Offshore wind projects run into turbulence 

Construction work at four offshore wind farm projects in Jiangsu province has not started a year after they were awarded to major state-owned power firms at prices widely seen as too low to be profitable.

While the tenders were organised by Beijing, critics levelled accusations of conflicts of interest within departments of some local governments over land allocation.

Chinese Wind Energy Association vice-president Shi Pengfei said some local government agencies wanted the developers to move their projects further offshore to make way for industries considered more lucrative to the government in terms of tax, even though other agencies had approved the coastal region for wind farm development.

“The location of the projects will certainly be changed as local governments have changed their mind,” Shi said on the sidelines of the China Wind Power conference. “This will completely change the business models of the project winners. The governments should negotiate with the developers to resolve the matter and provide them with some compensation.”

He said local governments were having second thoughts about letting wind farms occupy precious ocean resources, because the seafood industry and tourism were competing for the same territory.

Local governments had in previous years been keen to attract wind power projects, mainly because they often secure local equipment manufacturing as a condition for granting approval, which can generate long-term jobs and tax revenues.

But overcapacity and slumping prices mean equipment makers are suffering from low profits or, in some cases, losses.

Last October, the National Development and Reform Commission unveiled the winners of the mainland’s first large-scale offshore wind power projects.

Hong Kong-listed China Datang Corporation Renewable Power teamed up with the world’s second-largest wind turbine maker, Sinovel Wind Group, to win a 300MW project in Binhai at a price of 0.74 yuan (HK$0.90) per kWh.

State-owned China Power (SEHK: 2380) Investment also bagged a 300MW project in Sheyang together with Sinovel, at 0.7 yuan per kWh.

Shandong Luneng Energy, which is also state owned, joined turbine maker Shanghai Electric Group (SEHK: 2727) in winning the 200MW Dongtai project at 0.62 yuan per kWh, while Hong Kong-listed China Longyuan Power Group and Xinjiang Goldwind Science & Technology won the 200MW Dafeng project at 0.64 yuan per kWh.

Representatives from Longyuan, Datang, Goldwind and Sinovel declined to be interviewed after a panel discussion on the industry’s recent development.

Analysts have said these prices – not much higher than onshore projects that have been granted fixed tariffs ranging between 0.51 yuan and 0.61 yuan per kWh – are too low. They said reasonable levels should be double those of onshore projects.

Mainland state power generators had bid for both large-scale onshore and offshore projects aggressively, as they see it as a quick way to meet state minimum requirements on renewable energy generating capacity.

Since the requirements are not on the level of power output, analysts worried that quality of equipment and hence output will be sacrificed to meet low turbine costs required by the developers.