China’s Offshore Wind Market Provincial Breakdown (2)

China's OW Market

Six coastal provinces in China have shown burgeoning interests in foster local offshore wind industry development, following the footsteps of the country’s three main offshore wind regions Jiangsu, Fujiang, and Guangzhou.

We have broken down the offshore wind status quo of the six in the following piece.

Unfortunately, all face a common challenge to become the next “big area” for offshore wind investment, which is a lack of local political support and regional subsidy potential. As the market will witness the sunset of national offshore wind subsidy from 2022 onward, any new projects developed in these areas would struggle to take off without a substitute local financial incentive measures.

In some cases such as Hainan, Zhejiang, and Hebei, the conflicts of offshore area usages is another limiting factor.

Despite the challenges, some like Shandong has shown ambition in integrating offshore wind development with other emerging sectors such as hydrogen and aqua-farming.

Zhejiang: The Rising 4th Placer

  • Policy Targets: no specific installation target but aims to complete construction of three OW farms totalling 852MW (Putuo 6, Jiaxing 1, Jiaxing 2)
  • Local Subsidy: unlikely to provide local subsidy
  • Market Structure: relatively diverse players including central government-owned power utilities (Guodian, CGN, Huaneng, Huadian, CTG) and local government-run energy groups (Zhejiang energy group, Zhejiang Hydro Investment Corp)
  • Annual Maximum Load Utilization Time: 2600~2800 hrs
  • Long-term Plan: 6.37GW

Zhejiang has been relatively late in developing offshore wind. But right now it has five projects under development. All five are listed as the province’s energy construction priorities in 2020, showing a strong political support from the local government. 

The speed-up development and new momentum have triggered project grabbing moves, with tier-1 power utilities and local-run energy players both keen on securing future project quotas.  

But there are also stumbling blocks for the market to become a major offshore wind region in China. The potential conflicts among offshore wind, military, and natural preservation over ocean space may cap the future capacity potential of the region. 

Zhejiang government has expressed no intention to provide local subsidy for offshore wind projects, which is another negative factor. 

[Read our analysis on China’s tier-1 and tier-2,3 power players and the market dynamics ]

Shandong: Ambitious with Floating, Aquaculture & Hydrogen

  • Policy Targets: no specific installation target but aim to kick off development of 6GW projects (based on six offshore wind complexes) before 2020 
  • Local subsidy: undetermined and low probability 
  • Market Structure: selected groups of state-owned energy players have already set foot in the market for project grabbing, including CTG, Huaneng, SPIC, and CGN
  • Long-term Plan: 12.75GW projects

Last year, Shandong began offshore wind development, with a special focus on combining offshore wind turbine and the province’s aquaculture industry. 

The first offshore wind project in the region, developed by CTG, is to use turbine foundation as artificial reefs to breed oysters, sea cucumbers and several types of fish. The project is likely to kick off construction in late 2020. 

Recently, Qingdao city of Shandong province revealed a frontier project to set up vertical-axis floating offshore wind turbines (VAWT) in waters near Xiao Guan Island. The project plans to incorporate hydrogen production and aquaculture farming business. If indeed go ahead, the Xiaoguan Island project will be the first-of-this-kind experience in China. However, the private-owned and VAWT technology-focused developer lacks project development experience; its previous VAWT venture (in Fujian) has yet to produce solid success. The new venture may lead to more questions than answers. 

Shandong has drafted local energy policy to develop six offshore wind complexes located in Lubei, Laizhou Bay, Bozhong, Chang Island, North Ban Island, and South Ben Island, totalling 12.75GW. The realistic timeline for the commerce of these projects remains unclear. 

In 2020, the Shandong government also sets clear not to approve any new offshore wind project that requires national subsidy. The province is also unlikely to provide local subsidy to stimulate development. 

Hebei: Slow Progress and Limited Growth  

  • Policy Targets: 800MW installed—likely to miss 
  • Local subsidy: low probability 
  • Long-term Plan: 5.6GW

As one of the major wind production zone in China, Hebei set foot in offshore wind in a relatively early stage. But its progress in the sea has been dwarfed by the onshore steps.  

Right now Hebei has no operating offshore farms yet, only with 600MW under construction. Although the first project (Hebei Leting Puti Island 300MW) announced to kick off construction since 2017, the construction has been progressing at a slow pace. 

Back at 2012, Hebei had drafted a plan to develop 5.6GW offshore wind projects, of which 4.3GW would be off the coast of Tangshan city and 1.3GW off Cangzhou. The local 13th Five Year Plan target stipulated 800MW offshore turbines put up by the end of 2020. 

These targets are unlikely to see materialized, due to a seemingly growing conflict between energy construction and military defence for using the offshore area.

Earlier this year, the province announces not to greenlight any offshore project in 2020. Future development of the region remains unclear. 

Liaoning: Uncertainty 

  • Policy Targets: develop 1.5GW Zhuanghe offshore complex
  • Local subsidy: undetermined
  • Long-term Plan: 5.6GW

Liaoning has built up the first offshore wind project in China’s northern sea and is developing another 300MW project. 

The province submitted a plan to develop 1.9GW offshore projects with an undefined time horizon, of which 1.3GW has received approval and set off price-competition based allocations. 

Overall the future of Liaoning’s offshore wind development also looks uncertain, given the limited projects starting off construction and the lack of policy incentives from the regional ruler. 

Hainan: The Injured Momentum 

  • Policy Targets: no target for 2020, previously set to focus on developing 350MW Dongfang Sea 1 project 
  • Local subsidy: no incentive  
  • Long-term Plan: 3.95GW

Hainan has completed a provincial offshore wind development plan back at 2014. The plan envisions a total of 3.95 offshore wind power capacity to be built in the future, with an undetermined timeline. 

The province also laid out five potential offshore areas for wind power development including Dongfang (700MW), Ledong (1.65GW), Lingao (500MW), Danzhou (300MW), and Wenchang (800MW).  

The policy attracted investments from two tier-1 power utilities—State Energy Investment Corp (SEIC/Guodian) and Huaneng which had spent over hundreds of millions in early-stage research and development of Dongfang Sea 1 (350MW) and Wenchang (200MW) projects. 

However, the local regulator suspended these two projects—last year and early 2020, respectively. The abrupt suspension had severely damaged future investment intention. 

The decision to suspend these projects came against the backdrop of growing environmental concerns. In particular, the island is known for its tourism industry. It is unclear whether or when would the decision would be lifted. So far, this regional market’s future looks grim for offshore developers.  

Guangxi: Growing Interests 

  • Policy Targets: set to explore offshore wind potential in Beibu Bay (Tolkien Bay), no installed capacity target announced
  • Local subsidy: low probability 
  • Long-term Plan: 5.6GW

The southern coastal province has not developed a provincial policy guideline regarding offshore wind development. That means all projects in the region is unlikely to secure renewable subsidy. 

However, State Energy Investment Group (SEIC) and the local governments in Guangxi last year reached cooperation of intent, in which the power developer set to invest ¥90bn to develop 5.1GW offshore complexes as well as local manufacturing facilities during 2019-2025. The first project will be a 1.1GW pilot that combined offshore wind and aqua-farming off Beihai city. 

Beside SEIC, another state-owned power utility Huadian has also signed off a framework contract with a local energy engineering firm to explore offshore wind potential. 

These updates suggest burgeoning interests from Chinese major energy utilities to set foot in the untapped resources in Guangxi.