JWE Webinar: Deep Dive Japan Wind Industry

- Why are Japanese offshore wind promising?

  • Offshore wind has been mainly a European Industry, but market is moving to APAC & America.

  • Japan has large offshore wind potential:

      (a) the 7th longest coastline in the world;

      (b) MOE: Offshore wind potential: 1413GW - fixed 322GW; - floating 1081GW.

  • 22-24% of the country’s power mix by 2030 with wind accounting for 1.7%. (JWPA estimated the capacity requirement of offshore wind: fixed - 6GW, floating – 4GW by 2030; fixed – 19GW, floating – 18GW by 2025)

  • Milestones:

      (a) Nov 2018 - Japan passes regulatory framework for offshore wind;

      (b) July 2019: Government announces 11 offshore wind “promoting areas”.

           4 advanced sea areas (to be prepared for auctions: Noshiro, Yurihonjo, Choshi, Goto)

           7 promotion sea areas (require further development)

  • Japan’s strong industrial backbone helps to create local offshore wind supply chain.

  • Japanese banks already very active in lending to offshore wind projects.

  • Over 13.5GW offshore wind projects under EIA (significant amount of EIAs were initiated in the promising areas: Akita, Aomori, Nagasaki especially)

- A number of consideration specific to Japan:

 

  • Occupancy permit: Area to be selected as “promotion areas” subject to tendering & 30-yr lease term

  • EIA process: (a) lengthy work; (b) Opinions and comments gets stricter year after year; (c) accumulated impact together with existing onshore wind and fixed foundation offshore wind.

  • Fisheries: (a) Consent of fishery groups is required prior to offshore environment and geotechnical surveys and to obtain work permits; (b) fishing activities out of fishing right zone

  • Authorizations: (a) Conformity with Japanese design regulations and third party (Class-NK etc. certification); (b) rigorous review by expert panel.

  • FIT: (a) Auction; (b) valid for 20 years

  • Grid network: Grid heavily constrained in parts of Hokkaido and Tohoku with high upgrading cost of facilities.

  • Extreme Climate: (a) Earthquake, typhoon, soil liquefaction and Tsunami risks; (b) Higher seismicity in east coast

  • Bathymetry: (a) Very limited shallow waters (<60m) to allow for fixed bottom foundations resulting in very nearshore projects; (b) potential will be expanded by considering 200m depth.

  • Infrastructure: (a) 4 ports will be upgraded by the government for construction port; (b) suitable port facilities and yard for floating technology will be required.

 

- Challenges for offshore wind in Japan:

  Challenges for floating technology:

  • Bad reputation after Fukushima Forward - Solution: Introduce overseas technologies to compete

  • Conservative approach to design - Solution: Clarify better requirements & harmonization with international standards

  • Conservative approach (only use when off-the-shelf); Missed economic opportunity.

  • Japanese manufacturing cost higher - Solution: (a) import floaters (reduce cost but reduce local content), (b) Adapt to manufacture in Japan (local content is a key element)

 

  Supply chain challenges:

  • Limited vessels for coming big wind turbines + cabotage law

  • Ports are the main concern for offshore wind – Infrastructure adaption time is generally longer than development of projects

 

  Other challenges:

  • Wind resource in deep waters or in North where limited connection

  • Grid connection in Japan is one of its biggest limitation (frequency changer between Tokyo and Chubu is 1.2GW, but increase to 2.16GW by 2030 and increase to 3.06GW by 2027)

 

- Offshore wind market trends:

Bigger wind turbines: Higher capacity factor, Lower BOP costs, Lower OPEX, Bigger challenge for logistics & port facilities.

 

Developers under pressure: (Oil & Gas entering the market > Bigger pressure for developers)

  • Reduce CapEx & reduce return

  • Bigger financial capabilities of O&G players

  • Fierce competition on established bottom-fixed markets

  • Local content requirement

Developers need to act:

  • Gain volume (JVs, M&A)

  • Enter new markets:

    • Geographically diverse

    • Advantage of early access

    • Floating wind higher reward

  • Innovation

Conclusion:

Probably market to split between big developers (incl. JVs), and small ones, with almost no middle size ones. Small ones can work on early stage developments for bigger players to acquire.

How to prevent Japan is stepping in the same governmental approval mistakes Germany did in their early offshore wind years. 

A: The German government did some mistakes with forgot to set the regulation for the offshore grid connection. The Japanese government should make sure both steps are lines of the builder of the wind farms but also the build-out of the offshore grid connection.

HOST

Jennis Sun

Project Producer

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PRESENTER

Gunnar Herzig

Managing Director

WORLD FORUM OFFSHORE WIND

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Akio Hasegawa

Director, General Manager

The Renewables Consulting Group

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Luis González-Pinto

Barrenetxea

Chief Operations Officer

Saitec Offshore Technologies

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