China’s Offshore Wind Program is Beached by Interagency Disputes

China offshore windSHANGHAI — In 2011, when China unveiled its 2015 target for offshore wind development, it was an ambitious goal by any measure. Europe, the global leader in this sector, spent two decades building nearly 4 gigawatts of wind farms in the sea. China wanted to surpass that within five years.

But two years after China’s first round of bidding for offshore wind farms took place, none of these projects has moved beyond the planning stage. The nation’s second round of bids, which was expected to start in the first half of this year, is also delayed.

“Based on the current development speed, it is very unlikely for China to meet its target,” said Yang Fuqiang, an adviser on energy policy at the Natural Resources Defense Council. He says the nation’s goal is to ramp up its offshore wind power capacity to 5 GW by 2015.

While China has already built a few offshore wind farms as pilot projects, there is a strong desire to develop more. Climate activists hope they will contribute more clean energy to the economy, which largely runs on dirty coal.

The turbine-making industry views the Chinese offshore sector as a new gold mine; its estimated wind resources are three times greater than those of wind on land. And engineers hope installing wind turbines just outside the country’s energy-guzzling coastal cities can help save a considerable amount of money and trouble, compared with building thousands of miles of transmission lines to bring electricity from more wind-rich inland areas.

In 2010, China took a crucial step toward tapping wind from the sea. The nation issued its first tender for two offshore wind projects as well as two intertidal projects in which wind turbines are installed in areas that are above water in low tide and underwater in high tide.

Hurry up and wait

Four bids were soon offered by several Chinese wind project developers. What has stymied construction of those wind farms, according to Shi Pengfei, vice president of the Chinese Wind Energy Association, are disputes over where they should be built.

Because of lack of coordination, different government bodies drew different land-use plans for the same sites. As a result, one of those bid projects was sited in an area designated as home to rare birds.

While new locations for those projects have been selected and regulators here are reviewing the site changes so construction can begin, the end of one problem now becomes the beginning of another.

Already, developers that competed for the tender have charged little for their work, sacrificing investment return to gain a foothold in the emerging offshore market. And the money wasted on preparing to build wind farms in locations that have been rejected has further squeezed their thin profit margins — if not caused a loss. That, in turn, has led to an argument over whether the government should now accept higher-priced bids.

To be sure, Chinese policymakers want to avoid repeating the mistake. The National Energy Administration and the State Oceanic Administration last year jointly issued a guideline for China’s future offshore wind development. But although such a move can help regulate the project application process, experts say it can’t resolve a major conflict.

Old troubles, new troubleshooters

As Shi explains, the State Oceanic Administration wants wind farms to be built as far as possible from the shore, in order to save space for fishing, transportation and many other uses. Meanwhile, the National Energy Administration wants the opposite.

Andrew Grieve, analyst at Religare Capital Markets in Hong Kong, said the biggest problem in building wind farms far from the shore is the additional cost, which comes from “more materials, more cables and more time with the installation using very expensive specialized boats.”

Moreover, the farther out an offshore wind project is, the more technical challenges it must face, including stronger winds and higher seas. And for now, Chinese turbine makers are still struggling with projects built close to shore. The nation’s wind turbine leader, Sinovel, for one, had to replace many parts in a pilot intertidal project, as its first installation was found to have rusted, Grieve said.

Yet one way to quickly resolve these problems has emerged recently. It came from Europe, where industry players have mastered offshore wind power technology. A few months ago, Shanghai Electric formed a joint venture with Siemens AG, combining Chinese manufacturing power with German know-how to serve a market that for now is stalled, though it is rich with potential.

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