Fitch Solutions sees an “upside risk” to its forecast for wind power in Japan, as offshore wind may grow faster than initially thought, but also says several ongoing challenges in the sector need to be addressed to unlock the market’s substantial growth potential.

On the upside, Japan has launched a new offshore wind bill, with the aim to boost development of the sector across 30 potential locations by 2030, the analysts said. According to Ministry of Economy, Trade and Industry (METI), the government will aim to approve three to four offshore wind projects, with a combined capacity of 1GW, each year starting next year.

Japan also launched its first offshore wind tender in June 2020, for the Goto project off the southern prefecture of Nagasaki, and since 2016 offers one of the world’s most attractive feed-in tariffs of about $0.34 per kilowatt hour of energy produced.

“Despite these initiatives, investor uptake still remains fairly limited. As at end-2019, Japan only has approximately 65MW of offshore wind capacity. We currently forecast total wind capacity in Japan to grow only moderately from 3.8GW to about 7.0GW by 2029,” Fitch Solutions said in a research note without giving separate figures for offshore wind alone.

Among the challenges that need to be addressed, the analysts cite the relatively high costs of wind power in general in Japan, compared to solar or thermal sources.

This is largely due to the lack of economies of scale for offshore wind power in Japan, Fitch Solutions said, as existing supply chains are insufficient to support a substantial ramp-up and drive down costs.

Also, Japan’s environmental impact assessment processes takes up to five years, and are relatively expensive, which reduces the sector’s competitiveness, the analysts add.

Japan’s deep waters mean that 80% of its offshore wind potential is in sea-depths of more than 100 metres, where fixed-bottom foundations are not an option, while Fitch Solutions considers floating wind still a nascent technology.

“Furthermore, Japan will also have to contend with adverse weather events such as typhoons, which creates an additional challenge to these projects,” the analysts add.