China – SOEs rushing to build offshore wind energy plants with low bids

China’s State-owned power producers are jumping into unknown territory by rushing to build offshore wind farms at very low bidding prices, said Li Junfeng, deputy director of the Energy Research Institute of the National Development and Reform Commission (NDRC).

"The (low) bidding prices are unrealistic and can be very risky," Li said at the conference for the release of the China Wind Power Outlook 2010 report on Wednesday.

By contrast, China National Offshore Oil Corp, which has rich offshore project experience, tendered a reasonable price of more than 1 yuan (15 US cents) a kWh in the bidding concession, Li said.

"Offshore wind power can follow the model of inland wind farm projects, which use fixed rates, and gradually combine bidding prices and fixed rates," he added.

The first round of public tenders for offshore wind turbines, launched last month, attracted many low bids, leading some players to contemplate the industry’s development pattern.

Most bidders gave prices between 0.6 yuan and 0.7 yuan a kWh. The final prices were set between 0.6235 yuan and 0.737 yuan.

Depending on resource quality, China’s onshore wind power feed-in tariffs can be 0.51 yuan, 0.54 yuan, 0.58 yuan or 0.61 yuan.

The after-tax on-grid price of the country’s first offshore wind farm in China, the Shanghai East Sea Bridge Offshore Wind Farm, is 0.98 yuan a kWh.

The low prices have also forced private players, who are not as financially strong as the State-owned enterprises, out of the business, some market observers said.

Wind farms’ profitability comes from large-scale operation, so big State-owned companies enjoy an advantage, Li said.

The China Wind Power Outlook 2010 report shows industry consolidation is intensifying as the sector develops in China. This means more conglomerates will emerge to lead the industry.

The country’s top three wind turbines manufacturers – Sinovel, Goldwind and Dongfang Electric – control about 60 percent of the country’s market share, NDRC Energy Research Institute Researcher Gao Hu said.

The cumulative installation of China’s wind power industry is expected to surpass that of the United States by year-end, Global Wind Energy Council Secretary-General Steve Sawyer said.

The country’s offshore wind power sector has more exploitable resources than the inland sector. Fujian, Shandong, Zhejiang and Jiangsu provinces, and Shanghai municipality are planning to install 32,800 megawatts of offshore wind power capacity by year-end, the China Wind Power Outlook report said.

Source: China Daily,