Offshore wind in Japan may still be in its early stages, but a tipping point very definitely has been reached, says David Foxwell
Last week, ITOCHU, a Japanese trading company with an equity market capitalisation of US$29Bn, confirmed it would not develop any more coal-fired power stations.
Back in May 2018, the company said it recognised it needed to address the impact of climate change; now it has acted.
“We recognise that, among other things, our coal-related business must be one of the issues which we have to promptly address as its impact on our business and our stakeholders is significant,” the company said.
“We hereby commit ourselves, as our policy, not to develop any new coal-fired power generation business or to acquire any new thermal coal mining interests.”
It also announced it had sold an interest in the Rolleston coal mine, held through a wholly-owned subsidiary in Australia. This was the second such sale by ITOCHU of a coal mine, following the sale of its interest in the NCA joint venture in September 2016. As Institute for Energy Economics and Financial Analysis director of energy and finance studies Tim Buckley noted, the company, which had long traded coal mined in countries such as Australia and sold it for generation in Asia, is redirecting its capital allocations away from thermal coal mining and coal-fired power plants and proposing to instead prioritise investment in “low carbon industries of the future.”
Coincidentally, last week also saw energy research consultancy Wood Mackenzie highlight the very positive outlook for Japan’s offshore wind sector, which it said was projected to reach 4 GW in 2028.
Japanese trading houses may be stepping back from coal, but in Japan itself it is not coal generation that needs to be replaced, but nuclear.
As Wood Mackenzie noted, nuclear power fell out of favour in the aftermath of Fukushima Daiichi nuclear disaster, since when Japan has struggled to bring nuclear reactors back online. Only nine reactors have successfully come online again, bringing operational capacity to 9 GW last year. Wood Mackenzie estimates Japan will face a power generation shortfall of more than 10 GW by 2030, as it struggles to restart 30 nuclear reactors to meet the national nuclear target of 20-22% of the national power mix.
Ironically, as Japan’s trading houses move away from coal, Wood Mackenzie analyst Robert Liew said that, in the light of the power shortfall, Japan might need to increase coal imports, and grow its renewable energy capacity to replace nuclear. “But in terms of renewable energy,” he said, “scale matters and offshore wind is at an advantage.”
As he noted, Japan’s experience and preference for grid management – which is based on years of managing nuclear plants – means that in future utility companies would prefer larger scale power plants of the type that offshore wind can provide, rather than large numbers of small solar facilities.
Recognising offshore wind’s potential, Japan's largest utility, Tepco, has made several announcements regarding its ambition in offshore wind power. Orix Corporation has begun a seabed survey off the coast of Choshi as part of a feasibility study for the offshore wind project, and offshore wind developer Ørsted has signed a memorandum of understanding to work jointly with Tepco on offshore wind projects.
Mr Liew said he sees Tepco’s involvement in offshore wind as a ‘crucial development’ which has signalled to the market that offshore wind is commercially viable. That will make it easier for the government and local companies to accept offshore wind. As also highlighted by OWJ, the Japanese Cabinet recently аpproved an offshore promotion law which grants developers the right to occupy an area up to 30 years (including construction and decommissioning) in general sea areas.
Offshore wind in Japan may still be in its early stages, and in the short-term isn’t yet ready to replace all of the nuclear capacity that the country has lost. However, a tipping point very definitely has been reached, not just because of the new legislation, but because generators in the country have recognised that offshore wind works, is affordable, and can step in to begin filling the nuclear gap in the medium to long-term.