Japan’s Offshore Wind Market is on the Move

By the end of the year the results of Japan’s third auction round of offshore wind projects should be clear, with round 4 expected to open shortly afterwards. Though concerns remain around project sizes, approval processes and infrastructure, the government is trying to accelerate progress in the domestic sector and develop a local supply chain. Against this backdrop, global players are weighing up which markets in East Asia look the most promising, with some betting heavily on Japan.
The latest auction round, overseen by the Ministry of Economy, Trade and Industry (METI) and the Ministry of Land, Infrastructure, Transport, and Tourism (MLIT), had two areas: a 600 MW zone off the coast of Aomori and a 450 MW project off Yamagata.
This is smaller than the first two auctions though projects being approved in South Korea and Taiwan are of comparable scale. Meanwhile in Europe, where the market is more mature, offshore windfarms with at least 1GW in capacity are now the norm.
However, “there is plenty in the pipeline,” says Dan Shulman, founder of energy sector consultancy Shulman Advisory.
New potential areas are being regularly added to the lists compiled by METI, which it divides into preparation, promising or promotion zones, with the last category meaning ready for auction. Three more sites, one off Akita City and two off Wakayama prefecture, were put on the preparation list at the end of September.
Time is of the essence
The process of moving through to designation as a promotion zone and then auction is still a lengthy one, consisting of detailed environmental assessments, securing consent from all local stakeholders and ensuring sufficient grid capacity, notes Shulman
But there is a recognition of the importance of speed and authorities have centralised some parts of the process to expedite progress.
“This is where the government takes on a larger role in conducting environmental assessments on behalf of developers and offering higher points for projects with an earlier commercial operation date in the next auction,” explains Shulman.
Included in the lists are a number of areas designated for floating offshore projects, opening up vast tracts of ocean that are not viable for fixed-bottom offshore due to their water depth. An amendment to the Act on Promoting the Utilization of Sea Areas for the Development of Marine Renewable Energy Power Generation Facilities made in March this year allows operators to develop windfarms in Japan’s huge exclusive economic zone, or EEZ.
North wind blows
There are half a dozen sites off Hokkaido on METI’s list, including some for floating offshore. Japan’s biggest windfarm to date came online in January off Hokkaido’s Ishikari Bay New Port, with 14 Siemens Gamesa wind turbines giving a capacity of 112 MW. Meanwhile, local authorities and fisheries in Matsumae Town, on the southern tip of Hokkaido have given the go ahead for a 300 MW site that may go up for auction in round four.
Hokkaido has been designated by the government as a hub for renewable energy and next generation technology, and the Matsumae site is expected to provide power for new facilities on the northern island such as the new Rapidus semiconductor factory and a SoftBank data centre. More than 40% of Hokkaido’s electricity came from renewable sources last year, more than twice the national average.
Challenges remaining for the sector include the infrastructure at ports, another similarity that Japan shares with Taiwan.
“Most of Japan’s existing ports were designed to support smaller-scale shipping operations or traditional onshore industries, so they will need substantial upgrades to accommodate the assembly, storage, and deployment of floating OSW [offshore wind] components,” says Shulman.
Though there are hurdles to overcome for floating windfarms, in an encouraging development, a consortium of major domestic players earlier this year established FLOWRA, an industry group for collaborating on floating technology.
Local, regional, global
“Japan is also focused on building a localised supply chain to deliver local economic benefits and to reduce costs on transportation and currency or inflation risks,” adds Shulman.
Many global players, who effectively must form consortiums with local firms to bid for projects, see much potential in the domestic market, and Germany’s RWE is in the process of doubling its headcount in Japan. RWE, in partnership with trading house Mitsui & Co. and Osaka Gas, was successful in its second auction bid for a project off Niigata.
Spain’s Iberdrola is also looking at ramping up its Japan operations, while the UK’s floating equipment specialist Acteon recently signed a cooperation agreement with Taisei Corporation on project development. On the other hand, Danish renewable giant Orsted has said it is reducing its focus on Japan.
Another challenge for the sector, both in Japan and regionally, is a shortage of personnel, with many firms looking to attract capable staff from a range of other industries as demand continues to rise.
By: Gavin Blair
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