As the core driving technology for global decarbonization, offshore wind power has the advantages of stable processing, long power generation hours, and proximity to high-load coastal areas. It has received great attention and vigorous development internationally.
The submarine cable link is located in the middle reaches of the offshore wind power industry chain, accounting for about 8%-13% of the value, and is one of the most profitable links in the offshore wind industry chain. Below, LINT TOP starts from the offshore wind power industry chain to understand the overview development status and barriers, future development trends and market size of the submarine cable industry.
01 Overview of submarine cables
Submarine cable mainly refers to cables laid in the underwater environment and used to transmit electrical energy. Submarine cables are widely used in power transmission between land and islands, islands and islands, offshore oil and gas exploration, seabed observation and exploration, marine scientific research, offshore wind power and other marine fields.
Submarine cables are located in the middle reaches of the sea wind industry chain. Offshore wind power is currently the largest application field of submarine cables. Submarine cables account for about 8%-13% of the value of sea wind projects. Submarine cables need to run in highly corrosive and high water pressure environments for a long time. They have extremely high performance requirements such as corrosion resistance, tensile and pressure resistance, water resistance and water blocking. Their cost is significantly higher than that of land cables, and their proportion in offshore wind power project investments can reach up to 8%-13%. The cost structure of offshore wind power projects corresponding to different sea areas (corresponding to different seabed geological conditions), different water depths and offshore distances is different.
The submarine cable has strong profitability and its gross profit margin is far ahead. In the offshore wind power industry chain, the submarine cable link is the most profitable, with a gross profit of 40%-50%. The gross profit of other key components such as main shafts, bearings, converters, etc. is between 30%-40%, and the gross profit of the remaining links is 30%-40%. It can only reach a level of about 20%.
In the submarine cable industry, first-tier manufacturers such as Dongfang Cable, Zhongtian Technology, and Hengtong Optoelectronics are far ahead in gross profit margin.
02 Current status of submarine cable industry
There are many subdivisions of submarine cable products, and the product voltage levels are generally higher than those of land cables. China’s research started late, but the products produced by leading submarine cable companies have gained international recognition.
The submarine cable industry is highly concentrated, with leading companies occupying the vast majority of the market share. At present, the leading submarine cable companies mainly include Zhongtian Technology, Dongfang Cable, Hengtong Optoelectronics, Han Cable Co., Ltd. and Baosheng Co., Ltd. Only these five companies have the supply performance of submarine cables of 220kV and above.
Transportation must be carried out through wharves and specialized submarine cable laying ships, but wharf shoreline resources are increasingly scarce, so the construction period of submarine cable bases is relatively long, generally 2 years or more. At present, most of the new submarine cable bases built by new entrants are still in the early stages of construction, so new entrants will not have a substantial impact on the industry structure in 1-2 years.
03 Barriers to the development of submarine cables
The barriers to the submarine cable industry have begun to change since 2020, from the previous four major barriers of terminals, towers, technology, and performance qualifications to six barriers of terminals, towers, technology, performance qualifications, construction qualifications & cable laying vessels, and production capacity location layout. Big barrier. Among them, wharfs, towers, and technology are the hard barriers, while performance qualifications, construction qualifications & cable-laying ships, and production capacity location layout are the soft barriers.
1）Terminal: The length of submarine cables usually ranges from several kilometers to hundreds of kilometers. They should be produced continuously as long as possible. The weight of a single kilometer can reach 40 tons. Transportation is difficult, and large take-up turntables need to be used for storage near the pier.
2) Tower: The structure of submarine cable products is complex and the requirements for insulation eccentricity are extremely high. As the voltage level of submarine cable products increases, the use of AC towers has become necessary. Combined with the large length and weight of a single submarine cable, it is necessary to submarine cable factories with cross-link towers must be constructed adjacent to submarine cable terminals.
3) Technology: The underwater environment in which submarine cables operate is complex. The application environment of strong corrosion and high water pressure makes submarine cables have higher performance requirements for corrosion resistance, tensile and pressure resistance, water resistance and waterproofing. Its material selection, structural design, The technical difficulties in production technology, quality management, laying and installation, operation and maintenance are relatively high. At present, only a few domestic companies have the production capacity of submarine cables, and even fewer companies have the capacity to mass produce submarine cables above 220kV.
04 Development trends and market size
One end of the submarine cable of the offshore wind farm is connected to the wind turbine, the other end is connected to the land booster station or centralized control center, and the middle may also be connected to the offshore booster station or converter station. At present, China's offshore wind farms usually use a two-stage voltage boosting scheme to increase the voltage. That is, after the output voltage of the wind turbine is boosted to 35kV through a box-type transformer, it is then converged to a 220kV booster station through a 35kV submarine cable and finally connected to the power grid through a 220kV line. Therefore, the commonly used submarine cables for offshore wind power are mainly 35kV collector submarine cables and 220kV outgoing submarine cables. Let’s take a detailed look at the three major trends in the future development of submarine cables: longer lengths, higher voltage levels, and an increased proportion of flexible DC applications.
Submarine cable trend 1: The average offshore distance of sea breeze projects increases by 22%, and submarine cables become longer
According to statistics, as of 2021, the average weighted capacity of the 75 sea breeze projects (22.4GW) that has been put into operation is 32KM offshore. It is conservatively expected that 29 submarine cable projects will be tendered this year, with a scale of 13.8GW, an average weighted capacity offshore distance of 37.65KM, and an average offshore distance increase of 17.64%.
Submarine cable trend 2: voltage level improvement
Under the trend of large-scale, in order to reduce loops, reduce line complexity, and reduce investment costs, the voltage level of submarine cables will be increased. It is expected that the voltage of the on-site submarine cable will increase from 35KV to 66KV in the future, and that of the outgoing cable will increase from 220KV to 500KV. Currently, there are 6.8GW offshore wind power projects planned to use 500KV submarine cables.
Submarine cable trend 3: Under the trend of offshore wind power, the proportion of flexible DC submarine cable applications is increasing
Flexible DC submarine cables are mainly used for long-distance power transmission and new energy access and grid connection. Compared with AC transmission, flexible DC transmission has the characteristics of small loss, stable voltage, and high transmission power. At present, the Three Gorges Qingzhou 5 and 7 offshore wind power projects plan to use ±500kV flexible and straight submarine cables.
5. It is expected that China’s leading submarine cable companies will accelerate the acquisition of European orders in 2024.
There are several major players participating in the European submarine cable market, including Prysmian, Nexans, NKT, JDR, etc. The market structure is stable.
According to statistics from Wind Europe, as of 2020, the average offshore distance of sea wind projects invested in Europe is 52KM, and the demand for DC submarine cables is greater than that in China. At the same time, European submarine cables tend to use aluminum cores due to low cost considerations, but aluminum core materials are more difficult to process than copper cores.
The Southeast Asian market, led by Vietnam, is an emerging incremental market for Haifeng. Considering that there are no local submarine cable companies in the region, and China is relatively close to the Southeast Asian market, transportation costs are low. Compared with European submarine cable companies, Chinese submarine cable companies have a competitive advantage in exporting to the Southeast Asian market.