Having turned their focus to offshore wind as a means of achieving renewable energy targets, both Taiwan and China now face the considerable challenge of technology catch-up. Are foreign partnerships likely to be the way forward?

By Paul French in Shanghai

Since 2007, boosting offshore wind energy has been a long-term goal of both Mainland China and Taiwan.

China’s multitude of policies aimed at achieving its wind energy target of 30GW installed by 2020 has resulted in a rapid deployment of wind farms on the mainland.

Backed by a supportive policy framework and liberal bank lending, the PRC is set to surpass its 2020 target in 2010, representing an investment of RMB200bn, according to the Chinese Renewable Energy Industries Association.

Meanwhile, Taipei believes offshore wind offers the fastest way to attain its renewable energy target of 15 percent, or 8450MW, of Taiwan’s electricity to be generated from renewable resources by 2025. It aims to be generating 2-3GW offshore by 2025.

Not the right FiT

In terms of stimulating development, setting the right feed-in tariffs has been a major obstacle in mainland China.

Feed-in tariffs have gradually declined in recent years, due to reduced capital expenditure costs owing to economies of scale.

More recently, a turbine supply gap coupled with rising commodity prices eroded any remaining advantage conferred by the tariffs.

In early 2009, China introduced standardised feed-in tariffs for wind power, purportedly to regulate regional pricing disparities.

However, the UN allegedly suspects that China’s grid feed-in tariffs may have been manipulated to ensure that more projects are eligible for CDM funding.

To date, China has been the largest beneficiary of carbon credits under the Clean Development Mechanism (CDM), the UN’s carbon trading mechanism. To be eligible for credits, applicants must demonstrate that renewable energy projects would not have been developed without the aid of carbon credits.

But the UN has temporarily frozen its project approval process for numerous Chinese wind projects, allegedly due to suspicions of unfair play.

In Taiwan, the government passed a Renewable Energy Act in July 2009, which sets out a framework for a feed-in tariff. The FiT is likely to be announced in January 2010. 

Offshore interest growing

Offshore has traditionally been a secondary sector in the PRC due to significant land based facilities and the fact that most projects to date have been initiated by inland provinces.

As Shi Pengfei, vice-chairman of the Chinese Wind Energy Association (PRC) admits that when it comes to offshore wind: “There are many challenges in technology and operations.”

High costs and extreme weather conditions present the biggest challenges. “Construction of an offshore plant costs more than twice that of a plant with the same capacity on land,” says Shi.

Both the PRC’s eastern coast and Taiwan are in typhoon-prone areas, which demands more durable equipment. Additionally, there are concerns about the environmental impact on sub sea ecosystems.

More recently, however, Beijing has looked to Hong Kong, where available land is highly limited, for offshore wind development.

Responding to Hong Kong’s 2005 government target of 1-2 percent of electricity from renewable energy sources by 2012, French wind project developer, Wind Prospect, and local power generator CLP are developing the 200MW Hong Kong Offshore Wind Farm located 9km east of Hong Kong Island.

The project sparked the PRC’s interest in offshore wind. Two-years later in November 2007, China National Offshore Oil Corp (CNOOC) brought China’s first offshore plant online.

Installed on CNOOC’s Bohai Suizhong 36-1 oil platform around 70 km off China’s northern coast, the facility has an installed capacity of 1.5MW and is currently being upgraded to generate 3-5MW.

China’s coastal cities have been the first to inaugurate offshore wind projects. The PRC’s biggest offshore wind farm to date, comprising 34 wind-driven generators, is currently under construction near Shanghai. Costing RMB 2.4 billion, the wind farm is estimated to have an installed capacity of 100,000kw.

Shanghai Municipal Electric Power Company is planning a further two other offshore projects at Fengxian Bay and Changxing Island.

In total the three projects will increase Shanghai’s existing wind power capacity by 254,000kw to 293,000kw, equivalent to about 1.5 percent of total installed generating capacity.

Opportunity for foreign developers?

In the ROC Scotland’s SeaEnergy recently partnered with Taiwan Generations Corp (TCG) to develop a 600MW offshore wind farm on the west coast at a cost of US$1.2bn (€83bn; £75bn), 2.5km off Changhua County, in water depths of up to 30 metres. SeaPower has a 25 percent working interest in the completed facility, the first of several plants planned by TCG.

Meanwhile on the mainland, the PRC’s CNOOC is reportedly looking to partner with a foreign company to expand its offshore developments in northern China.

But on the whole, the PRC’s regulations supporting the wind industry have been designed to promote technology transfer and investment by foreigners into China, thereby giving local companies the opportunity to quickly catch up to their foreign rivals.

With large wind resources, both onshore and offshore, the PRC’s offshore wind energy potential is estimated at around 750GW, three times the potential on land.

As with its other ‘strategic industry sectors,’ Beijing is keen to protect its domestic companies.

As Alex Tancock of Wind Prospect Hong Kong warns: “Foreign players should exercise caution. While it is easy to plan a large portfolio, turning “braggawatts” into profitable projects is not always easy. Success will come from experience, patience and long-term commitment.”

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Rikki Stancich: rstancich@gmail.com