utilities and China’s power generation market structure: https://energyiceberg.com/state-owned-power-utilities/
China’s plan to provide a 5% reduction of electricity prices for all industrial and commercial businesses will be extended till the end of the year, Premier Li Keqiang said in his annual work report last week.
State Grid Corporation of China (State Grid) said it would implement this policy and estimated that the policy would lead to a total electricity bill cut of ¥92.6bn.
Energy Iceberg Note: the policy is part of the industry stimulus package and the current energy policy priority. But it certainly means a massive revenue cut for the grid operators. For power market reform, it is not necessarily good news.
Our review of the COVID-19 impacts on China’s renewable and power market: https://energyiceberg.com/coronavirus-impacts-renewable-in-china/