According to the Zhitong Finance APP, Huayuan Securities released a research report stating that the decline in new offshore wind installations in the past three years was mainly due to the withdrawal of national subsidies and other external factors, leading to lower-than-expected project commencements. Currently, domestic offshore wind is expected to enter a period of intensive construction, with related manufacturers having sufficient orders on hand, and the certainty of performance release is relatively high after the projects are successfully put into operation. European offshore wind is expected to accelerate, and there is a shortage of capacity. Domestic manufacturers have already laid out plans to go overseas and are expected to capture the spillover demand from Europe, making domestic offshore wind opportunities promising.

The main points of Huayuan Securities are as follows:

Offshore wind has been in a low valley for three consecutive years due to multiple factors

In 2021, due to the withdrawal of national subsidies, China's offshore wind experienced its last rush for installation, with new installations reaching 16.9GW, the highest peak in history. Subsequently, installations declined significantly. New installations for 2022/2023/2024 are projected to be 5.1/6.3/4.0GW, significantly lower than in 2021. The decline in new offshore wind installations was mainly influenced by the withdrawal of national subsidies and other external factors, leading to lower-than-expected project commencements.

Sufficient reserve of projects awaiting commencement, expected to enter a period of intensive construction

(1) Guangdong: The main equipment for the Qingzhou 57 project has completed bidding, and the Fanshi No. 1 project has entered the full construction phase. The Sanshan Island offshore wind power DC transmission project has already commenced. The external factors affecting offshore wind in the Yangjiang area of Guangdong have been resolved, and it is expected to enter a period of intensive construction. The 7GW of 15 projects launched in 2023 have all been approved in 2024. (2) Jiangsu: In 2022, Jiangsu started three projects totaling 2.65GW, but construction was delayed due to external factors. By 2025, all three offshore wind projects have successfully commenced. At the beginning of the year, 21 projects totaling approximately 8GW of offshore wind in Jiangsu have confirmed their investment entities, and construction is also expected to commence within the year. (3) Shanghai: The deep-sea offshore wind power demonstration project totaling 4.3GW has begun preliminary work such as environmental assessments and bidding.

The trend of high-voltage and DC cables is evident, benefiting leading cable manufacturers significantly

As offshore wind enters the parity era, using higher voltage AC cables or DC cables, such as 500kV, has become an important means to reduce costs, and the trend towards high voltage and DC is more favorable for leading enterprises. Currently, only a few companies in China, such as Dongfang Electric, Zhongtian Technology, and Hengtong Optoelectronics, have won bids for 500kV ultra-high voltage AC cables and DC cables. The competitive landscape is improving. The projects that have been bid continue this trend: (1) Dongfang Electric: won the bid for Qingzhou 57 ±500kV DC cable (1.5 billion yuan), Sanshan Island ±500kV DC cable (900 million yuan), Fanshi No. 1 and No. 2 500kV AC cables (2.6 billion yuan); (2) Zhongtian Technology: won the bid for Sanshan Island ±500kV DC cable (900 million yuan), Fanshi No. 2 500kV AC cable, etc. The optimization of the landscape is expected to drive the gross profit margins of related enterprises' products.

European offshore wind is expected to develop on a large scale, and domestic manufacturers are expected to accelerate their overseas expansion due to capacity shortages

According to GWEC forecasts, by 2028, new offshore wind installations in Europe are expected to exceed 10GW, and by 2030, they are expected to exceed 20GW (only 3.8GW in 2023). The production capacity for offshore cables is relatively tight, with European medium and high voltage cable production capacity at 5,000 kilometers per year, roughly matching current European cable demand, while demand is expected to exceed 15,000 kilometers per year by 2030. Domestic cable production capacity is approximately 15,000 kilometers per year, and the current combined capacity of Europe and China cannot meet long-term demand (with demand expected to be around 30,000 kilometers per year by 2030) Under the condition of tight production capacity, domestic submarine cable manufacturers are expected to accelerate their overseas expansion. Some domestic submarine cable companies have already laid out their overseas business: (1) NBO: Since 2020, it has secured orders exceeding 2 billion yuan in Europe, with the highest voltage reaching 220kV; (2) ZTT: It has won bids exceeding 1 billion yuan in projects such as Baltica2, with the highest voltage reaching 275kV. Leading domestic submarine cable manufacturers are gradually entering the mid-to-high-end market in Europe.

Risk Warning: The construction progress of offshore wind is lower than expected, the competitive landscape is deteriorating, and offshore wind planning is below expectations