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Fixed prices for output from offshore wind farms hailed

PUBLISHED : Friday, 20 June, 2014, 12:59am
UPDATED : Friday, 20 June, 2014, 1:23am
 

Beijing has unveiled fixed power prices for output from offshore wind farms for the first time, providing badly needed certainty on returns for developers that will help them meet ambitious clean energy targets.

New wind farms commissioned between now and the end of 2016 on inter-tidal shores - areas above water at low tide and under water at high tide - would be entitled to charge the power distributor a tariff of 75 fen per kilowatt-hour, the National Development and Reform Commission said yesterday.

Those permanently submerged in near-shore regions would be allowed to charge 85 fen per kWh.

Tariffs for projects that begin generating power from 2017 would be set later according to the pace of technological advancement and changes in construction costs, the commission said.

Power prices for projects previously awarded via tendering would remain at levels at which the winning bids were submitted.

"Providing certainty to on-grid power prices is conducive to restarting the sluggish offshore market," Bocom International analyst Louis Sun Shengquan said in a research note. "But the possibility of massive expansion in the next two to three years is non-existent, as China's offshore technology needs upgrading."

A spokesman for China Longyuan Power, Asia's largest wind farm developer, said the new prices would give its offshore projects an annual return of at least 12 per cent.

According to the National Energy Administration's 2011-15 development blueprint, the mainland should have 5,000 megawatts of offshore wind farms by the end of next year, rising to 30,000MW by the end of 2020.

Four pilot projects were awarded to developers by tender in late 2010 but few were completed as planned because the power prices of the winning bids were too low, and execution proved more complex than expected.

The China Wind Energy Association says the mainland installed 39MW of new offshore wind farms last year, down 69 per cent from 2012. The cumulative installed total was 428.8MW at the end of last year, of which 300.5MW were on inter-tidal shores and 128.1MW in near-shore waters. The mainland has the world's fifth-largest bank of installed offshore wind farms, after Britain, Denmark, Germany and Belgium.

Offshore projects cost twice as much to build as onshore ones and are more challenging technically, which means they require higher power prices to achieve the same rate of return.

Power prices of the four pilot projects were between 62 fen and 74 fen per kWh. Tariffs for onshore projects range from 51 fen to 61 fen.

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