News of companies’ weak performances but aggressive investment plans are prevalent in China’s new energy industry last week, sending uneasy signals. But there is also good news–Beijing shows stern support for new energy vehicles with a critical subsidy policy circling in the industry.
Below are some of the highlights you may want to know:
- HYDROGEN: Ministry of finance allegedly designed a new subsidy plan for H2 value chain; Ningxia province unveiled China’s 8th provincial H2 development plan
- WIND: Shanghai government voiced policy support for the city’s delayed floating offshore wind demo project
- SOLAR: SPIC announced an aggressive investment plan in solar and new energy; LONGi further reduced wafer prices
- Power & Policy: State Grid recorded its first quarterly loss in a decade under Coronavirus
Scroll down for the full update of 15 updates of the Chinese wind, solar, hydrogen, EV, and power sectors.
Have a nice week like always!
The Shanghai local Development and Reform Commission (DRC) released its 2020 work plan regarding sustainability and emission reduction. The plan pledged to push forward the construction of Fengxian Offshore Wind Farm and the offshore wind manufacturing base in Lingang. It also announced to promote the city’s “Deep and Far Sea” offshore wind project, as well as decentralized wind, and solar-aquaculture-hybrids.
Energy Iceberg Note：Shanghai government has already funded China’s first demo floating offshore wind project. A ten-party consortium led by a local energy company, China Three Gorges Shanghai Engineering Institute, as well as Shanghai Electric, has been carrying out the R&D for the floating pilot. The project sets to embark TLP solution. But evidently, it has run into some technical challenges and has yet to start construction as planned (previously set to begin at 2019H2).
Chinese oil and gas E&P engineering and equipment producer Honghua Group (HH) entered into an agreement Guangzhou Salvage Bureau of Ministry of Transport and Power China Huadong Engineering Corp (Huadong Institute) for building jacket platforms, offshore substations and foundation jackets.
The basket of deals involved approximately ¥517mn, marking the company’s first contract in the offshore wind sector. HH said the company would seize the opportunity to set foot in the booming offshore wind power market.
Citic Heavy Industries Co. (Citic Heavy Industries) last week announced to invest some ¥100 mn to establishing a new subsidiary focusing on R & D, manufacturing and technical services for offshore wind equipment such as towers, iron piling and steel structure accessories, hydraulic hammers, rock-embedded pile drilling rigs, etc.
Citic Heavy Industries is an affiliate of state-owned investment group Citic, formerly the China International Trust Investment Corporation. This is the first move of the heavy industry manufacturing firm in the offshore wind market.
State Power Investment Corporation (SPIC) plans to develop nearly 300 projects this year, with a total investment of ¥104.4 bn. Clean energy and new technology projects would account for 90% of the announced new investment, of which seven are solar PV plants totaling 3GW capacity.
Up to now, SPIC and its subsidiaries have invested over ¥28 bn in solar, wind, energy storage, and hydrogen sectors. The firm sets to achieve 54% of clean power in its total power mix, while current the percentage is 50%–but already the highest among the five largest power utilities.
Energy Iceberg Note: for more information on SPIC and the power utilities, please check our introduction on the Chinese power market structure https://energyiceberg.com/state-owned-power-utilities/
- China’s photovoltaic inverters shipment reached 88GW last year, accounting for about 70% of the global delivery (126.735GW). 51.91GW of which were taken up by photovoltaic inverter exports with a total export value of $2.341 bn, while 36GW were from domestic installation.
- Huawei export volume came in the first place, with total export revenue of $504 mn, followed by Sungrow as the second place.
- China achieved the world’s largest photovoltaic installation with a total installed capacity of 30.1 GW, accounting for about 26.3% of the global installation (114.9GW).
- The total delivery of photovoltaic components in China was about 95 GW, accounting for about 80% of the global amount (ETA. 95 GW). Some 63.61 GW were sold abroad while some 30 GW was consumed domestically.
Monocrystalline silicon wafers manufacturing giant LONGi announced to reduced 20% of its products again.This is the fourth time the firm cutting price this year.
Energy Iceberg Note: more price reductions are on the way.
Hydrogen Storage & Fuel Cells
A policy draft allegedly issued by the MOF has emerged and circled in the industry last week, which stipulates to select a group of cities or regions as “H2 fuel cell demonstrative areas” and provide direct subsidies.
The draft is a feedback-inviting version sent to Beijing, Shanxi, Shanghai, Jiangsu, Henan, Hubei, Guangdong, and Sichuan province (or municipality). The local governments of these provinces would need to apply to become the demo areas for the subsidy. The policy requires the demonstrative regions to develop more than 1000 FCVs during the demo period (4 yrs). Eligible candidates are those with local H2 supply capacity, critical fuel cell technology development, as well as filling station constructions.
Energy Iceberg: the alleged new subsidy plan fits recent industry speculation that Beijing would design fuel cell and FCV subsidy set up similar to those of EVs in 2009. The direct subsidy plan would be a great push for the industry.
More about the existing subsidy structure and issues in China’s H2 sector: https://energyiceberg.com/china-hydrogen-provincial-subsidy
Ningxia Hui Autonomous Region (Ningxia) last week released its provincial H2 development plan, which marks the third of such plans announced this year and the eighth in China. The Ningxia policy follows the releases of similar plans in Tianjin, Chongqing and Henan.
Ningxia appears to be more cautious in formulating the goals :
- The plan envisions, by 2025, only 1-2 hydrogen refuelling stations with a daily hydrogenation capacity of 500 kg.
- It sets to support 1-2 demo bus lines in operation in Yinchuan City.
- The province plans to first carry out H2 energy demonstrative in Yinchuan (capital city) area and the Ningdong Energy and Chemical Industry Base (a coal and coal-to-chemical base), before fully rolling over to the whole province.
In the past weeks, shares prices of Chinese rare-earth listed companies have soared significantly, due to an improved market scenario for the suppliers.
Meanwhile, a Chinese Academy of Sciences (CAS) affiliated company Zhongke Xuanda New Energy Technology Co. (Zhongke Xuanda) announced to successfully launch a production line for rare earth magnesium-nickel hydrogen storage alloy electrode materials.
The new alloy materials production line will produce nickel-hydrogen batteries with high capacity, low self-discharge and low-temperature features, which will be deployed in hybrid vehicles, fuel cells, and stationary hydrogen storage.
China previously had no domestic capacity for technology. The company claimed that it had overcome barriers and challenges to achieve an innovative milestone.
Forward Economist reported last week that China’s hydrogen energy industry has initially formed five major development areas of “Eastern, Western, Southern, Northern, and the Central Region”：
- The eastern region: represented by Shanghai, Jiangsu and Shandong Province. This region is the earliest region for FCV R&D and demonstration in the country
- The western region: mainly at Sichuan Province, is a rising region for H2 production and fuel cell manufacturing R&D
- The southern region: led by Foshan City and Yunfu City in Guangdong Province. The region is the most aggressive in developing large-scale H2 infrastructure network
- The northern region: represented by Beijing, Hebei and Liaoning, show a collective focus on developing fuel cell tech and fuel cell system main parts manufacturing capacities. Beijing and Zhangjiakou of Hebei are tasked to deploy FCVs in the coming winter Olympics.
- The central region: represented by Hubei and Henan provinces, is a manufacturing hub for cars. Its development focus is on fuel cell component R&D and H2 passenger vehicles
EV & Battery
A recent report of SNE Research of South Korea revealed that:
- S. Korea lithium battery producer LG Chem (LG) has taken the first place in global installed battery capacity in 2020Q1, raising from formerly the 3rd place and surpassing Japan’s Panasonic and China’s Contemporary Amperex Technology (CATL). LG’s market share is estimated at 27.1%.
- CATL ranked third with a market share of 17.4%, down 6% YoY and dropped from the formerly first place. BYD’s market share fell drastically, and its position dropped to the 4th. While AESC, a subsidiary of Envision Energy, rose to fifth place with a 5.6% share in 2020Q1 (from 4.4% in 2019Q1 ).
- In Q1 2019, CATL ranked the first with a market share of 23.4%; Panasonic ranked second; BYD ranked the third with a market share of 15.1%; while LG only ranked the fourth with a market share of 10.7%.
Shandong government officially announced a policy to set off off-peak and peak power pricing pilot scheme for a selected group of energy storage service providers in the province. The policy will become effective for participants from Jun.1 this year and be valid for two years.
The province offers a further ¥0.03/kWh reduction of off-peak power price from the current level for the pilot-project participants.
Energy Iceberg Note: the policy sets to stimulates ESS development in the province. Besides the battery storage system, flexible coal-fired units, pumped hydro, nuclear power plants and gas peakers are likely ESS options in the province. More about China’s battery ESS business model: https://energyiceberg.com/china-battery-energy-storage-new-momentum/
Hunan Changyuan Lico Co. (Changyuan Lico), a subsidiary of China Minmetals Corporation (China Minmentals), plans to raise ¥2.718bn through an initial public offering (IPO) in Shanghai Stock Exchange, according to the company filing.
Some ¥1.92 bn of the raised fund will be used to expand the cathode material project in Hunan.
Changyuan Lico was founded in 2002 and then entered the field of ternary cathode materials. It is one of the earliest players of ternary cathode materials in China. The firm supplies to major Chinese lithium battery makers, including CATL, BYD, Eve Energy Co and Sunwoda Electronic Co. In the past four years, Changyuan Lico has ranked 1-2 places for ternary cathode materials production in China. It was the leader in 2016 and 2018.
Clean Energy Related
State Grid (SGCC) had its first quarterly loss in a decade, posting a ¥926 mn net loss which marked a 106.03% project decrease YOY. The power monopoly registered ¥568.8 revenue, down 8.85% YoY.
Last year Q1, SGCC reported a net profit of ¥15.3 bn.
Energy Iceberg Note: the sharp decline in the performance was mainly affected by Beijing’s decision to reduce by 5% electricity price to support businesses to survive during and after the COVID-19 outbreak in China. Meanwhile, the outbreak also led to lesser electricity consumption, leading to lower income.
2020Q1 marks the second time that China’s grid companies reported profit decreases. Notably, SGCC’s financial leasing and investment affiliate recently unveiled an alarming debt-to-asset ratio at 90%, which might trigger the investor protection mechanism clause.
Declaring a national emergency over threats to the U.S. bulk power system (BPS), President Trump in an executive order on May 1 issued a sweeping ban on transactions by U.S. persons for electric equipment sourced abroad if the U.S. government determines they pose undue security risks.
- The definition of BPS “electric equipment,” meanwhile, appears limited. It covers: substations
- control rooms
- power generating stations, to include: reactors, capacitors, substation, transformers, current, coupling capacitors, large generators, backup generators, substation voltage regulators, shunt capacitor equipment, automatic circuit, reclosers, instrument transformers, coupling capacity voltage transformers, protective relaying, metering equipment, high-voltage circuit breakers, generation turbines, industrial control systems (ICS), distributed control systems (DCS), safety instrumented systems (SIS)
Energy Iceberg Note: stock prices of wind power and electrical equipment producers in China sunk this week. Though most Chinese suppliers may face limited impact due to the lack of market share in the US. Further analysis required.