Offshore wind power is on course to be cheaper than coal generation in Japan as soon as 2022, leaving the country’s consumers exposed to higher costs from up to $71bn of stranded coal assets, claims a new study.
Plants built-out from Japan’s 11GW coal pipeline also risk being outcompeted by new solar in 2023 and fresh onshore wind installation by 2025, calling into question the viability of any investments in the polluting fuel source, said the report from the Carbon Tracker initiative, the University of Tokyo and CDP.
Major coal investment plans are continuing in Japan despite policy signals from the nation’s government calling for decarbonisation and a greater role for renewables, plus the imperatives of the Paris Climate Agreement, said the report, The Land of the Rising Sun and Offshore Wind.
Offshore wind will beat Japanese coal from the word go, matching its price at around $65/MWh and then rapidly falling further as new coal plants get more expensive, although in the long term to 2040 it will be solar that shows the most spectacular reductions, according to projections in the study.
“Building coal power today equals high-cost power and fiscal liabilities tomorrow. Japan’s planned and operating coal capacity is partially protected by regulations that give coal generators an unfair advantage in the marketplace,” said the report’s authors.
“These regulations are sheltering high-cost coal from significant cost declines in renewable energy. Without policy reform, the Japanese consumer may not be receiving the lowest-cost power possible.”
Japan’s offshore wind sector is finally starting to spark into life after its parliament, the Diet, earlier this year passed a law creating a legal framework for auctions and zone allocations to enable the country’s 5GW-plus project pipeline to move forward.
The nation – seen by industry experts as offering big potential for both fixed-foundation and floating wind – in July picked the first four zones off its coast for future government offshore wind auctions.
Andreas Nauen, offshore CEO of turbine group Siemens Gamesa, told Recharge last year the Japanese market is on a “very favourable” time-line for rapid expansion, with the first large projects installed as soon as 2022.
Siemens Gamesa in June achieved a milestone in the Japanese market when it won the first preferred supplier deal for a major turbine supplier.