Companies Battle for Piece of Offshore Wind Energy Pie

Courtesy of Sumitomo Corp.
Windmills are operated off Belgium by Sumitomo Corp. Similar large-scale development projects are likely to start in Japan as well.

The government is publicly seeking contractors for offshore wind energy projects off Akita and Chiba prefectures. The projects will help the nation for the first time realize large-scale wind power generation using up to about 100 windmills. Offshore wind power is positioned to be a key renewable energy source with the goal in mind of achieving the decarbonization of society that Prime Minister Yoshihide Suga advocates. Relevant businesses are competing for marine areas in which to establish wind power generation.

■ Up to 100 windmills

The government is seeking contractors for a total of four sites — three in waters off Akita Prefecture and one off Chiba Prefecture. Contractors for the projects will be decided in about a year, and offshore wind power generation is expected to start at these sites in around 2025.

The government for the first time publicly sought in June a contractor for offshore wind power generation off Goto, Nagasaki Prefecture. The wind power generation uses a floating offshore windmill, which is easily affected by high waves. Out of safety concerns, the windmill is small and with an output of only about 20,000 kilowatts.

The latest wind power projects will use bottom-mounted windmills. As the electricity generation facilities are anchored to the bottom of the sea, it is possible to make bigger windmills. The windmills is nearly 200 meters in diameter and almost as high as the 333-meter Tokyo Tower. Each windmill generates up to 10,000 kilowatts. According to government calculations, 50 to 100 windmills can be installed in each marine area, with the expected total output to be the equivalent of a thermal power plant.

For the latest projects, nearly 30 companies each have created business entities and shown interest. Companies applying for the projects include those affiliated with major power companies like a renewable energy subsidiary of Tokyo Electric Power Co., as well as the power subsidiaries of Mitsubishi Corp. and East Japan Railway Co. Foreign companies with experience in offshore wind power generation are also applying.

■ Potential

Companies are drawn to the potential of offshore wind power generation.

The marine areas have been designated as “promotion areas,” where their long-term use is permitted based on the law regarding using sea areas for power generation through renewable energy resources. All electricity generated is purchased at a predetermined rate of up to ¥29 per kilowatt-hour. Companies can easily estimate revenue with relatively few business risks.

The government set a goal of achieving an offshore wind power capacity of 10 gigawatts by 2030 and is expected to set a new goal of between 30 gigawatts and 45 gigawatts by 2040, in an action plan to be compiled by the end of this month.

“We’d like to add more investment from companies and strengthen our competitiveness,” including reducing power generation costs, said Economy, Trade, and Industry Minister Hiroshi Kajiyama.

The total output of the new wind power facilities at the four sites across three areas is expected to be 1.5 million kilowatts. The government also plans to further promote areas in the Sea of Japan off Aomori and Nagasaki prefectures.

Wind power facilities require many components, and creating them will involve businesses across a wide range of fields. If the government’s 2030 output goal is achieved, it is estimated to produce economic effects worth between ¥13 trillion and ¥15 trillion, according to one calculation. The Akita prefectural government estimates there will be investment of about ¥1 trillion in relevant facilities, including ports, and that local businesses will receive economic benefits worth about ¥270 billion.

“When full construction starts, restaurants and hotels will be able to receive the economic benefits as well,” said an official of a local chamber of commerce and industry.

■ Challenges

Since there are no domestic manufacturers of large offshore windmills, they would likely need to be imported from Europe. It is said transportation will take 50 to 60 days, with a high possibility of costs rising.

Offshore wind power generation is expected to require several hundreds of billions of yen in business costs for each location. Since power generation costs are directly related to electricity charges, efficiency would need to be improved via windmill manufacturers and by other means.

In Japan, there are few shallow waters suitable for installing bottom-mounted windmills. In addition, a wind speed off Akita Prefecture, where wind is relatively strong in Japan, is 7 to 8 meters per second. Given that a wind speed of 10 meters per second is said to be needed for stable electricity generation, the wind is not strong enough in Japan. Due to unstable electricity generation, additional power grids need to be developed to constantly supply electricity.

■ Europe takes the lead

Offshore wind power generation has been widely introduced in Europe due to its geological advantages. For example, there are many shallow seas suitable for the installment of windmills while stable winds can be expected in the coasts of the Atlantic Ocean and the North Sea.

Britain, surrounded by sea like Japan, has been turning to wind power over concerns the North Sea oil fields are depleting, among other issues. The country has more than 2,000 windmills generating about 10 million kilowatts, which meets about 10 percent of the country’s total electricity demand.

In Europe, offshore wind power is widespread, with Germany boasting about 1,500 windmills and Denmark about 600.

According to WindEurope, a business organization comprising companies related to wind power generation, the total offshore wind power capacity in Europe stood at about 22 million kilowatts as of the end of 2019, or equivalent to about 80 percent of total world capacity. In Japan, wind power facilities that include one off the Goto islands generate only 20,000 kilowatts in total.

In Europe, large-sized facilities have been installed that make it possible to efficiently generate large amounts of electricity. For that, purchase prices for wind power, including both onshore and offshore, are on a downtrend in Europe. In fiscal 2019, the purchase price per kilowatt-hour was less than ¥7 in Germany. In Britain, wind power is bought at ¥11 to ¥15 per kilowatt-hour. In Japan, onshore wind power, which makes up a large proportion of wind energy, is purchased at ¥19 per kilowatt-hour.

In the Netherlands, wind power generation is becoming more profitable, and private companies are now able to develop wind power facilities without relying on government subsidies.

There are a great deal of benefits for the industrial world. The Denmark-based Orsted A/S has the largest market share in offshore wind power facilities. When it comes to the production of windmills, companies in European countries like Denmark and Spain have large shares. These companies are increasing windmill sizes, aiming to increase the output of each windmill to 20,000 kilowatts by 2030.

“Japan needs to introduce European technologies to reduce costs, accumulate technologies to respond to various weather conditions and develop industries with an eye on export to Asian countries,” said Yukari Takamura, professor of environmental law at the University of Tokyo.