China's rapid expansion of its offshore wind power capacity is bringing formidable new challenges as well as opportunities for its domestic industry and international investors.
Its frenzied pace of offshore wind turbine installations is occurring as its government prepares to end national subsidies for such projects at the end of this year.
While China's massive renewables-led drive to become carbon neutral by 2060 is expected to continue, new research from energy consultancy Wood Mackenzie suggests offshore wind operators will face considerable operational challenges to ensure the profitability of their projects.
“China, who is set to become the single largest offshore wind O&M market globally, must tread carefully,” Wood Mackenzie senior analyst Shimeng Yang said.
China is expected to overtake the UK to become the world’s largest offshore wind operations and maintenance (O&M) market by 2029. It could see 41 gigawatts of growth throughout the 2020s, leading to 49GW of total capacity — equivalent to $2 billion (€1.7 billion) of operating expenditure opportunities by 2029, Wood Mackenzie said.
By the end of last year, China had operated 7.5GW of offshore wind projects — up from 450,000 kilowatts in 2013 — ranking third in the world by country after the UK and Germany, according to the Global Wind Energy Council.
By region, Europe is expected to be the biggest regional O&M market, reaching $6.6 billion (€5.5 billion) of opex opportunities by 2029, according to Wood Mackenzie.
Worldwide, the offshore wind O&M market is expected to grow 16% annually to reach $12 billion (€10 billion) by 2029, Wood Mackenzie said.
Three provinces' projects 'in disorder'
Provincial governments in China's coastal areas are rushing to install offshore wind turbines, especially as they face the halt in national subsidies at the end of the year.
Under the current policy, offshore wind projects that have secured approval in 2019 and 2020 have to be commissioned before the end of 2021.
If not, project developers will be deprived of a government subsidy of 0.85 yuan ($0.13) for every kilowatt hour of electricity generated.
However, the authorities in southern China’s Guangdong province have decided to finance the province's own subsidies for the local offshore wind projects in 2022 and 2023.
Those subsidies will cover projects totaling 4.5GW, including 2.1GW built in 2022 with a subsidy of 1500 yuan per kilowatt of new capacity installed.
The subsidy will be reduced to 1000 yuan per kilowatt of new capacity built in 2023.
Projects now being built in Guangdong, Jiangsu and Shandong provinces are “in disorder,” without inter-provincial coordination, according to an official involved in China’s offshore wind farm engineering.
Some 32GW of Chinese offshore wind projects are planned for construction in the next five years, including 23GW in eastern China’s Jiangsu province, and another 6GW to 10GW planned for construction in Fujian, Shandong and Liaoning province.
“China’s young and rapidly growing fleet will require sweeping changes in asset-management strategy to deal with massive uptake throughout the 2020s,” Yang said.
Construction of future offshore wind projects will be planned for deep water farther away from shore, where borders between different provinces are hard to define, Chinese industry officials told Upstream.
Floating offshore wind projects in deep water are an emerging opportunity in China where oil and gas companies looking to transition to renewable energy might find particular success.
Supply of vessels constrained
The offshore wind farm construction spree has also sparked strong demand for offshore wind installation vessels, said Qin Haiyan, secretary general of the Wind Energy Committee of China Renewable Energy Society, at a recent offshore wind conference in Beijing.
“There is a serious supply shortage of offshore wind installation vessels," he said. "Those available are not enough to meet the demand to install facilities with capacity totalling 4GW a year.”
The constrained supply of offshore wind vessels could delay most of the projects seeking to meet the commissioning timeline, Qin said.
The window for installing offshore turbines is very short, as rough climate, typhoons and high seas make most of the year inhospitable for offshore work, he added.
Chinese yards are now building nine offshore wind installation vessels. Of the total, seven are of jack-up design, while one is bottom-supported design and one is ship-shaped.
Five of them will be delivered this year, with the rest targeted for completion in 2022.