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The National Energy Administration (NEA) announced that China's
offshore wind annual installations soared to 16.9 GW in 2021,
accounting for over 80% of global total additions that year and
quintupling China's domestic additions level from the previous year
in 2020. Following the record-setting growth, China surpassed
United Kingdom and Germany to become the largest offshore wind
market globally.
Compared with the official figure of 16.9 GW, IHS Markit
estimates close to 15.0 GW of grid-connected project additions in
2021. In our view, some of the projects may not have fully
commissioned in 2021 despite registering as grid-connected to meet
the subsidy deadline. Nonetheless, even with IHS Markit estimate,
by end-2021, China still holds more offshore wind capacity than any
other market in the world.
The boom in installations resulted from a rush to meet the
cut-off point for subsidy at the end of 2021. Developers missing
the deadline would suffer serious economic penalties—offshore
wind power tariff would be halved following the subsidy
removal.
For years, the availability of construction vessel has been the
key bottleneck in China's supply chain capabilities for offshore
wind installation. However, the number of offshore construction
vessels increased sharply in 2021, thanks to the developers' great
efforts in building, purchasing, leasing, or modifying existing
vessels to cope with the installation rush.
More project development experience, longer working hours, and
favorable weather also contributed to the unprecedented additions
in 2021. However, safety and quality risks increased resulting in
an uptick in accidents, demonstrating that such all-out
installation rush in 2021 is not sustainable.
Record level offshore additions will not reoccur in 2022, but
the strong momentum will continue during the 14th Five-Year
Planning (FYP) period. Cost reduction from declining turbine price,
shared transmission lines as well as policy incentives will support
the subsidy-free project pipeline. China's state-owned enterprises
will continue being the main drivers for offshore wind project
development, with strong support from provincial governments.
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