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European firms are driving offshore wind in Asia—what does this mean for the energy transition?

Asian governments see massive potential in offshore wind, as they ramp up climate action. But to get the industry started they are relying on European expertise. Does this matter?

In recent months, China, Japan and South Korea have committed to net-zero carbon emissions targets, and see offshore wind as an increasingly important way to achieving their goals.

This is translating into bumper growth. Offshore wind is one of the fastest growing parts of the energy sector, as Asian nations place their bets on its tumbling electricity prices and improving technology to meet climate targets.

But a failed pilot has underscored the key role that European companies could play in helping kick-start offshore wind development across Asian markets.

The three-turbine pilot, off the coast of Fukushima in Japan, was supposed to be Japan’s entry point into floating offshore wind. But it is now being dismantled following disappointing results.

According to press reports, the largest wind turbine in the project barely achieved a capacity factor, or proportion of total potential output, of 2 per cent.

No turbine will operate at full capacity 100 per cent of the time, because the wind does not always blow—and in the case of floating turbines, which are a nascent technology class, some challenges might have been expected.

However, the results at the Fukushima offshore wind farm are in stark contrast to the first floating turbines deployed in European waters.

While offshore turbines typically have capacity factors of between 40 per cent and 50 per cent, according to the International Energy Agency, the world’s first floating wind farm, installed by Statoil (now called Equinor) in Scottish waters with 6-megawatt (MW) Siemens turbines, achieved 65 per cent.

In the Fukushima pilot, even the best-performing turbine, a 2-MW model, only managed 34 per cent. The lesson? It could be hard for Asian markets to emulate Europe’s success in developing offshore wind farms without relying, to begin with at least, on European expertise.

Europe’s experience in offshore wind has come partly from their companies’ expertise in dredging and offshore vessels. “Now wind is even bigger for these companies, which have learned a lot and reduced their costs,” says Hans van Mameren, who was in the shipping trade before launching renewable energy consultancy Energy Renewed.

This experience helps reduce the risk involved in wind farm development, and can help Asian countries pivot away from fossil fuels more quickly, says van Mameren.

One market that is moving gustily into offshore wind is Taiwan, which is aiming to generate 20 per cent of its electricity from renewables by 2025 but has faced numerous hurdles in rolling out its plan.

“What we see in Taiwan is that in projects that have localisation requirements the costs are much higher when compared to a project that has no such requirement,” says Robert Liew, a principal analyst for Asia Pacific power and renewables at Wood Mackenzie.

This price difference has skewed early projects in favour of foreign interests. In 2019, Taiwan, which has some of the best conditions in Asia for offshore wind, invested USD$7.8 billion in a trio of offshore wind farms where non-Taiwanese firms featured prominently.

The largest shareholder in Taiwan’s pioneering Formosa 1 project, for example, was the Danish wind developer Ørsted. And Energie Baden-Württemberg, a German firm, has a significant holding in Formosa 3, soon to become the largest wind project in the country.

As well as ownership, European companies have had a major hand in developing these early Asian projects. For instance, Formosa 1, which is already operational, and Formosa 2, which will enter operation this year, both feature turbines from Siemens Gamesa Renewable Energy.

Overall, said Erik Rijkers, director of market development and strategy at analyst firm Quest Floating Wind Energy, in Asian offshore wind markets excluding China: “We see maybe 10 European developers, mostly with Asian partners, representing some 30 per cent of the market.”

China remains an exception for several reasons. As well as being generally less open to foreign interests than other Asian markets, the country has a well-developed wind energy industry of its own, with a range of established turbine manufacturers.

Furthermore, the sites that China is currently exploiting for offshore wind are typically in shallow waters that do not require the level of engineering know-how needed in deep-water markets such as Japan.

These circumstances are allowing China to move forward rapidly with a massive offshore wind buildout plan. The country overtook the United Kingdom as the world’s largest offshore wind market for new installations in 2018, with practically no support from outside interests.

In China, “it’s very rare we see any projects that have been done by foreign or private developers, unless it’s a government-to-government deal,” said Liew.

Whereas foreign companies can comprise between 20 per cent and 30 per cent of the offshore wind development ecosystem in markets such as Japan and South Korea, and possibly up to 60 per cent in Taiwan, in China the landscape is made up of 90 per cent or 95 per cent local players, he said.

For policymakers elsewhere in Asia, achieving that level of self-sufficiency is likely to remain a distant goal for some time—for a number of reasons.

South Korea, for example, has relatively shallow waters, facilitating development, but lags behind European firms in offshore wind turbine technology.

The country’s main turbine maker, Doosan, is still commercialising a 3MW machine which is less than a quarter of the size of turbines now being made by companies such as GE and Siemens Gamesa in Europe.

Japan, meanwhile, potentially has access to top-tier European turbine technology via the Mitsubishi Heavy Industries joint venture MHI Vestas, which was awarded a supply contract for the 139MW Akita Noshiro offshore wind farm in 2019.

But Japan’s position on the edge of the Asian continental shelf means there are few locations where it will be possible to install bottom-fixed turbines.

This means the country will have to rely on floating wind farms, which as the Fukushima pilot shows is still a challenging technology to get right. 

Meanwhile, Japan is relying on European know-how for its early, bottom-fixed projects, with Spanish developer Iberdrola lined up to participate in a 600MW project in waters off Aomori.

Finally, there is Taiwan, which not only lacks native turbine makers but also sits on the edge of the continental shelf. Despite these drawbacks, it was the first Asian market outside China to have invested heavily in offshore wind.

And it is acting as something of a training ground for other countries in the region. The Japanese utility JERA, for example, is a shareholder in Taiwan’s Formosa projects.

Such Asian players are clearly keen to learn as much as they can about offshore wind development. And European companies have no qualms about helping out.

The British marine engineering firm James Fisher, for example, is already taking on specialist tasks in Taiwanese waters and “our strategy increasingly will be to identify and work with local partners,” according to Jim Hey, group business development director.

There is no risk that Asia will become too dependent on European know-how, says van Mameren, who adds that cooperation makes both sides stronger as they work towards decarbonisation targets. “Europe is big enough to be of impact, and too small to be dominant. Is that the case for China?” he says.

It could be some time before Asia Pacific nations have the supply chains and the know-how to bring natively built offshore wind down in cost to a level comparable with projects in Europe.

In the meantime, says Andy Page, director and naval architect at British vessel maker Chartwell Marine, “If you can use a proven product, exported from Europe into Asia Pacific, then it’s a lower risk for the bigger picture, which is a successful offshore project.”

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