CHINA'S offshore wind market is set to pick up with the approval of more projects, but that may not be enough to ease overcapacity among many struggling turbine makers.
China has become the world's largest wind market after years of explosive growth that also spawned oversupply, intense price competition and quality concerns. In particular, the offshore segment of the industry got off to a relatively slow start because of high costs and the lack of an on-grid tariff that could ensure investment return.
China's offshore capacity stood at 389.6 megawatts at the end of 2012, the third-largest after the UK and Denmark. But that's below 10 percent of China's official target of having 5,000MW offshore by 2015.
"We think the 2015 target is unlikely to be met," said Jin Xiaolong, chief executive of Shanghai Electric Wind Energy Co, a joint venture between Shanghai Electric Group and Germany's Siemens. "The industry's general consensus is 2,500MW to 3,000MW."
Offshore boom
Still, the offshore sector could see a rapid growth period through 2015 as the government approves more projects and may unveil a preferential tariff policy soon, Jin said in an interview last week during the Offshore Wind China conference.
To date, the government has given initial approval for 17 offshore wind farm projects, with a combined capacity of 3,950MW, along the east coast, according to Yi Yuechun, deputy chief engineer at state-owned planner HydroChina Corp. Another 28 projects totaling 8,500MW are awaiting approval.
Among them is the second phase of the Shanghai Donghai Bridge Wind Farm, a 116.6MW offshore facility that will use turbines made by Shanghai Electric. Construction will begin in the second half of this year, Jin said.
The first phase of the Donghai project was supplied by Beijing-based Sinovel Wind Group Co. It started operation in 2010 as the first grid-connected offshore wind project outside of Europe.
Still, Steve Sawyer, secretary-general of the Global Wind Energy Council, said China needs to speed up substantially to meet its 2015 offshore wind target, citing costs as the main challenge in slower economic times.
Jin said Shanghai Electric aims to capture 30 percent of China's offshore wind market through its 51 percent-held partnership with Siemens, which has brought key turbine prototypes to the venture. Siemens is a leader in the global wind market.
A 30 percent share is enough to make Shanghai Electric No. 1 in China's offshore market, a new focus for turbine makers that have suffered from a decline in onshore installations.
Wind's No. 3
Wind is already China's third-largest power source after coal and hydro, but grid connection problem and poor planning have left many onshore wind farms idle, causing slower development and overcapacity in the sector. China installed 15,900MW of onshore wind capacity last year, less than 19,300MW in 2011.
Turbine makers are now hoping to capture the faster growth offshore. However, in addition to costs, China also faces other hurdles in its offshore market.
China has to catch up on marine hydrographic surveys and submarine geological surveys, which are essential for the construction of offshore wind farms.
Also, the government should hasten the process of clarifying the function of sea waters to pave the way for wind farm projects to be erected at potential sites, said Shi Pengfei, vice president of the Chinese Wind Energy Association.
Meanwhile, the offshore wind market is facing competition from other renewable energy sources.
For example, the government has this year initiated an ambitious program to promote distributed solar power generation, with the State Grid Corp of China announcing it will connect all distributed renewable sources, such as solar, for free.
