Foreign wind power players urge Japan to scale up offshore auctions

Northland Power (Ontario)

30/11/2023 23:00

By Katya Golubkova and Yuka Obayashi
       TOKYO, Dec 1 (Reuters) - International energy companies,
from Germany's RWE to Spain's Iberdrola, are urging Japan to
beef up offshore wind power auctions and make investments more
attractive, amid soaring installation costs as competition for
suppliers grows worldwide. 
    Although desperate to ease its heavy dependence on energy
imports from the Middle East and Russia, Japan is coming late to
offshore wind, but some industry players say it is taking a more
cautious approach that puts it at a disadvantage.
    "It's a global race and we can't look at it in isolation,"
Jens Orfelt, president for offshore wind development for
Asia-Pacific at RWE Renewables  RWEG.DE , told a recent
conference.
    The remarks came amid surging prices and fierce competition
for equipment, from nacelles and towers to installation ships,
with some major global projects, particularly in the United
States, having recently been scrapped or facing delays.
    From turbine selection to the start of operations, Japan's
development process takes much longer than in Europe, said a
spokesperson for Vestas  VWS.CO , a top global supplier.
    "The longer the project timeline, the more uncertainty and
risk arise," they told Reuters, saying industry and government
could work more closely to shorten such periods.
    That view is echoed by global players such as Orsted
 ORSTED.CO  and Iberdrola  IBE.MC , among others.
    Japan's ministry of economy, trade and industry (METI) did
not reply to a request for a comment.  
    With less than 500 megawatt (MW) of installed offshore wind
capacity now, Japan aims for projects of 10 gigawatts (GW) by
2030.
    So far, it has auctioned 1.7 GW of offshore wind capacity
contracts, all won by Mitsubishi-led consortiums  8058.T  in
2021, and will choose winners for four more wind farms with
total capacity of 1.8 GW by the end of March. 
    A third round, yet to be announced, is expected to offer
1.05 GW more in two projects, METI says.
    But foreign players involved in some of the world's biggest
offshore farms consider that scale and speed to be too modest,
adding that bigger auctions allow better planning of supply
chains and cost control.
    "We would say continue with the auctions but consider 1 GW
per project instead of 1 GW per auction," Orfelt added.
    In this area, Japan is well behind Taiwan, which is offering
3 GW in its auctions, and South Korea, which is expanding in
floating wind, a technology yet to be commercially launched in
Japan. 
    "If you want to create appetite from investors you need to
propose larger plants," Begona Diaz, Asia-Pacific area manager
for offshore wind at Spain's Iberdrola Renewables  IBE.MC , told
the conference.
    "You are not able to generate scale economies from just 300
MW, you need to go for huge plants." 
    Japan needs about $18 billion to develop offshore wind farms
by 2030, including already invested funds, and $250 billion by
2050, which includes hard-to-predict floating offshore wind
costs, said Chris Wilkinson, a senior analyst at Rystad Energy. 
    Orsted's country manager for Japan, Henriette Holm, called
on Japan to tender "10 GW to 15 GW in one go".
          
    MYSTERY BIDDERS
    In the wake of the emissions-fighting U.S. Inflation
Reduction Act (IRA), Japan adopted a law in March to promote
green investment by selling government debt of about 20 trillion
yen ($136 billion) to lure private capital of 150 trillion yen
over the next decade.
    Japan's auction rules bar companies from commenting on the
second-round process or saying whether they are bidding.
    But Japanese government documents show Germany's RWE, in
consortiums with Japanese companies, was making environment
assessments - an indication of a bid - for two areas in the
second round in the regions of Akita and Niigata.
    Other foreign companies making such assessments included
Singapore's Vena Energy, SSE Pacifico co-owned by UK-listed
energy group SSE  SSE.L  and Canada's Northland Power  NPI.TO . 
    RWE and SSE Pacifico declined to comment. Vena Energy and
Northland Power did not reply to Reuters requests for comment. 
    BP  BP.L  is seeking partners for offshore wind projects in
Japan, a market it has identified for growth, an executive told
Reuters in November. The company did not reply to request for a
comment. 
    Norway's Equinor  EQNR.OL  did not bid in the second round
but is "positioning together with local partners for upcoming
licensing rounds", spokesperson Magnus Frantzen Eidsvold said.  
    
    SUPPLY CHAIN 
    METI is pushing for domestic suppliers to make up at least
60% of offshore wind projects by 2040, to help Japan grow its
expertise, and foreign players will probably have to join forces
with Japanese companies to win jobs and localise production.
    GE Renewable Energy  GE.N  has teamed with Toshiba Energy
Systems & Solutions  6502.T  to make GE's Haliade-X offshore
wind turbines near Tokyo.
    Toshiba Energy Systems plans to build a domestic supply
chain for offshore wind turbines and will start nacelle
production from 2026, to gradually phase out foreign parts, said
Yuji Shimada, an official at Toshiba Energy Systems & Solutions.
    Vestas, which produces nacelles and blades in India and
China, is pushing for a strong regional supply chain, rather
than factories in individual countries, its spokesperson said.
    "We think establishing a supply chain in one country for one
country will only lead to increased costs and increased risks,"
the spokesperson added. 
($1=147.0900 yen)

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How will Japan reach its ambitious goal in offshore wind energy?
    ID:nL8N3CU3PV 
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 (Reporting by Katya Golubkova and Yuka Obayashi in Tokyo,
Christoph Steitz in Frankfurt, Nerijus Adomaitis in Oslo, Ron
Bousso in London and Benjamit Mallet in Paris;
Editing by Tony Munroe and Clarence Fernandez)
 ((ekaterina.golubkova@thomsonreuters.com;))