One of the unique phenomena in China’s offshore wind development is the central role of power design & engineering companies (D&E) in project development.
For foreign companies that hope to make an inroad into China, it is critical to offshore wind and in the electricity market in general. But in offshore wind
However, there are hundreds, if not thousands, electricity design, engineering, and construction companies active in China. For outsiders, to figure out whom to team with as better access to the market is not an easy task.
In this article, we will provide the key names in Chinese offshore engineering fields and explain why foreign technology companies or suppliers must seek to work closely with these companies to access the Chinese market.
Key Offshore Engineering Firms in China
There are many influential electricity engineering players in China. But three currently dominate the offshore wind market:
Based in Hangzhou and established since 1954, ECIDI is one of the seven core E&D institutes under PowerChina Group—world’s largest power design, engineering, and research firm. These seven are known as the most capable E&Ds in hydraulic engineering, coming from a background of hydropower. Notably, ECIDI used to be seen as a lesser player in the seven hydro E&Ds as it is geographically far away from China’s hydropower bases, the west. But in the past decade, it emerged to be the leader among the seven due to a swift transition to new energy and especially offshore wind. Among its peers, it uniquely “top-level” engineering license.
The firm is a real frontrunner in China’s offshore wind market, already stepping into R&D back in 2006. It designed the country’s first wet-leg wind project Rudong Intertidal owned by Guodian Longyuan. It has been leading most “milestone” projects ever since with its unique experience in the field.
Before 2018, China’s offshore wind development is, in fact, mostly in the waters off Jiangsu province. Given its experience and proximity to the market, ECIDI thus took up a majority part of the market share—by 2017, it was way over 70%, although that has been gradually lowering since new players joined and new regional markets open up.
Like its peers, Sidri has a history of more than half a century. But its ownership has been changing for a few times—at a certain point, it was the Shanghai-based subsidiary of ECIDI. Since 2013, China Three Gorges invested in the firm and became the major shareholder.
Sidri set foot in offshore wind by leading China’s offshore wind demonstrator, the Donghai Bridge project developed by the Shanghai government in 2016. It has a strong tie with the municipality government and is a crucial player in the Shanghai government-lead demonstrative floating offshore demonstrator, too. But the firm claimed to be the only D&E with a portfolio of all eight provinces that already put up offshore wind turbines.
Sidri is poised to become an even stronger player in offshore wind, as its mother firm CTG has secured a majority of Chinese pipeline offshore wind projects (2018 data though). By promoting a strategy of “centralized & bulk offshore wind development” (集中连片开发).
The Guangdong-based D&E is relatively new to the market, compared to the formerly mentioned duo. But as one of most technology-wise influential D&E, GEDI is surging quickly.
Last month, GEDI completed the drafting of an offshore wind farm design standard–the first in the country. The milestone cements the firm’s position in the offshore wind sector.
GEDI belongs to China Energy Engineering Corp (CEEC)– the other engineering powerhouses in China and the arch-rival to Sinohydro and PowerChina. Historically, GEDI was part of China Southern Power Grid but was stripped off from the monopoly grid player during a market reform in 2011.
It is unsurprising to see GEDI being tasked to lead the offshore wind development in Guangdong, not only because the firm is based in the province but also thanks to its highly recognized position in the power industry. GEDI is the one who designed the local offshore wind development plan for the government and is rightfully the engineering options for most projects.
GEDI also becomes the first to assume the role of EPC in offshore wind projects, while previously, there were no EPC contracts.
Limited Alternative due to High Entry Barrier
While the three dominate the offshore market, a few others trying to squeeze in, including Central-Southern Electricity Power Research Institute(CSEPDI 中南院) and, more recently, Shandong Electric Power Engineering Consulting Institute (SDEPCI 山东院) which belongs to the nuclear technology arm of State Power Investment Corp. Lately, SDEPCI has won a design and engineering contract from CTG for building the first offshore wind farm in Shandong province.
As construction in the conventional electricity market slows down, more hope to seek new revenue streams from renewable projects. But offshore wind remains a market with higher entry barriers owing to the higher technology requirement and experience for marine engineering.
Dominant Role in Projects
Engineering firms play a critical role in offshore wind projects in China.
This is partially due to the cooperation model between power developers and the D&E firms in project approvals. The former relied on the “licensed” D&Es to provide project designs for project green-lights. Such services are even more critical in offshore wind projects given the limited options. Moreover, Chinese developers still largely lack experience in offshore electricity projects, who then value heavier the opinion and experience of the D&Es and builders.
Another factor is that D&Es have participated extensively in China’s electricity regulatory planning—both on national and regional levels, serving partially the government functions.
On a local level, for instance, the three mentioned key offshore E&Ds were tasked for drafting provincial wind and offshore wind development planning in Shanghai, Jiangsu, Fujian, Guangdong, and others.
On a national level, ECIDI and GEDI, as mentioned, belong to two of the most influential power engineering & construction conglomerates: PowerChina and CEEC, respectively. The two conglomerate each “supervise” two national regulatory and R&D facilities: CEEC supervises China Electric Power Planning & Engineering Institute (EPPEI 电规院), and PowerChina controls China Renewable Energy Engineering Institute (CREEI, formerly Hydropower Water Resource Planning & Design General Institute, SDZY, 水规总院). The two facilities are, in history and in current practices, key regulatory arms for the government (e.g. National Energy Administration) and only turned into companies that managed by the conglomerates. EPPEI has a decisive role in determining China’s top-level electricity policy (e.g. the 13th Five-year plan), while SDZY was tasked to plan China’s offshore development roadmap, capacity, and design pricing formula.
The intertwining between corporate and government means the D&Es are no simple services providers as in the western market context.
Finally, D&Es in their long development history has extensive connections with the local governments. These connections provide them leverage in influencing provincial decisions for offshore wind projects. Just as the Chinese old saying, even a powerful dragon cannot crush a snake in its old haunts (强龙不压地头蛇). Often time, the developers and turbine OEMs are the dragons, while the D&Es are the equally significant snakes. For international companies seeking a stake in China’s offshore wind game, cooperation with the “snakes” may be essential.