Let the offshore wind games in Japan begin!

As the long-awaited offshore wind policy guidelines are now in place, companies are gearing up to get a piece Japan’s offshore wind market

Japan’s effort over the last decade has fallen behind other emerging offshore wind markets with unclear legislation and low targets. However, earlier this year, Japanese authorities gave a promising signal to the market and opened the first area under the new Offshore Wind Act: Goto City. Last week, the draft public auction guidelines on the first round of four fixed-bottom areas were announced with an auction to be completed in 2021. As a result, major energy players such as Orsted, Equinor, Iberdrola and CIP have entered the market together with locally established companies and are getting ready to bid. With the recent development in mind, there are now good reasons to believe in an emerging offshore wind market in Japan.

Aegir Insights took a view on the market conditions for a nascent offshore wind market in Japan:

• The highest wind resources can be found in deep-waters which favors floating technology; however, all designated promotion zones are in near-shore shallow waters with low wind speeds of ~8 m/s
• Key market drivers are emissions targets and reduction of dependency on foreign electricity, however current Government target of 820 MW is not sending a good signal to the market
• There will be a generous fixed feed-in-tariff of 36 JPY/KWh (~290 EUR/MWh) for the first floating project, however coming auctions will be market-based subject to a price ceiling of 29 JPY/KWh (~236 EUR/MWh)
• Strong industrial capabilities and designated offshore wind ports speak in favor of a favorable supply chain, while lack of specialized vessels might be a bottleneck
• Grid constraints in the north could be bottlenecks in the long-term

Taken the market conditions into account Aegir Insights assessed the four sites that will be auctioned in the first fixed-bottom round: Noshiro-Mitane-Oga, Yurihonjo South, Yurihonjo North, and Choshi, providing LCoE levels of 105-118 EUR/MWh in the lowest case, and 121-138 EUR/MWh in the highest case, for site capacities of 210 to 350 MW.

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