This week, RenewableUK hosts the Global Offshore Wind conference in Manchester. One topic we will be keeping a close watch on is the growing influence of Chinese investors.
Over the last month we have seen two major breakthroughs by Chinese companies in the European offshore wind sector. Last week, hydro giant China Three Gorges Corporation completed its first investment in European waters by buying an 80% stake in joint venture WindMW from Blackstone Energy Partners, which gives it the majority stake in the 288MW Meerwind Sud and Ost in the German North Sea. The deal valued WindMW at €1.7bn.
This is not the first deal that Three Gorges has announced in the European offshore wind sector.
In October, it agreed to buy up to 30% of the planned up-to-1.1GW Moray scheme in waters off Scotland from EDP Renovaveis. However, this deal is only set to complete if the development wins support under the UK’s Contracts for Difference regime. EDPR has also started consultation on its planned Moray 2, so more deals between EDPR and Three Gorges at Moray could yet happen.
Meanwhile, the first Chinese-backed offshore wind development in UK waters, the 588MW Beatrice off the Scottish coast, reached its £2.6bn financial close on 23 May. The project is 25% owned by China’s SDIC Power Holdings, with the majority held by SSE (40%) and Copenhagen Infrastructure Partners (35%). SDIC bought its stake from Repsol this year.
In our view, there are three key points that firms in European offshore should take from these deals.
The first is that they should give developers extra confidence to pursue development plans. There is certainly no shortage of major investors interested in offshore wind, but any move into the market by deep-pocketed state-run Chinese firms is an extra boost.
The second is that such deals could open up opportunities for supply chain companies in China. It is tough to enter the Chinese market speculatively, but the opportunity to work on schemes in Europe could cement relationships that would make it easier to enter China. If there is one thing that China needs in order to develop its offshore wind industry, it is experience.
And the third point about these deals is that they show the Chinese government is serious about building wind farms offshore. Such investments would not secure government permission otherwise.
We need only look at the Global Wind Energy Council’s annual review of the global wind industry to see the progress that’s being made. In 2015, offshore wind farms totalling 360MW were installed in Chinese waters to take total installed capacity to over 1GW.
Now, these are not offshore projects as most European developers would know them. Most of them are nearshore inter-tidal schemes, but GWEC has reported that an increasing number of developers are ‘testing the waters’ with such projects; and there are deeper-water projects in the development process. The pace is picking up.
It will not be easy. The major obstacle for large-scale offshore wind in China at present is the low feed-in tariffs; and these are likely to stay low in the short term as the government remains cautious about offshore wind growing too fast. It is already dealing with problems connecting the large number of onshore wind farms to the grid, and will not want a repeat offshore.
But moves by SDIC and Three Gorges in the North Sea may help it gain that confidence. We will watch the market with interest.
Investment expertise. High-quality events. Exclusive content. Lead generation.
Talk to the Tamarindo team today to find out how membership would benefit your business.