Japan has secured the funding for its first large-scale commercial offshore wind project, as it follows in the footsteps of Taiwan, who aim to generate 20 per cent of its power by renewable energy by 2025.
Japan is the world’s third-largest economy and is aiming to boost the renewables share of its energy mix from 16 per cent to 24 per cent by 2030, with hydropower contributing 9.2 per cent, solar 7 per cent, biomass 4.6 per cent, wind 1.7 per cent, and geothermal 1.1 per cent.
Marubeni Corporation, through a special purpose company called Akita Offshore Wind Corporation, has decided to implement the construction, operation and maintenance of offshore wind farms at the Akita and Noshiro ports in Akita prefecture.
The project, which will cost 100bn yen (nearly $900m) will generate approximately 140 megawatts of electrical power to be sold to Tohoku Electric Power over a 20-year purchase agreement. The project is expected to commence commercial operations in 2022, with the base for operations and maintenance at the Noshiro port.
Japan has constraints to be able to scale up onshore wind and solar projects due to its high population density, and its topography is not conducive to such projects. However, while Japan is land-constrained, it has a lot of coastline, which allows offshore wind farm projects to be significantly bigger than those that can be built onshore.
Daniel Mallo, managing director and head of natural resources and infrastructure for Asia-Pacific at Societe Generale CIB, which acted as a senior lender in the transaction, says the long-term potential for offshore wind farm development in Japan is much greater than in Taiwan.
Japan has a lot of domestic sponsors, who are investors in the energy and power sector, such as Marubeni who are active investors in European offshore wind. In addition, a large amount of domestic capital is available to fund offshore wind farm projects.
While the Marubeni project involves only Japanese sponsors, foreign sponsors are highly interested in the project due to its huge potential and the fact that Japan is an attractive and highly-rated investment space. “Similar to the Taiwan story, these foreign sponsors are looking for new growth markets and that’s what will draw them to Japan as well,” notes Mallo.
Looking to the future, the next step for Japanese offshore wind will be floating wind farms, due to the deep seabeds surrounding the country, and there is interest among investors in Japan to sponsor such projects.
Japanese authorities have also made a strong push to develop the offshore wind farm power sector by addressing regulatory issues, such as the terms of concessions.
A bill passed in November 2018 allows a maximum occupancy period of 30 years for offshore wind farms in the so-called promotion zone. This was a welcome development from the short-term occupancy rights previously granted by local prefectures.
This year, Japan is also launching a competitive tender for offshore wind farming to generate more investor interest.
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