Chinese appetite for European investments


June 9, 2017

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The Chinese wind market is as mysterious as it is large. We know its size (169GW installed capacity at the end of 2016) and its potential, but we rarely hear insights from its key players.

The Offshore Wind Energy 2017 conference in London this week enabled us to do just that. At the ‘Market Developments in China’ session on Tuesday, we heard about the opportunities that growth in offshore wind in China might open for European investors.

The country currently has 2GW of operational offshore projects, according to latest Bloomberg New Energy Finance figures – both inter-tidal and nearshore – and has a target of reaching installed capacity of 5GW by 2020 with at least 10GW under construction.

It also has an ambition to be the world’s largest single offshore wind market within ten years, which will of course make overseas companies sit up and take notice.

During the session we heard from Zhang Yi, general manager of SPIC Jiangsu Offshore Wind Power. The State Power Investment Corporation (SPIC), which was established in June 2015 through the merger of China Power Investment Corporation and State Nuclear Power Technology Corporation, is one of China’s five largest power generators.

Zhang revealed the company plans to expand its presence in the offshore wind sector in China, and said he would welcome future partnerships with European businesses. The firm has installed 500MW of offshore wind capacity so far – the 100MW Binhai North H1 and the 400MW Binhai North H2 projects – and is planning a further 600MW to be completed by 2018: the 300MW Binhai South and the 300MW Dafeng schemes.

These would bring its total capacity next year to 1.1GW, and SPIC then aims to double that in the following two years. It has received approval for three projects this year: the 400MW Rudong H7, the 400MW Rudong H4 and the 300MW Sheyang H1 wind farms. All these projects are due to be completed by 2020.

However, Zhang said one challenge for realising its plan would be the lack of an established local supply chain, and the barriers to overseas firms seeking to enter the market.

Overseas firms often struggle with laws and regulations in China and its lengthy bureaucratic procedures. Also, the country has become more internally-focused in the past few years to boost its economic growth, preferring to support local players. But Zhang said he would be very happy to welcome European companies in China, including in the projects on which SPIC is working.

There is an irony here. Zhang explained that China’s fledgling offshore market would need investment from overseas experts, including developers, manufacturers and contractors. But, when it comes to the money needed to take projects to financial close, China has the capital and willingness to invest in offshore wind developments in its home market and in Europe.

Indeed, the increasing presence of Chinese capital in European schemes has shown that appetite. More cross-border investment in both directions could strengthen future relationships between the two regions.

Rifu Huang, deputy dean of offshore wind at China Three Gorges, made a similar invitation at the conference as he invited European businesses to enter into long-standing profitable relationships with their Chinese partners. China is showing an interest in offshore wind, but it is likely to take some relationships with experienced players from Europe to help the market realise its full potential.

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