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First city-level IoE project completed in Haining, Zhejiang province
The first city-level Internet of Energy (IoE) demonstration project was completed in Haining of Zhejiang province on August 29. The project, also known as the IoE Pilot Demonstration of Jiaxing City (which used to be a part of Haining city), is jointly led by State Grid Zhejiang Electric Power Company and the Haining government. The demonstration project was successfully selected as one of the first batches of the National Energy Administration’s (NEA) smart energy projects.
The project is located in Haining, a city of 700 square meters with a population of 0.8 million. The IoE structure is based on Active Distribution Networks (ADNs) and builds an urban integrated energy service platform that integrates and consumes 100% renewable energy and provides services such as building energy efficiency management, supply and demand mediation, smart energy and green transportation. It aims to successfully build an intelligent, open, shared, diverse and comprehensive urban IoE engineering model. Zhejiang Electric Power hopes to be the pioneer to realize State Grid’s vision to build and operate “a STRONG smart grid” and “Ubiquitous Power Internet of Things,” and to become a world-class IoE enterprise.
In addition to high integration of DE (distributed energy), the ADN also achieves high quality and reliability of power operation through actively planning, managing and controlling loads, storage and power generation response and participation. (JX PEOPLE)
Photo source: hqew
Mitsubishi sets up JV with State Grid for integrated energy services
State Grid Energy Saving and Mitsubishi Heavy Industries have jointly set up a company to provide integrated energy services.
On September 4, Grid Energy Mitsubishi Heavy Integrated Energy Engineering Technology Services Co., Ltd. was inaugurated in Beijing. The company is jointly funded by State Grid Energy Saving Co., Ltd. and Mitsubishi Heavy Industries Co., Ltd. State Grid Energy Saving holds 55% of the company shares and Mitsubishi Heavy Industries 45%. The company is committed to building the largest and the most advanced integrated energy engineering and technology services company and key energy equipment supplier in China.
Ren Weili, Chairman of State Grid Energy Saving and Party Secretary, said at the unveiling ceremony that the establishment of the JV is to implement State Grid’s company vision in becoming a world-class energy enterprise. The integrated energy service industry involves a wide range of missions, including a strong collaboration with professional institutions, as well as international and multi-dimensional cooperation. State Grid Energy Saving sees the establishment of the JV as an opportunity to actively comply with the new trend of the energy production and consumption revolution, stating that it will continue to promote cooperation in exploring world-class integrated energy services and other aspects, so as to achieve "complementary advantages, resource sharing, win-win cooperation and common development." (baijiahao)
Yunnan Energy Investment’s operating income increases 9.3% YoY in 1H2019
In the first half of 2019, Yunnan Energy's operating income was 967 million CNY, up 9.37% year-on-year (YoY). The company’s net profit was 210 million CNY, a 37.98% YoY increase. Yunnan Energy has investments in four wind power companies with an operating income of 310 million CNY, an increase of 74 million CNY over the same period last year, and total profit of 192 million CNY, an increase of 86 million CNY. (Sina)
According to the NEA 2018 Operating Wind Power Status, Yunnan had an average wind utilization hours of 2,654 last year, making it the number one ranked province in China. From publicly released information, Yunnan Energy Investment’s four wind farms in Qujing and Honghe averaged 2,782 hours, which is 128 hours above Yunnan’s usual average.
Xiangyang builds 500MW non-subsidized solar project
Powerchina Zhongnan Engineering and the Xiangyang government have signed a contract stipulating the terms by which Powerchina will invest 4 billion CNY to build a 500MW non-subsidized solar project in Xiangyang, Hubei province. The project is set to be operating in September 2021 with an estimated annual power generation of about 900GWh. (Xiangyang GOV)
Hebei promotes distributed rooftop solar poverty alleviation projects
The Hebei government has announced plans to promote the construction of about 406 distributed rooftop solar power systems as part of its housing resettlement service for the province’s impoverished population. With a construction period from November 2019 to March 2020, the projects will be under the unified organization of the government and will report to the management of the village-level poverty alleviation solar power stations. (Hebei DRC)
Shanghai DRC releases China’s first offshore wind farm bidding results
Results of China’s first offshore wind farm bidding show Shanghai Electric Power and Shanghai Green Energy Consortium have been awarded the highest scores for the Shanghai Fengxian offshore wind farm project. (Shanghai DRC)
Donghai Bridge offshore wind farm
From recent publicly released information, we know that Longyuan has declared an on-grid price of 0.65CNY/kWh, while Shanghai Electric Power and Shanghai Green Energy Consortium have declared an on-grid price of 0.7338CNY/kWh. However, as we noted in last week’s Azure newsletter (Week of August 26, 2019), “the lowest price is not guaranteed to win the bid for the project,” and we were expecting the consortium to have higher score given their strong references in the Shanghai area, having participated in the construction and operation of the Shanghai Donghai Bridge I 100MW offshore wind farm.
China hydrogen energy and fuel cell development sees 700% growth
As the major application of hydrogen energy and fuel cell in China, hydrogen fuel cell vehicle production and sales in the country have increased considerably. According to data released by the Power Battery Application Branch of the China Chemical and Physical Power Industry Association on August 27, between January-July this year, China's hydrogen fuel cell installed capacity reached 46MW, a nearly seven-fold year-on-year (YoY) increase from the 6MW installed in 2018. At the same time, due to many favorable policies, hydrogen energy industry-related investments have demonstrated a rapid development momentum throughout the country in 2019.
By the end of July, the production and sales of hydrogen fuel cell vehicles was 1,176 and 1,106 respectively, a growth of nine and ten times from the same time last year. It is worth noting that so far China's hydrogen fuel cell vehicles are focused mainly on buses and special vehicles, with 60% of the installed capacity going to special vehicles. (Sohu)
In June this year, the China Hydrogen Energy Alliance released the White Paper on China's Hydrogen Energy and Fuel Cell Industry, which emphasized hydrogen energy’s increasingly important role in China's energy system, expected to account for at least 10% of China's end-use energy system by 2050, with 1.6 million fuel cell commercial vehicles holding 37% market share and fuel cell passenger vehicles holding 14% by 2050. In the meantime, we can observe this trend with hydrogen demand close to 60 million tons today.
First grid-parity wind farm in China starts commercial operation
China’s first grid-parity wind farm has begun commercial operation on August 24, after the last wind turbine of the 50MW project was connected to the grid in Heiyazi, Yumen of Gansu Province. (BJX)
The project comprises of 25 2MW-WTG manufactured by Shanghai Electric, which will sell 15,910MWh of electricity to the grid annually. The CAPEX for this project is being strictly controlled within 5.7CNY/watt, and its annual utilization hours is expected to exceed 3,000 hours. From its commencement on March 25, the project’s construction took only four months to complete, also enabling to keep the CAPEX at a minimum. This is one of the first 13 grid-parity wind power demonstration projects (700MW in total) approved by the National Energy Administration (NEA) in 2017 and the first to be connected to the grid. This project will have a PPA with State Grid at the present on-grid coal benchmark price of 0.3078CNY/kWh for 20 years.
NDRC approves Yazhong – Jiangxi DC±800Kv UHV line
The total investment of the project is about 23.8 billion CNY. Spanning across Liangshan, Sichuan Province to Fuzhou City, Jiangxi Province, the total length of the line is about 1,704 kilometers, with a transmission capacity of8GW. (Sichuan GOV)
By the end of 2018, the installed capacity of hydropower in Sichuan reached 76.74GW, accounting for about one-fifth of the country's total. It is the country's largest clean energy base. However, since the "12th FYP," due to the rapid increase in hydropower installed capacity and insufficient local power demand or transmission capacity, the power supply and demand imbalance in Sichuan has grown more serious resulting in hydro curtailment during the rainy season.
Shanghai Electric wins bid for 3-Gorges’ Rudong 800MW offshore wind farm
Shanghai Electric won the bidding of 3-Gorges’ Rudong 800MW offshore wind farm, which consists of two parts, Rudong H6 400MW and Rudong H10 400MW. Rudong H6 is located about 50km from the shore with a water depth of 9~20m; Rudong H10 is located about 66km from the shore, with a water depth of 14~22m.
1H2019 China report shows solar curtailment rate of 2.4%, a 1.2% YoY decrease
In 1H2019, newly installed capacity of solar in China totaled 11.4GW, of which 6.82GW was centralized and 4.58GW was distributed. With this newly installed capacity, the country’s total solar installed capacity reached 186GW, and its power generation, 107TWh. Total curtailment during this period amounted to 2.6TWh, a 0.57TWh year-on-year (YoY) decrease, with curtailment mainly concentrated in Tibet (25.7%), Xinjiang (10.6%), Gansu (6.9%) and Qinghai (6.3%). (NEA)
Longyuan declares 0.65CNY/kWh for Shanghai Fengxian 200MW offshore wind project on-grid price
Longyuan has declared an on-grid electricity price of 0.65CNY/kWh, 0.15CNY below the nationally established guiding price, for the Shanghai Fengxian 200MW offshore wind project, China’s first offshore wind project to undergo competitive bidding. The project is located in the northern area of Hangzhou Bay, at a Wind Power Class 3 site with annual average wind speed of about 7.2m/s, hub height of 95m and annual average wind power density of about 349.16W/m2. (Shanghai DRC)
The declared price has a 40% weight in the competition method. According to rules set by Shanghai DRC, the lowest bidding price can get a score of 40, while other bidders' prices will be scored relative to the lowest. However, the lowest price is not guaranteed to win the bid for the project; other influences include developer references and WTG capacity (see graph). If the lowest price is 0.65CNY/kWh, and the national guidance price is 0.8CNY/kWh, the project can get a score of 36.5. The remaining 3.5 points can be determined by WTG capacity (>6MW can get 5 points, ≥5MW can get 3 points, <5MW gets 0 points) and company references (references in at least 200MW of offshore wind farm in Shanghai can get 4 points, 100MW-200MW can get 2 points).
Hoisting of 3-Gorges Guangdong Yangjiang 300MW offshore substation is completed
The 3-Gorges Guangdong Yangjiang 300MW offshore booster station, located 28km west of Shaying, Yangxi County, Yangjiang City, has a water depth of 27-32m. Though successful, the construction of the station was reported as challenging due to harsh sea conditions and complex geology. (BJX)
Dongfang Electric develops China's first 10MW direct drive permanent magnet offshore wind turbine
The first domestic 10MW direct drive permanent magnet offshore wind turbine has been successfully developed by Dongfang Electric and will be sent to Fujian for installation in the Xinghua Bay Wind Farm. The company’s large-scale turbines are designed to adapt to the characteristics of offshore wind resources both at home and abroad, and use permanent magnet direct drive and full-power conversion technologies to provide active typhoon-resistant performance. (Dongfang Electric)
Huaneng Lancangjiang Hydropower’s 1H2019 net profit reaches 2.8 billion CNY
Huaneng Lancangjiang Hydropower has released its half-year report, stating an installed capacity of 23GW and a power generation capacity of 53.9TWh, a 57.13% YoY increase, for the first half of the year. The company’s operating income was 10.6 billion CNY, a growth of 63.66% YoY, and net profit attributable to the parent company was 2.8 billion CNY, which is up 224.77% YoY. The company’s infrastructure investment during the six months totaled 1.25 billion CNY. (stock)
Huaneng Xiaowan hydro plant 4.2GW
Zhejiang DRC releases methods for competitive bidding of offshore wind projects
According to the notice, all projects that will undergo competition must be listed in the Zhejiang Offshore Wind Farm Project Planning Report, which has yet to be released. Projects subject to competition include two types:
For both types of projetson grid price accounts for a score of 40 pointsout of a total of100. (Zhejiang DRC)
Liaoning strives to reach PV installed capacity of 5GW in 2021
In the Liaoning PV Construction Plan Notice (2019-2021) released by the provincial DRC, it has been revealed that the 2021 target for PV installed capacity is 5.1GW. This reflects the province’s desire to take advantage of the lack of any serious PV curtailment problem in the region and therefore fully exploit PV capacity. The notice also emphasizes promoting investment in PV poverty alleviation projects in Northwest Liaoning. (PVNEWS)
Heilongjiang promotes nuclear, wind, hydrogen and smart grid development
The Heilongjiang Government has released the Strong Industrial Provinces Construction Plan (2019-2025). In regards to energy, the plan aims to strengthen the construction efforts of new energy service platforms, as well as encourage the development of production support services such as R&D and design, inspection and testing, and management consulting within the new energy industry. Specifically, emphasis was placed on promoting the R&D and application of nuclear energy, wind power, hydrogen energy and smart grids. (Heilongjiang GOV)
South Hebei power grid power trading to include all commercial users
The power trade on the South Hebei power grid is now fully open to commercial users. Prior to the opening of the power trade, only users with voltage levels above 10kV and annual power consumption above 10MWh were able to participate in direct trading, while those below 10MWh were required to entrust a trading company to act as their agent. Now, commercial users—which are power users in industries other than residential, agriculture, utilities and public welfare services—are no longer subject to such voltage level, power usage and general industry restrictions. (Hebei DRC)
Mingyang’s offshore wind turbine orders exceed 4GW
Mingyang has released its semi-annual performance forecast, declaring a half-year net profit of 290-350 million CNY, an increase of 99.19-140.4% year-on-year. The company also reported that its offshore wind turbine orders reached 4.18GW, and that its contract amount was about 26.949 billion CNY. Its offshore wind power orders were mostly concentrated in Guangdong and Fujian Provinces. It was also revealed that Mingyang has deployed three sea blade production bases in Guangdong and that by 2020, the production capacity of the MySE5.5MW series and above will reach 3.5GW. (Sina)
MySE6.0MW product line basic parameter
This piece was written by Azure CEO Hubert Beaumont to share his opinions on the potential opportunities and challenges for international companies entering the Chinese offshore wind market, as well as advice on a few basic things to think about before entering. This article is also featured in Global Wind Energy Council's (GWEC) Asia Newsletter Industry Pulse, where you can find the latest on wind energy news in Asia.
I must admit I have been surprised to see the wave of developers and investors suddenly moving into the Taiwanese offshore wind market over the past five years, bringing along with them a comprehensive supply chain, financing and several hundred westerners who have established their homes in Taipei or in coastal cities. This is certainly comforting as such an appetite for investing in offshore wind despite the risks inherent to emerging markets reaffirms that we have chosen a viable line of business, but it also makes one wonder: while Taiwan is a fantastic place and has great wind resource, it is, in term of size and opportunity, only a fraction of mainland China. Taiwan has a total offshore wind pipeline of 10GW, whereas last year Guangdong alone, which is one of 12 Chinese coastal provinces, approved 30GW in just two weeks. So why is there in comparison so little foreign participation in the Chinese renewable energy market? Of course, there are many answers to this question, including that China does not lack the capital to do it on its own, but I believe part of the answer also lies in the fact that China is just so big and so different than most investors are not confident enough to approach it. Yet we are seeing more and more signs of change; developers that are already established in Taiwan cannot ignore the big neighbor, the Chinese central and local governments have renewed interest to attract foreign capital, and SOEs can benefit from partnering with foreign developers with strong references and expertise. In order to seize these opportunities, foreign participants will need to understand the rules of the Chinese game. Here are a few basic principles that can give you a head start:
1. Most players are State-Owned Enterprises (SOEs)
The establishment of the current power market structure in China can be dated back to 2002, when State Power Group, which until then was the sole owner of a majority of the energy infrastructure in China, was divided into five power generation companies (the “big 5”) and two grid companies (China State Grid Corporation and China Southern Grid). Today the “big 5”, namely China Energy, Huaneng, Huadian, Datang and SPIC, own about half of all energy projects in China, and the remaining half is in majority distributed among a number of smaller (yet still huge) specialized state-owned enterprises (e.g. Three Gorges, CGN, SDIC, China Resources) and provincial state-owned energy groups (e.g. Guangdong Energy, Fujian Energy, Zhejiang Energy, etc.). Only a small portion of energy projects is owned by private or foreign companies.
The distribution is similar for offshore wind, as the approved pipeline is currently developed by state-owned players, with a few exceptions—in cases where either local entrepreneurs or private wind turbine manufacturers have been able to secure project rights.
2. The rules are made for them (the SOEs)
State-owned players have an intricate relationship with central and local governments; state policies are generally addressed to them and designed for them, and SOEs are in the front line for receiving information and explanations regarding policy, and in return, they influence and participate in policy drafting. While this is an advantage, SOEs also carry a number of disadvantages compared to private or foreign investors which we summarize below:
Electricity prices are also suited to them. Indeed, until the recent introduction of market trading mechanisms under the on-going power market reform, and still today for a majority of electricity produced and consumed on the grid, every single energy-related price in China has been calculated and fixed by state regulators, from production of energy using different types of technologies, to transmission across various distances and different voltage levels, to consumption of energy varying per type of consumer, connection voltage, location, time of day, etc. There are three general guiding principles used by regulators in defining energy prices:
Reasonable returns are typically defined as follows:
Given that prices are regulated for a large number of projects, individual project performance may vary from that constant. Returns may be tolerated below the reasonable benchmark, especially in areas where further investment is not encouraged such as in the coal sector in general or for wind and solar in regions facing heavy curtailment, but generally, losses are to be avoided. Similarly, returns on single projects may largely exceed these benchmarks as well. There are examples of onshore wind projects in Yunnan or offshore wind farms in Fujian with excellent wind resource, no curtailment, and high tariffs, which have yielded excellent returns.
Therefore a private investor working on a smaller pipeline may be able to cherry-pick the best project locations, spend more time and resources to optimize project design, implement higher standard O&M practices, etc., while at the same time benefitting from the same prices. This approach has proven successful onshore for a small number of private and foreign investors, while the key challenge remains the ability to compete with SOEs in securing such pipeline, except for those who have chosen to partner directly with them. For offshore wind, the opportunity to optimize projects will also depend on the ability to work closely with the unavoidable local design institutes, the only entities accredited to design projects.
3. The rules are stable or predictable
Renewable Energy is a fully-grown and mature market in China that is way beyond its first exploratory trials and surprises. While there is on-going reform affecting a number of key market drivers, we consider that the regulatory and legal environment for renewable energy investors is generally stable and predictable. Of course, there are still a number of considerable risks and challenges, such as those listed below:
4. China is huge, diverse and ripe with opportunities
While this extract provides a simplified illustration of how the Chinese energy market works, it is important to keep in mind that in fact, nothing in China is simple. There are tremendous forces at play. The central government has engaged in a battle to reduce grid monopoly, which is creating great waves within the markets. Meanwhile, local governments, as well as local branches of SOEs, are protecting their own interests, which all need to be understood in their respective contexts. Opportunities, risks, interlocutors, resources, costs and other factors affecting your business plan will vary greatly from one province to another. In order to be successful as an investor in China, you will need to carefully pick your areas of focus, your projects, teams, and partners, as well as develop an understanding of China at all levels of your organization.
At Azure International we have worked with foreign investors in the Chinese renewable space for over 15 years, including in both onshore and offshore wind, helping our clients and partners to assess markets, projects, and players in this complex environment. While the road has not always been straightforward for foreign investors, with many feeling left on the sidelines of a booming market essentially shared between locals, we currently see a new window with tremendous opportunity for foreign players, due to a combination of three trends. First, as the Chinese economy is slowing down, the country has realized the need to attract more foreign capital. Second, the offshore wind brings a set of new challenges compared to onshore, a context in which having an experienced foreign partner can be a strong competitive advantage. And finally, the regulatory environment for renewable energy in China is strong and mature and designed to provide stability to state-owned investors, thus creating a safe framework for various players to evolve in.
P.S: We are currently working on a publication that will detail the history and status of Chinese energy players, regulation and policy, with the aim of helping foreign investors to develop a detailed understanding of the market. Subscribe to our newsletter mailing list and we’ll be sure to send you a copy!
Zhangjiakou plans to establish a renewable energy power trading center
The Zhangjiakou Capital Water Conservation Functional Zone and Ecological Environment Supporting Zone Construction Plan for 2019-2035 has been introduced by the National Development and Reform Commission (NDRC). The notice specifies that Zhangjiakou will build a strong smart grid with high-quality on-site matching of renewable energy supply and demand. The document also reveals the province’s plans to establish of a renewable energy power trading center in Zhangjiakou to carry out market-based trading of renewable energy consumption in the Beijing-Tianjin-Hebei region. (NDRC)
Jing-jin-ji (Beijing-Tianjin-Hebei) coordinated development plan
NDRC reveals power spot market construction plan
The NDRC has revealed its plans for a spot market that will mainly carry out daily, intraday and real-time electricity energy transactions, which contrasts traditional power trading that carries out medium to long term transactions. According to the plan, the corresponding priority power generation of non-hydro renewable energy should then cover the number of guaranteed utilization hours. (NDRC)
Shandong accelerates construction of new energy projects
The Shandong Government has just rolled out a new measure to “vigorously expand the consumer market and accelerate the shaping of new advantages for the domestic demand-driven economy. In terms of energy, Shandong has pledged to speed up the construction of “Shandong power import” transmission projects, implement solar power generation demonstration projects, offshore wind projects, coastal nuclear power and coastal LNG import hubs, as well as launch the first pilot demonstration project for offshore wind power integration development. (Shandong GOV)
Changyi City Marine Ranch and 3-Gorges 300MW Offshore Wind Power Integration Test Demonstration Project
Data on 1H2019 show 26% of electricity consumed in China is generated by renewable energy
In the six months, China consumed 3400TWh of electricity, up 5% from the same time last year. The total electricity consumption in the east, central, west and northeast regions account for 47.0%, 19.1%, 27.9% and 6.0% of the nation-wide total electricity consumption, respectively. Electricity consumption in Qinghai, Gansu and Shanghai provinces decreased by 2.8%, 0.7% and 0.1%, while electricity consumption in the other 28 provinces grew at a rate that exceeded the national average.
In the first half of 2019, renewable energy has generated 888TWh of electricity, which means a growth of 14% year-on-year (YoY). Within this, 514TWh of electricity was generated by hydropower for an 11.8% YoY increase, 215TWh was generated by wind power for an 11.5% YoY increase, 107TWh was generated by photovoltaic (PV) power for a 30% YoY increase and 53TWh was generated by biomass power for a 21.3% YoY increase
Newly installed capacity for the first six months totaled 41GW, of which 1.8GW is hydropower, 9.1GW is wind power, 11.4GW is PV power and 1.3GW is nuclear power. Therefore, non-fossil energy generation has a significant share of 58.4% of newly installed capacity.
Moreover, progress in electrification has been further advanced. In recent years, the share of electricity in China's energy consumption has been steadily increasing. In the first half of the year, 98TWh of electric power had substituted fossil fuels, accounting for 2.9% of total electricity consumption of the whole society. By the end of June, a total of 1 million charging piles had been built across the country. In addition, according to data released by the China Charging Alliance, as of June 2019 China's EV to charging station ratio reached 3.5:1. Meanwhile, China has 2.81 million all-electric cars, which is 82% of the total number of new energy vehicles.
Source: Azure International, NEA, CEC, EVCIPA
New subsidy bidding mechanism brings average PV subsidy to 0.0645 CNY/kWh
As of the end of July 2019, the average subsidy for PV projects participating in the subsidy auction was 0.0645 CNY/kWh, which is down more than 50% compared to the guiding price. Since the new release of the Notice on the Active Promotion of Grid-Parity of Wind Power & PV Power Generation in May, a total of 23 provinces (except Jilin, Heilongjiang, Fujian, Hainan, Yunnan, Gansu, Xinjiang, Tibet and Xinjiang) organized 4,338 projects for the bidding of state subsidies for 24.56GW of PV power generation. According to Mr. Li Chuangjun, Chief of the New Energy Division of the National Energy Administration (NEA), a new mechanism has been established to both save subsidy funds and guarantee stable development of the industry. Comparing the demand for subsidies under the new bidding mechanism and that under the current guiding FIT, the demand can be reduced by 2.16 billion CNY per year, which can save the state 43 billion CNY based on a 20-year subsidy period, said Mr.Li at an NEA press conference at the end of July. (NEA)