COVID-19 slows wind sector
The knock-on effects of COVID-19 on China’s wind power industry is expected to last until the third quarter of 2020. The lasting influence is due to COVID-19-induced disruption in workforce and logistics in Hubei, an important labor-exporting province, and the severe condition around the globe.
China’s logistics have recovered in March, with the average van load-to-truck ratio returning to normality in April and highway freight rates rising steadily to the pre-COVID-19 level. However, Henan and Jiangsu provinces, as well as various areas had remained in lockdown at that time, impeding deliveries of the wind turbine components.
Lockdown measures imposed in countries that supply China with key wind turbine components have also hampered the recovery of wind power industry in China. For instance, China ran short of imported raw materials such as balsa wood, bearings and IGBT chips as COVID-19 took its toll on Italy and Ecuador.
According to Bloomberg BNEF, impact of the pandemic on offshore wind is limited compared with other renewables sectors. The research organization has maintained its offshore wind capacity forecast at 6 GW, with installations mainly coming from China and Europe. Offshore wind was among the industries that resumed operations earlier in China because offshore production cycle is long and large in scale and has a concentrated supply chain.
An upward trend
Wind turbine prices have been gradually increasing since 2019 after hitting bottom in 2018. The price increase was driven by a surge in demand after the Chinese government announced in May 2019 that new onshore wind projects will no longer be subsidized beginning January 1, 2021.
Subsidy steps down
The Chinese government finalized the FIT levels for offshore wind in 2019, which was RMB 0.8/kWh (NT$3.55/kWh). It was revised down to RMB 0.75/kWh (NT$ 3.33/ kWh in 2020. The government has approved 8.3 GW projects eligible for the 2019 rate this year. However, more than 40 GW projects that are under way may be late for the grid-connection deadline.
Over the past decade, the costs for wind power generation have halved globally. China’s onshore wind power generation cost is expected to decline 30% in the next decade due to market competition. It is expected that most provinces in China will achieve grid parity or provide even lower prices, as wind turbine technology made wind turbine with capacity larger than 10 MW possible, thereby driving costs down and efficiency up. Although wind manufacturing sector will face adaptation issues for the short term, the prospect of the wind industry remains optimistic.
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