Waiting for the winds of change
Barriers to European offshore wind firms in Japan
JUNE 2022 Feature / Text by Gavin Blair
JUNE 2022 Feature / Text by Gavin Blair
While few doubt there is great potential in Japan’s offshore sector, deployment is being hampered by a number of issues, including regulatory aspects, infrastructure challenges, less than fully transparent tender processes, small project sizes, and protracted timelines. This has left some global developers, including many European firms, questioning the viability of the market and whether the Japanese government is serious about hitting its own targets for offshore power generation.
As part of its goal to achieve carbon neutrality by 2050, the government has called for the deployment of 10GW of offshore wind capacity by 2030, and of between 30GW and 45GW by 2040. That would be enough to power millions of homes, but it is not even close to achievable at the current rate of progress.
Last December, the results of the first auction for major offshore projects — two off the coast of Akita and one off Chiba — saw consortia led by Mitsubishi Corporation sweep the board with bids to supply electricity at prices so low many believe they will operate in the red. In addition to dismay over a single domestic firm heading all the winning bids, Mitsubishi is only set to begin construction between 2028 and 2030.
“That makes the probability of anything approaching 10GW of capacity coming online by 2030 extremely low,” notes Dan Shulman, head of energy consultancy Shulman Advisory.
The Ministry of Economy, Trade and Industry (METI) is overseeing the auctions, along with the Ministry of Land, Infrastructure and Tourism (MLIT), and to its credit METI has taken on board the criticism over the first auction. It announced in late June that for the next round — now expected at the end of the year — ultra-low pricing will be given less weighting, more emphasis will be placed on shorter construction timelines, and no company will be able to sweep the board again.
“There is an issue in many countries in which offshore is now starting up, where parts of the industry are more experienced than the regulators,” points out Lena Kitzing of the Technical University of Denmark’s Department of Wind and Energy Systems. “This is nothing unusual, and the situation was similar in Europe 10 or 15 years ago, when the industry and regulators went through a joint learning process.”
Another issue is the size of Japan’s current projects. The combined generating capacity of the first three is approximately 1.7GW. For perspective, the average output of a nuclear reactor is approximately 1GW.
However, as Netoshi Kuriyama, country manager for Vestas Japan, points out, “In Europe they’re developing in gigawatts; here in Japan, a single project is a few hundred megawatts. It is difficult to [gain the] advantages [that come with] economies of scale.”
A different kind of size-related problem is the lack of port facilities that can handle the huge structures used in large-scale offshore projects, notes Kuriyama.
“The Japanese government has started to work on it but there seems to be a lot of bureaucratic paperwork and silos that are still disrupting ease of deployment,” he says. “What we’re hearing from many of the European developers is that they are believers, in terms of the regulatory framework and the trajectory for offshore wind. They don’t question that the market has a lot of potential, but they are concerned about the size of individual developments and the timelines of these actually happening.”
There are also technical challenges due to assessments on resistance to typhoons and earthquakes, which are an added expense for developments. Another issue is keeping local people onside, in particular, the fishing associations, more than one of which can be involved in larger projects.
Shulman suggests, “These are not only barriers in terms of timelines, but they are also barriers in terms of costs for developers and investor risk.”
Kuriyama points out that, while Japan has major potential, it is far from the only Asian country currently developing offshore wind power, so there are opportunities across the region.
“If Japan wants the local economy to benefit from offshore development, then the government needs to make the Japanese market look attractive to invest in, compared to those neighbouring markets,” he says.
Japan’s extensive territorial waters offer the possibility of generating more than its total energy needs through offshore projects. However, current offshore wind turbines are fixed to the ocean floor, making it technically difficult to deploy them in very deep water.
“Japan doesn’t have a very large continental shelf so there is not a lot of space for fixed-bottom offshore wind,” explains Kitzing, who in March was appointed to the EU Scientific Advisory Board on Climate Change.
She adds that next-generation tech for floating wind turbines is “on the horizon” in terms of commercial deployment.
The world’s first floating wind farm, an experimental 30MW project, went into operation off the coast of Scotland in 2017, and construction of a 16.8MW trial project is due to start construction off of Nagasaki in 2024.
Vestas Japan’s Kuriyama also believes that “the future of offshore development in Japan lies in the so-called floating technology”, which he expects to feature in the later auction rounds.
In the more immediate future, the current energy problems may be the extra push Japan needs, says Shulman, who points out that within weeks of Russia’s invasion of Ukraine, a METI official spoke about “accelerating the development of offshore wind, without going into details, but explicitly linking it to the Ukraine situation”.
Kitzing sees the sector as instrumental in the fight against climate breakdown. She notes that prices of offshore wind projects are falling, as is true of almost every technology, and that costs have roughly halved over the past decade.
“We are all relying on offshore wind to become one of the largest contributors to decarbonising our energy systems,” she says. •