The Asia-Pacific offshore wind sector is at a pivotal juncture, with Taiwan's early lead now under pressure from rapidly advancing markets in Japan and South Korea. Industry experts at the 13th Asia Offshore Wind Day warn that the region must address key challenges to maintain its competitive edge against European projects.
Gero Tschierschke, Head of Business Development at Offshore Siemens Gamesa, notes a significant shift in the APAC offshore wind landscape. "We see the market shifting into more of a one-third, one-third, one-third setup. Japan and Korea are expected to achieve similar market sizes in terms of yearly installations as Taiwan from 2028 onwards," he said.
This evolving dynamic is reshaping strategies for major players in the sector. Siemens Gamesa, which has invested heavily in Taiwan, is now looking to foster a more regional approach. The company is exploring ways to cross-utilize supply chains, factories, and talent across the three key markets of Taiwan, Japan, and Korea.
Majority of offshore wind developers eye APAC market (excluding China)
Credit: Rystad Energy
Taiwan, once the undisputed leader in APAC offshore wind, is facing challenges that could erode its position. Javier Magro, CEO of CDWE, highlighted some of these issues: "We see infrastructural shortages... The availability [of ports] is indeed a constraint towards continuing developing these offshore wind farms on time." He also pointed to shortages in local equipment and qualified personnel as ongoing challenges.
The success of Taiwan's Round 3 projects is seen as crucial for maintaining its leading position. Japan and South Korea are making significant strides, with policies that are seen as more flexible and developer-friendly compared to Taiwan's strict localization requirements. Both countries have implemented annual auction systems with predictable timelines and volumes, creating a more stable environment for investment.
Developers may choose components or services to be procured locally from 24 categories promulgated by the Industrial Development Administration and decide their degree of localization. A total of 120 points is available, with points assigned to each category. To be eligible to bid, developers must achieve at least 70 out of the 120 points.
Local suppliers
Source: Nishimura & Asahi
In this context, Sean Conaty from Nishimura & Asahi explained that while Taiwan allows bidders to accumulate a total of 120 points, Japan's system is less stringent, with a maximum of 40 points. The Japanese approach emphasizes subjective engagement with local authorities, who determine scores based on factors such as economic spin-offs and collaboration with local industries. Conaty noted that Japan's flexible framework might pose less risk of falling afoul of WTO qualifications and that upcoming phases could even eliminate local content requirements.
South Korea, in particular, is emerging as a frontrunner in floating offshore wind technology. "In Korea, it's not about 6 to 12 positions. They're thinking about 500, 600, 700 MW projects for floating by the end of the decade," Tschierschke noted, highlighting the ambitious scale of Korean projects.
However, the APAC region as a whole faces challenges in competing with the European market. Matt Bowden of Cadeler emphasized this point, citing recent European projects: "1.12 GW went to Ørsted in allocation round six [in the UK]. You had the German auction where 1.25 GW project size and Dutch auction where 2 GW was the project size."
In contrast, recent project awards in APAC have been significantly smaller. Korea's average project size last year was described as "very, very small," with Japan's round two and Taiwan's Round 3.1 following a similar pattern. Taiwan's Round 3.2 has seen an increase to around 520 MW on average, but this still falls short of European scale.
To address this disparity, Bowden advocates for linking projects together, either within a developer's portfolio or across developers. "If you put two 3.2 projects together, you get something that actually looks quite similar to the allocation round six Ørsted allocation," he explained.
Responding to questions from investors regarding the practicalities of linking projects, Bowden acknowledged the complexity of managing liabilities and ensuring accountability across multiple projects. However, he pointed to other industries, like telecommunications, where shared resources are effectively managed through pooled ownership models. "If telecoms can do it, why can't we?" he challenged, advocating for more contractual creativity in the offshore wind sector to facilitate shared assets, particularly in operations and maintenance.
Offshore wind capacity auctions are expected to reach an all-time high in 2024
Data compiled Jan. 9, 2024
Source: S&P Global Commodity Insights: 2011869
Another key recommendation is to embrace winter installations, particularly in Taiwan. Despite perceptions that winter work is impossible, Bowden noted that approximately 20% of turbines in Taiwan have already been installed during winter months (November to March).
The experts also highlighted the need for greater regional collaboration. Magro stressed, "Taiwan is not just an allocated market here and isolated, and we really need to find ways to cooperate with other countries." This sentiment was echoed by Tschierschke, who emphasized the importance of a regional supply chain strategy.
However, challenges remain in implementing such collaborative approaches. Contractual complexities, particularly in joint procurement scenarios, need to be carefully navigated. As one industry investor pointed out, ensuring proper allocation of liabilities and operational responsibilities across linked projects requires innovative contractual frameworks.
Despite these challenges, the potential benefits of a more integrated regional approach are significant. Shared assets for operations and maintenance, for instance, could lead to substantial cost savings and improved bargaining positions for developers and OEMs.
As the APAC offshore wind sector continues to evolve, it's clear that adaptability and regional thinking will be key to its success. With Europe setting the pace in terms of project scale and efficiency, APAC players must find ways to leverage their collective strengths to remain competitive.
The coming years will be crucial in determining whether Taiwan can maintain its early lead, or if Japan and Korea will surge ahead. What's certain is that the APAC offshore wind market is no longer a lone player on the global stage, but an integral part of a fiercely competitive international industry.
