Wind Power Network News: The “Belt and Road” initiative has received positive responses from countries along the route. As the world’s largest producer and consumer of renewable energy, China is increasingly participating in international wind power capacity cooperation.
Chinese wind power companies have actively participated in international competition and cooperation, promoted advantageous industries to go global, and realized the entire chain of exports of the wind power industry from investment, equipment sales, operation and maintenance services to overall operations, and achieved positive results.
But we must also see that with the increase in international wind power projects by Chinese companies, risks related to exchange rates, laws and regulations, earnings, and politics will also accompany them. How to better study, grasp, and avoid these risks and reduce unnecessary losses is of great significance for domestic enterprises to improve their international competitiveness.
This paper conducts risk analysis and risk management by studying the South African project that Company A invests in driving equipment exports, and proposes risk management and control suggestions for the wind power industry in the process of going global, and strives to make a positive contribution to the healthy and sustainable development of China’s wind power industry’s international operation.
1. Models and risks of international wind power projects
(1) The construction of international wind farms mainly adopts the EPC mode
International wind power projects have multiple modes, such as the mode in which “design-construction” is entrusted to one company for implementation; another example is the “EPC engineering” mode, which involves contracting out most of the design consultation, equipment procurement, and construction at the same time; and According to the concept of the whole life cycle of a project, the design, construction and operation of a project are handed over to a contractor for implementation.
Combining the characteristics of wind power projects, international wind power projects mainly adopt the EPC general contracting model, that is, the contractor provides the owner with a full set of services including design, construction, equipment procurement, installation and commissioning, completion, commercial grid-connected power generation, and handover until the end of the warranty period. In this mode, the owner only conducts direct and macro-management of the project, and the contractor assumes greater responsibilities and risks.
The wind farm construction of Company A’s South Africa project adopted the EPC general contracting model.
(2) Risks of EPC general contractors
Because foreign contracted projects involve risks such as the political and economic situation of the country where the project is located, policies, laws and regulations related to imports, exports, capital and labor, and foreign exchange control measures, and may also encounter unfamiliar geographic and climatic conditions, and different technologies. Requirements and regulations, as well as the relationship with local government departments and other issues, so the risk factors have a wide range, which can be mainly divided into political risks, economic risks, technical risks, business and public relations risks, and management risks.
1. Political risk
The political background of the unstable country and region in which the contracting market is located may cause serious losses to the contractor. The South Africa project strengthened investigation and research at the decision-making stage: South Africa has a good relationship with neighboring countries, and there are no obvious hidden dangers to external security; China-South Africa bilateral trade has developed rapidly, and relevant protection agreements are sound. However, the social security issue in South Africa is an important political risk facing the project. The EPC general contractor employs a large number of laborers in the process of project implementation, and the personal and property safety of workers and management personnel are threatened, which needs to be taken seriously.
In addition, potential geopolitical risks, political conflicts, and regime changes will affect the continuity of policies and the enforceability of contracts. Ethnic and religious conflicts lay hidden dangers to the safety of personnel on site.
2. Economic risks
Economic risk mainly refers to the economic situation of the contractor, the economic strength of the country where the project is located, and the ability to solve economic problems, mainly in terms of payment. It includes several aspects: inflation, foreign exchange risk, protectionism, tax discrimination, poor payment ability of owners, and delays in payment.
In the South African project, the electricity price is obtained in rand as the settlement currency, and the equipment procurement expenditures in the project are settled in U.S. dollars. There is a certain exchange rate risk. The losses caused by exchange rate fluctuations can easily exceed the project investment income. The South African project won the third round of bidding for new energy projects by the South African government through bidding. Due to fierce price competition, the process of preparing the bidding plan to putting into production is long, and there is a risk of loss of wind turbine equipment and services.
3. Technical risks
Including geological conditions, hydrological and climatic conditions, material supply, equipment supply, transportation issues, grid connection risks, technical specifications, etc. The biggest technical risk faced by international wind power projects is grid connection risk. The installed capacity of South Africa’s wind power integrated into the power grid is growing rapidly, the impact of wind turbines on the power system is increasing, and power grid companies continue to improve grid connection guidelines. In addition, to increase the utilization rate of wind energy, high towers and long blades are the industry trend.
The research and application of high-tower wind turbines in foreign countries is relatively early, and high-tower towers ranging from 120 meters to 160 meters have been put into commercial operation in batches. my country is in its infancy stage with technical risks related to a series of technical issues such as unit control strategy, transportation, installation, and construction related to high towers. Due to the increasing size of the blades, there are problems of damage or bumps during transportation in the project, and the maintenance of the blades in overseas projects will bring about the risk of loss of power generation and increased costs.
Post time: Sep-15-2021
