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  • Supply Chain Challenge in China’s Offshore Wind: The Vessel Shortage
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    1. The primary challenge is still the supply chain pressure. Vessel as an important part of the offshore wind supply chain significantly matters to project completion.
    2. There is a shortage of vessels in China and will get worse when the Chinese turbine size continues to increase, and projects go far sea. For example, WTIVs of >1,600 tons of lifting capacity, cable laying vessels with >5,000 tons of cable capacity, and SOVs might face a supply risk in the short to medium term.
    3. Digital platforms that have vessel management and window of opportunities prediction could be demanding to improve vessel utilization rate.
    4. Although green maritime logistic is not an urgent task now, it is expected to become a decisive criterion for tendering in the future. To avoid the vessel shortage crisis that the industry faces now, it is better to prepare early for decarbonization in maritime transportation sectors. Methanol-powered vessels can be an option for SOV.

  • China's Offshore Wind Turbine Manufacturers Pioneering the Global Market: What Does it Mean for the Rest of the World?

    1. China has secured its leading position within the offshore wind energy sector, displaying consistent growth in recent years. This sustained progress persists even with the cessation of China's "feed-in-tariff" premium for wind energy in 2021, signifying a shift from subsidy-dependent to market-oriented dynamics.
    In response to heightened industry competition, diverse technological trends have emerged to facilitate cost reduction, notably encompassing the continuous expansion of turbine size and the localized production of upstream key components.
    2. Projections indicate the industry's eventual economic viability for expansive growth in the forthcoming years. The outward expansion into international markets appears to be a promising prospect for Chinese turbine OEMs, a path already paved by industry leaders like Mingyang and Goldwind.
    3. Despite concerns stemming from a protectionist stance regarding the importation of China's offshore wind turbines, it becomes increasingly apparent that China will establish a more significant presence in the offshore wind sector. This trend is accentuated by the foreseeable imbalance between supply and demand in Western markets, particularly Europe and North America.

  • Navigating climate disclosures in China -- An in-depth comparison of Scope 1, 2 and 3 emissions reporting criteria between CDP and China’s national ETS

    1. Scope 1 emissions reporting: Compared with China’s national ETS, CDP requires a lower level of emission breakdown. Emission data collected for CDP could provide a reference for China’s ETS reporting, but it cannot be directly copied.
    2. Scope 2 emissions reporting: Both location-based and market-based method are accepted in CDP. Whereas China’s national ETS does not accept market-based method yet. Only location-based method, a method does not factor any contractual agreements such as green electricity PPA or energy attribute certificates (i.e. GECs), is used when calculating Scope 2 emissions. Thus, unless the factor changes, the only way for emission entities to reduce location-based emissions in ETS is to reduce total energy usage, or increase on-site renewable generation such as installing rooftop solar PV.
    3. Scope 3 emission reporting: Companies participating in CDP should report their Scope 3 emissions, while the level of detail and the data accuracy of Scope 3 accounting are less required than that in Scope 1 and 2, given the primary evaluation of Scope 3 lies in the engagements with value chain partners to achieve decarbonisation. China’s national ETS does not require reporting on Scope 3 emissions.

  • VPP (Virtual Power Plant): Growing as China’s Energy Market

    1. China’s VPP construction, in which most of VPPs are invitation type, falls behind world’s advanced energy markets, exposing market opportunities for experienced VPP players. Chinese VPP market size is expected to exceed RMB 30 bn in 2025.
    2. The load modulation market leads to good opportunities for VPP players who are able to modulate various energy resources, including distributed generators like rooftop PV, especially in middle, west and north regions. A national demo gave VPP stakeholders an average profit of RMB 0.18/kWh in 2020-2021. The profit is expected to increase as AS is further marketized.
    3. The frequency modulation market can be potential business for VPP players with efficient frequency control capabilities, e.g., owning Energy Storage System (ESS), in the southern regions. The South Grid disclosed a frequency modulation market size of RMB 1.11 bn in 2022.
    4. The emerging spot market will provide profitable chances for VPPs with sophisticated forecast capabilities for power generation, consumption and market price. Guangdong, Shandong, Shanxi, Inner Mongolia and Gansu’s spot markets have a price spread gap between RMB 0.195/kWh and RMB 0.548/kWh, which can be the profitable room for VPPs.

  • China’s Path to Green Steel: Varies Technologies Can Have a Chance

    1. International policies such as CBAM and US’s Global Agreement with the EU will further accelerate a low-carbon transition for China’s steel export business. Although the immediate impact is low now, steel exporters better pay close attention to its long-term impact.
    2. Three main options exist for Chinese steel producers. EAF might be the fastest one to adopt. The proportion of steel produced by EAF is expected to exceed 15% by 2025 and 20% by 2030. Hydrogen reduction and DRI can commercialize in the later phase but with huge potential.
    3. China has a large share of young blast furnaces, it is not economical to shift to hydrogen DRI or EAF in the short term. Thus new technologies such as CCUS, biomass and hydrogen reduction could have some potential as well.
    4. China is rich in coal but lacks natural gas resources. Because of this, coke oven gas is mostly used to inject hydrogen reduction or hydrogen DRI. This lowered costs but comes with limited emission reduction. This creates future business opportunities for green hydrogen, distributed generators, water electrolysis etc.

  • Enter the Chinese EMS Market as an ESCO with technical advantages

    1. Carbon neutral and energy conservation-related policies, cost reduction needs, and also social drivers have been driving the EMS installation in China. The Chinese EMS market is quite promising with a total market size of around $9.57 billion in 2022 and a CAGR of 19.5% from 2020 to 2025.
    2. Overseas EMS suppliers can enter the Chinese market by demonstrating their technological advantages in components such as programmable logic controller (PLC) and variable-frequency drive (VFD) which have obvious advantages in some of the parameters compared with Chinese suppliers. (Check the Technological Advantage part below)
    3. Overseas EMS suppliers with integrated solution-providing ability can successfully enter the Chinese market through a suitable business model – Energy-saving Service Company (ESCO). (See further analysis on ESCO and Schneider’s project below)

  • FCEV Model City-Cluster Project in China : Progress after 1st year of Demonstration
    Shanghai FCEV Operation Ceremony 2

    Although there were various obstacles encountered in the first year of FCEV Model City-Cluster demonstration, more and more players having been entering the industry from the upstream green hydrogen production to downstream start-up FCEV OEM. Benefiting from the continuous introduction of various economic stimulus subsidy policies, in the second year of the demonstration period, the execution of FCEV-related projects will be accelerated, and with the help of the capital market, the industry will still maintain a relatively rapid growth momentum. For instance, after the COVID-19 epidemic ended in 2022, the number of HDT promoted has greatly increased, especially in Hebei and Henan province which shows a fast speed to catch up with the demonstration target.

  • Unlocking the Potentials of Hydrogen Credits: See How Chinese Companies are Leading the Change in Bringing Hydrogen to Carbon Trading

    【In brief】
    - Two Chinese hydrogen projects, one renewable hydrogen production project, and one hydrogen fuel cell logistic truck project are seeking CDM crediting to issue international carbon credits. Another hydrogen fuel cell commercial vehicle project is up for CCER issuance at home.
    - Hydrogen credit issuers expand from upstream to downstream, going from green hydrogen producers, hydrogen fuel cell vehicle operators, to vehicle end-users based on different emission baseline scenarios.
    - Hydrogen credit can be sold either as a stand-alone product (unbundled credit) or bundled with hydrogen (bundled credit). If it is sold as a stand-alone product, the issuer should pay extra attention to the double-counting between the credit retiree and the physical hydrogen product buyer.

  • CCUS in China: Unlocking the Potential Opportunities of Carbon Utilization and Storage

    1. To achieve carbon neutrality, CCUS decarbonization technology will be necessary for hard-to-abate sectors such as cement, steel etc. For instance, in the cement sector, the replacement of green electricity and green fuels could only cut 40% of emissions. The rest 60% cut might only be reduced through CCUS, carbon conversion technology etc.
    2. Considering the high cost needed during the capture process, except for driving down high capture costs, usage of captured CO2 can be of vital importance to increase the overall revenue.
    3. In the short term, EOR will continue to be one of the most economical feasible carbon utilization methods. Under a high oil price situation, such as now, oil revenue from CCUS-EOR (~USD 270/ton) is able to offset CCUS operation cost which is estimated to be around USD 130/ton.
    4. Although currently dominated by big SOEs, private and foreign companies play key roles in China’s CCUS project development. Dunhua and Shell are two examples.
    5. EOR can be a transitional method in the short term, but the development of other storage resources shall also be put on the agenda, otherwise, it raises the risk of slowing down CCUS deployment due to a lack of data and experience on storage resources.

  • China's Emissions Trading: The Opportunities Ahead

    In brief:
    1. Although financial investors both home and abroad are temporarily excluded from the national ETS, it is likely that they will be introduced in the near term.
    2. Once financial investors are involved and derivative products are adopted, the national carbon market could grow further and the price of CEA could rise from the current ¥49/t to around ¥93/t by 2030, according to China Carbon Forum’s estimation. A similar trend could be expected on CCER.
    3. For those participants who are eyeing the relaunch of CCER and seeking business opportunities in China, the international voluntary carbon market provides a valuable reference in terms of credit issuance project types, carbon offset business model, scope 3 emission reduction strategy, etc.
    4. Looking forward, China’s carbon market is likely to embrace new projects that support cutting-edge technologies such as Carbon Capture, Utilization and Storage (CCUS), hydrogen storage, and commercial fuel cell vehicles to align with the country’s carbon neutral goal. Innovative business model that reaches beyond the corporate level and further down to end-consumers could be an emerging trend to watch.