At that time, annual offshore wind additions will have reached industrial volumes of more than 5GW every year. And, with the expected growth in demand for electricity from renewable sources, the increasingly cost-competitive nature of offshore-wind technology and the many offshore wind farms built near load-centres with short construction lead-times, it is easy to see the business cases for much more offshore wind in the APAC region.
There is no doubt that on paper, APAC has a lot of potential for offshore wind. But there are also major risks that this transition to clean technology will be unnecessarily fragmented and take a protectionist view. This would make the adoption of the technology more expensive and cumbersome to implement, adding unnecessary cost burdens for the APAC nations and end-consumers. That scenario must be avoided and should be taken seriously by leaders in the region.
Looking at APAC offshore-wind development, there are positive signs, exemplified by the latest development in Taiwan, which many commercial operators currently regard as the hottest offshore wind market in the region.
Within the past 24 months, Taiwan has developed an official offshore wind target of 5.5GW and awarded projects of more than 3.8GW to be fully implemented by 2025. This is supported by rewarding feed-in-tariffs (FITs) and auctioned power purchase agreements (PPAs) that are surprisingly close to more mature markets, such as Europe. Taiwan has become the first volume market outside Europe to award gigawatt-level projects and is now the fastest moving commercial offshore wind market in APAC. How did the country achieve this apparent success and attention from leading offshore original equipment manufacturers and international investors? I write "apparent" success, because these projects are still at early stages and much can still go awry before completion. But still, there are some important lessons to be learned from the successful approach Taiwan has taken.
Primarily, investors and suppliers have been convinced of the regulatory stability of ventures since Taiwan first announced an official target for its offshore ambition and carved the way with a two-staged subsidy (FIT followed by PPA auctioning) scheme, delivering bankable offtake guarantees and grid-connection, as well as a well-planned one-stop-shop site permitting process. Taiwan has also taken an open commercial approach and invited the most experienced leading developers and suppliers to this investment opportunity, sending a clear message to international investors and project financiers that this venture is a credible one.
Flexibility and limited risk
Taiwanese planners also learned about the benefits of international, independent third-party certification and verification. This has helped to limit project risk by using measurements from mature markets to stimulate confidence. Furthermore, although Taiwan applied a local-content requirement, it saw the benefits of allowing certain flexibility and cooperation models to enable experienced players to organise and choose their own partnerships to fulfil the local supply-chain requirements. Taiwan seems to have understood the limitations of its market pull-capacity to establish a full offshore wind supply chain and instead has targeted more specific niches that can support local companies to then become players in a global supply chain.
Offshore wind can play a huge role in the power mix of many other Asia-Pacific countries, such as Australia, India, Japan, South Korea, Thailand and Vietnam, if they are willing to learn from experienced players. Concerns about not creating sufficient numbers of local jobs are unfounded, as offshore wind will always deliver plenty of opportunity for local content and jobs. Countries with competitive, high-quality suppliers will play a big role in these projects — not only in building them, but also by providing services throughout their lifecycle and by becoming suppliers to the global industry.
The alternative non-cooperative approach will surely result in limited transfer of technology and knowledge, as we have already seen in several markets over the past ten years. Don’t forget that offshore wind today is an advanced global industry, to be compared with the aerospace sector, challenging both the limits of materials and seeking advanced system efficiencies, not only to deliver CO2-free electricity, but also develop and innovate the least costly power generation technology per megawatt hour for future generations.
Peter Brun is segment leader for offshore wind at DNV GL
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