For anyone familiar with the Czech novelist Franz Kafka, or just used to the bureaucracy of business life, the saga of offshore Chinese wind should be easy to grasp.

In 2010, Peggy Lui, chair of the Joint US-China Collaboration on Clean Energy said the country was "going from manufacturing hub to clean-tech laboratory of the world".

She was speaking at the Shanghai World Expo, just after the first of China’s commercial offshore wind projects was completed – a 102MW farm in the East China Sea, close to the city’s Donghai Bridge. The entire fair was powered by the wind farm – a gesture that gave credence to the hype and optimism surrounding the sector.

Then came the projections. Starting in 2011, China’s stated goal was to generate 5GW of offshore wind capacity by 2016. By 2030, the target was 30GW. Implementation plans for further capacity were drawn up by many
of China’s coastal areas – places like Zhejiang, Liaoning and Guangdong, where industry is everywhere but fuel shortages remain a problem.

Not everyone was bullish, of course. Speaking in The New York Times, Andew Grieve, a senior researcher at J Capital Research, expressed caution. "The top-level people are cautiously optimistic," he said. "They are far more optimistic on the local and provincial level."

Even that seems overstated today. Four years after the Donghai Bridge Wind Farm was constructed, barely anything seems to have happened in the Chinese offshore sector. Just 39MW of installed capacity was added in 2013 – a dramatic 69% drop on the previous year.

In a rare admission of disappointment, Yi Yuechun, deputy chief engineer of HydroChina, laid out the facts at the Offshore Wind China 2013 conference. "Even if China could construct the 3.95GW approved by the National Energy Administration) for preliminary preparations by 2015, China is barely able to complete the 5.00GW goal by that time," he said.

Perhaps the biggest surprise in this saga was the fate of four big projects in Jiangsu. A public tender for 1GW
of offshore wind power was issued back in 2010 by the National Energy Commission (NEC, formerly the NEA), but it wasn’t until the third quarter of 2013 that they were actually approved.

Fighting FiTs

If there’s an explanation to be found as to why a country whose record in onshore wind is so strong should be
so laggard and ineffectual in the offshore sector, it is almost certainly in these projects. The most obvious place to look is the conflict between the NEA and the State Oceanic Administration (SOA) – two agencies with apparently clashing interests.

In 2002, the SOA established marine functional zones (MFZs) to control and direct the use of sea areas, protecting the ecological environment and promoting exploitation when sensible for the marine economy.

The possibility of offshore wind farms springing up in the seas around China was not considered when this document was first drafted, nor was the remit of the SOA factored in when the NEA organised the public bidding back in 2010. The result was a series of seemingly endless arguments around the legitimate use of China’s seas by two parties convinced that the other was ignoring them.

Unfortunately, the problems didn’t end there. Squabbles around feed-in tariffs (FiTs), which developers felt were too low, were another big hindrance. The FiTs, which ranged from 0.62 yen to 0.74 yen (around $0.10-0.12) per kilowatt hour, were as high as anything offered for onshore wind. But the costs of constructing and maintaining an emergent sector are incredibly high.

The private sector, dominated by five large power generators, was clearly not satisfied it could make a sufficient profit.

"It’s clear that, with the right changes to the market and with appropriate levels of planning, China has every chance of becoming an important player in the offshore sector."

"The bid-winning feed-in tariffs are too low," said Feng Xuepei, deputy general manager of the project development department of Shenhua Guohua Energy Investment. "We are unsure if and when we will make profits. This partly explains why few companies are eager to develop offshore wind projects after the public tender."

Xuepie’s fears are certainly understandable. It seems almost impossible for offshore wind developers to make rational decisions about investment without a clear, unified tariff system in place.

"A clear pricing system is urgent for offshore wind power development," said the deputy chief engineer at the China Renewable Energy Engineering Institute (CREEI). "Otherwise, the developers will not invest more into the projects without clear prospective earnings."

Look to the East

In 2012, the Center for Renewable Energy Entrepreneurship and Innovation was commissioned by the NEC to
sort this out, charting China’s offshore development and producing an appropriate benchmark for FiTs. There
is now an acceptance that accelerating the development of offshore wind will require a higher benchmark – possibly around 1.00 yen per kilowatt hour. To date, nothing official has been produced.

That’s not to suggest it’s all doom and gloom however. The final quarter of 2013 was impressive for offshore wind, particularly given the imbroglio holding it back. Construction of a 100-turbine, 400MW farm off Nanri Island is underway in China’s Fujian province. In Jiangsu province, two more are in progress – one in Rundong by China General Nuclear Power Group and the other in Rundong by Longyuan Power.

Three of the original four commercial projects laid out by the NEC have now also been agreed, and phase II of the Donghai Bridge wind farm in Shanghai has started – with 28 turbines and 102MW of additional capacity being added to the site.

Shanghai has been particularly receptive to this spike, announcing a regional tariff system in May that it hopes will increase supply across the renewable energy sector. And it’s in the east that China hopes the future of its offshore sector will lie, with priority given to Shanghai, Jiangsu, Hebei and Shandong – areas where the conditions and the demand for offshore development is present.

"Developing offshore wind farms in these areas will reduce local energy shortages and avoid the problem of long-distance transmission experienced by China’s major land-based wind farms," said Qin Haiyan, secretary-general of the China Wind Energy Association (CWEA) in China Daily.

It’s clear that, with the right changes to the market and with appropriate levels of planning, China has every chance of becoming an important player in the offshore sector. The delays and false starts that have troubled the sector are disappointing but by no means overpowering.

China has made some staggering achievements in the past two decades. If it can sort out the pricing system and get all the different parties singing from same hymn sheet, there’s no reason it can’t carry on in the same vein.