Japan’s offshore wind ambitions attracting major developers

What a national-level push for offshore wind can do in a relatively short time is perhaps best visible from Japan’s example, with some of the biggest offshore wind names now making concrete business moves in the country whose government put a new law into effect last year, and announced new promotion zones and offshore wind auctions.

Since the beginning of this year, five major offshore wind players announced their plans for the Japanese offshore wind market.

The latest to inform about its moves in the country was Spanish renewable energy giant Iberdrola, which said in mid-September it was set to acquire full ownership of the Japanese offshore wind developer Acacia Renewables, owned by Macquarie’s Green Investment Group (GIG).

The Norway-headquartered Equinor joined a consortium also comprising Electric Power Development (J-Power) and JERA at the beginning of the month, with an aim to submit a joint bid in Japan’s upcoming offshore wind auction that would see the development of wind energy projects off the Akita Prefecture.

Denmark’s Copenhagen Infrastructure Partners (CIP) entered into a joint venture with Mitsubishi Heavy Industries (MHI) in July. Through the 50-50 joint venture, the two parties plan to develop offshore wind projects in Hokkaido.

RWE Renewables Japan and Kyuden Mirai Energy signed a Joint Bidding Agreement in May for a full-scale feasibility study for the offshore wind project planned off the coast of Yurihonjo City in Akita Prefecture. This came after an offshore wind cooperation agreement was signed by E.ON and Kyuden Mirai Energy in April 2019 and RWE acquired E.ON’s renewables business later that year.

In March, Ørsted announced entry into the Japanese offshore wind market through a partnership with Tokyo Electric Power Company Holdings (TEPCO). The companies established a joint venture company Choshi Offshore Wind Farm K.K. to develop the Choshi 1 offshore wind project in the Chiba Prefecture.

Japan became Asia’s first offshore wind market after installing two V47-660 kW wind turbines in a pilot project in 2003. However, the country is not scheduled to see its first commercial-scale offshore wind farm before 2022.

While it holds vast offshore wind potential, especially in floating wind, Japan has been lagging in installation of wind turbines off its coasts due to its lengthy and complex permitting system.

Japanese government approved a wind energy feed-in tariff (FiT) in 2012, however, there was no specific FiT for offshore wind at the time. Two years later, the country’s Ministry of Economy, Trade and Industry (METI) approved an offshore wind FiT of € 0.28/kWh (JPY 36/ kWh) with a duration of 20 years.

“Although the purchase prices were high, complex permitting, and approvals made wind energy development a daunting process in Japan”, the Global Wind Energy Council (GWEC) said in its Global Offshore Wind Report 2020.

In 2018, Japan set up a new framework for offshore wind and introduced competitive bidding process for pre-identified promotion zones, whereby the developers compete on both the FiT and project suitability in the promotion zones.

According to GWEC, at the end of the last year, Japan had only 66 MW of installed offshore wind capacity. This includes five wind turbines on floating foundations and 23 wind turbines installed at nearshore sites.

“The slow uptake is attributed to Japan’s overly complex Environment Impact Assessment (EIA) system and market uncertainty. It can take four to five years to pass through Japan’s strict environmental assessment process, and the lack of clarity and coordination between different government bodies has prompted industry to call for a ‘one-stop shop’ approach. As of January 2020, 14.8 GW of offshore wind projects are in the EIA pipeline”, GWEC said.

When it comes to Japan’s promotion zones for building offshore wind farms, until early 2019 these were restricted to waters within the country’s port-related areas.

In the spring of 2019, Japan passed into law the Bill on promotion of use of territorial waters for offshore renewable energy generation facilities, which enables the development of offshore wind farms outside the port-related areas.

Under the law, the METI and the Ministry of Land, Infrastructure, Transport and Tourism (MLIT), in consultation with other relevant ministries, identify potential offshore wind zones for which developers then submit their bids in an auction. The auction winners are granted a 30-year lease to develop and operate their wind farms.

The new law has been expanded to add resolutions on the fishing industry and obligatory funds to be set aside by the awarded developers for decommissioning.

In July 2019, the METI, the MLIT, and the Port Authority of Japan identified eleven areas as potentially suitable for offshore wind development: four offshore Akita Prefecture, three offshore Aomori Prefecture, two offshore Nagasaki Prefecture, one offshore Chiba Prefecture, and one offshore Niigata Prefecture.

Four of these areas: Goto (Nagasaki), Choshi (Chiba), and Yurihonjo and Noshiro (Akita) were later designated as “promising areas” for offshore wind projects.

This July, Japan opened its first auction for a floating offshore wind farm off Goto City. The auction will be open until December, the winner to be selected in June 2021. The same month, the three remaining “promising areas” were designated as official promotion zones, with the Yurihonjo area in Akita Prefecture divided into two areas: Yurihonjo North and Yurihonjo South.

Furthermore, the ministries nominated further ten offshore wind promotion zones in July, of which four have been designated as “promising areas”: Aomori Japan Seaside North, Aomori Japan Seaside North South, Happou and Noshiro in Akita, and Saikai in Nagasaki.

As reported earlier, Japanese government is also drafting a bill that could lead to designating new development sites with 1 GW of installed offshore wind capacity per year from 2021 to 2031.

Three to four project sites could be identified each year, starting from April 2021 until 2030/2031, adding a total of 10 GW across 30 promotion zones in the next decade.