China’s Huadian Fuxin will slow wind farm expansion and seek power-swap deals

Huadin wants to pump more of its power into the grid system.

PUBLISHED : Monday, 04 April, 2016, 3:52pm
UPDATED : Monday, 04 April, 2016, 3:52pm


Huadian Fuxin Energy, — the renewable energy unit of one of China’s biggest state-owned power generators China Huadian Group — will slow wind-farm installations due to ongoing power-grid bottlenecks.

The company will also seek to ‘swap’ power allocations with coal-fired producers. The aim would be to pump more wind-generated energy into the grid and sell it in central and eastern China.

Such moves would lessen the amount of energy from coal and require other generators to decrease output.

Grid operators’ approval is also needed.

“We will offer to pay the coal-fired producers sums equivalent to or slightly higher than their profit margins, so that they are no worse, or better off,” Fuxin chairman Fang Zheng said in an interview.

Subsidised wind power prices are higher than those of coal-fired power.

Fang said making such deals is worthwhile, even if the net benefit amounts to only “a few fen” per kilo-watt-hour, after paying off the coal plants. Wholesale on-grid coal-fired power prices generally range between 40 and 50 fen per kilowatt hour.

Some 19 per cent of Fuxin’s wind power output was not taken up by the grid and went wasted last year due to the bottlenecks last year. That compared with 11.3 per cent in 2014.

Most of Huadian’s wind farms are in northern China, a region that suffers from the worst grid capacity shortages.

The national wind-power wastage rate was 15 per cent last year compared with 8 per cent in 2014.

Fang said Fuxin will not start any new wind farm projects this year in the worst-hit provinces of Gansu, Jilin and Heilongjiang as well as the Xinjiang Uygur autonomous region.

Fuxin shifted its development focus to eastern, central and southern China last year. It is now looking for those territories to account for 40 to 50 per cent of total wind generation capacity, up from less than 20 per cent now.

The company plans to add 1 to 1.2 gigawatts (GW) of new wind farms this year, 75 per cent of which will be in the central, eastern and southern China. It added 1.53 GW last year.

The slow down mirrored an industry trend.

Fang forecasted China’s total wind farms installation would fall to 25 GW this year from 38 GW last year because regulated power prices have been cut.

Generation by Huadian the end of last year comprised 3.6 GW from coal-fired power, 2.5 GW from water, 0.8 GW by solar and 0.5 GW out of natural gas. It owns minority stakes in two nuclear power projects.

Fuxin last month posted a 1.8 per cent rise in net profit of 1.9 billion yuan. Revenue rose 10.4 per cent to 15.35 billion yuan.

Higher profit from water-, wind-, solar- and gas generated power was almost entirely offset by lower profit from coal-fired generation. Utilisation of the company’s coal-fired plants dropped 20 per cent due to weak power demand and rapid coal and nuclear power supply growth in Fujian province, where all its coal-fired plants are located.

The shut down of a small plant also contributed to the decline.

Fang forecast Fujian’s power demand growth will grow up to 3 per cent this year, after diving to 1 per cent last year from 9 per cent in 2014.

He said Fuxin’s coal-fired plants’ average utilisation is expected to fall further to between 3,900 and 4,000 hours this year, or below 50 per cent their capacity.

Last year’s utilisation slumped 20 per cent to 4,011 hours.

“We believe power [generation] overcapacity in Fujian is a key risk,” Dennis Ip, head of utilities and renewables research at Daiwa Capital Markets, said in a report. He cited Fuxin management’s projection of an average 5 per cent power generation growth in the five years to 2020 and “accelerated” coal-fired and nuclear power capacity between this year and 2018.