Japanese officials will soon release operational guidelines for a first offshore wind tender set to take place in the first half of 2020, said market experts at law firm Baker McKenzie.

The 'Basic Policy', scheduled to be out by the end of May, will clarify arrangements for the country’s emerging sector, following the earlier enactment of Japan's milestone offshore wind law.

The law passed by the Japanese parliament, the Diet, set the legal framework for the government to identify suitable maritime zones for offshore wind and to establish a bidding mechanism for project allocation.

Two Japanese ministries are now working to establish the 'Basic Policy', which will lay down rules for how the government selects offshore wind promotion zones and the allocation methods for the selected areas, said a briefing from Baker McKenzie, whose partner and co-head of its Renewable and Clean Energy Group, Naoaki Eguchi, updated the Asia Offshore Wind Day in Seoul on latest developments in the market.

Officials have asked all Japanese prefectures to provide information on potential sites, which should meet the requirement of a minimum 7m/s wind speed and a maximum 30-metre water depth.

Meanwhile, an interim policy draft for allocating promotion zones has just been compiled. The draft followed a two-week public hearing and is set for release this month.

According to the draft policy, all allocations will be based on a scoring mechanism totaling 240 points, of which price competition will account for at least 50%, while companies’ capabilities and their localisation plan will account for 80 and 40 points, respectively.

The ministers also decided to set a ceiling rate next year to cap offshore wind costs.

Evaluation of developers’ capability is based on project experience both in Japan and overseas. However, “to be rated as a top runner, track records in Japan is essential,” Eguchi told Recharge. Foreign developers could improve their chances in the bidding by forming consortia with domestic players with solid local wind project records, he added.

That means Japan’s local utilities such as Tepco and Kyushu Electric Power are likely partners for foreign players wanting to enter the market, while private developers of extensive wind portfolios such as Japan Wind Development (JWD) and Renova are potential options, too.

European offshore players have been preparing for local cooperation. Orsted inked an MoU with Tepco this January, while E.ON secured a pact with Kyuden Mirai Energy, the renewable subsidiary of Kyushu Electric Power.

The interim policy also highlights the emphasis on protecting the interest of the fishing industry, as it sets consent from local fishery representatives as a prerequisite for offshore wind occupancy rights.

The unusually swift policymaking will hopefully enable the first auction to begin in early 2020, and the first project’s commercial operation by 2023, the law firm commented.

But despite the encouraging law and speedy policy set up, the offshore wind market in Japan still has “a key missing piece — an ambitious five-year target” for the sector, without which financial commitment to invest and develop an offshore wind supply chain will be challenging, Baker McKenzie claimed.

The Japanese government in 2017 laid down a 2030 energy vision in which renewables would account for 22-24% of total generation, with onshore and offshore wind representing an underwhelming 1.7%.

The industry, however, hopes a new policy review round in 2021 could lead to an increase of overall renewable penetration target to 40% and a clear installed offshore wind goal of 10-15GW by 2030.

Wind

Japan gets ready to hold first offshore wind tender in 2020