Winds of Change Blowing Through Japan’s Offshore Sector
It is not yet full steam ahead, or even full wind ahead, for Japan’s offshore sector, but things are certainly headed in the right direction. Winners of the second round of auctions for offshore wind projects were announced last month, and bidding for the third round recently opened. While a number of issues remain, so does enthusiasm for the potentially huge market.
Encouragingly for the numerous international players looking for a slice of what the government hopes will be a 10GW pie by 2030, the largest of the second round projects was won by a consortium led by Germany’s RWE, joined by Mitsui & Co. and Osaka Gas. Though still smaller than some of the offshore wind farms in Europe, the site off Murakami and Tainai in Niigata is set to deliver 684MW when it comes online – slated to be mid-2029.
Next in terms of size is a 420 MW development off Enoshima Island, Nagasaki, to be operated by Sumitomo Corporation and TEPCO Renewable Power, followed by a 315MW farm off Akita City from a JERA-led consortium.
The fourth winner, also for a site off Akita, has been told to resubmit its bid due to overlapping port use. This illuminates one of the potential bottlenecks for future development: the need for ports able to handle the large-scale, specialist infrastructure for offshore wind.
Ding-ding, round three
January 19 saw the launch of the third round of auctions, for two sites off northern Japan with a total capacity of 1.05GW, approximately equivalent to the output of one nuclear reactor. The auction is set to close mid-July and results are expected before the end of the year, according to the two entities in charge: the Ministry of Land, Infrastructure, Transport and Tourism (MILT) and Ministry of Economy, Trade and Industry (METI). The price ceiling for supplied electricity is \18/kwh, a drop from the \19/kwh in round two, with consortia expected to bid a few yen below that.
Both the dates when projects are due to become operational and bid prices, “have provoked a lot of scepticism in the industry,” says Meg De Pasquale-Crighton, a consultant at Japan energy market specialists Shulman Advisory.
“Even mid-2029 to come online could be ambitious,” she says, pointing out that there are no guarantees that the necessary upgrades to the power grid will be completed in time. “There is no compensation planned if the grid is not ready, but there are quite severe penalties if deadlines are not met on the developers’ side.”
Nevertheless, the challenges do not appear to be scaring too many out of the market. Indeed, RWE is doubling down after its recent auction victory. CEO Sven Utermohlen told Reuters: “We’re actively developing further projects and also actively preparing for the upcoming auction rounds in Japan to participate again. … We can’t do the whole world and we felt that for us, Japan and South Korea are more attractive than India and Taiwan.”
The offshore holy grail
As part of the development of Japan’s offshore market, METI is aiming to create a domestic supply chain, the importance of which has been underlined by disruptions to multiple global sectors in recent years. “But for the immediate future, we can expect a mixture of importing and building here,” suggests De Pasquale-Crighton.
Though the technology is still in its infancy, it is floating offshore that is the key to unlocking much of Japan’s wind potential thanks to its ability to operate in the deeper waters that surround much of the archipelago.
The Japanese government has classified the areas it is looking at developing into ‘Preliminary,’ ‘Prospective’ and ‘Promotion.’ In addition to the first two areas that could exceed 1GW in generation being placed in the Prospective category, there are now three areas earmarked for floating at the Preliminary stage.
Floating turbines are likely to remain significantly more expensive than their fixed counterparts for the foreseeable future. But the government expects the two offshore varieties to account for about an equal share of the 45GW in generating capacity it envisions being operating or under development by 2040.
The government has said it will make efforts to accelerate assessments for potential wind farm sites, centralise the overall assessment process and prioritise grid upgrades. Japan will need all the help it can get to achieve its stated goal of carbon neutrality by 2050. The answer, my friend, may be blowin’ in deep offshore wind.
By: Gavin Blair
We are currently looking for talent from the Energy Industry, as well as related industries such as Construction and Machinery. To find out more about hot roles in sustainability area and elsewhere please contact us at +81-3-5962-5888 or email us at info@slate.co.jp
Current openings:
• Technical Project Managers
• Technical Project Engineers
• Service Managers
• Project Developers
• Commercial Managers