Floating Offshore the Next Frontier in Wind Development in APAC: WoodMac

United Caps Joins Hands with Italian Firm Renantis' 46.8 MW Wind Farm

Floating offshore could be the next frontier in wind power development in the Asia Pacific (APAC), according to Wood Mackenzie. 

The analysis finds that a significant market for floating offshore technology is emerging in Asia. With developers in Japan, South Korea and Taiwan having announced plans to develop key demonstration projects, although the scale of deployment is still limited compared to conventional fixed-bottom technology. Floating offshore wind accounts for just 6 percent capacity of the 26 gigawatts (GW) of new offshore capacity expected in the current decade in the Asia Pacific (APAC) excluding China.

Wood Mackenzie principal analyst Robert Lieu said “this 1.56 GW of new floating offshore capacity in Japan, South Korea and Taiwan will require investments of at least USD 8 billion. If we consider the additional 9 GW project pipeline in early planning stages, total investment opportunities could be worth up to USD 58 billion.”

The analysis details that maintaining power supply is a key challenge for these markets as legacy thermal plants reach the end of their project life and opportunity for new-build coal and nuclear are severely limited. The three Northeast Asian markets face projected thermal and nuclear capacity retirements totalling 89 GW from 2020 to 2030.

“Governments in these markets are increasingly looking to renewables to fill the supply gap, but due to land constraints, scalable options are limited. Floating offshore wind is starting to gain more attention but the high cost remains a major barrier to widespread adoption of this technology,” Lieu said. Further adding that “to ensure the long-term sustainability of floating offshore wind, prices must come down significantly to at least be competitive with new-build gas power.”

With a limited track record and only 21 megawatts (MW) of operating floating demonstration units, there is high uncertainty over project costs in Asia Pacific markets. For now, the Japanese government estimates that current capex costs of floating offshore can be as high as USD 10 million per MW but could be commercially feasible if brought down to USD 4 million/MW, compared to grounded offshore capex cost of USD 2-3 million/MW and average Asia Pacific onshore wind capex cost of USD 1.5 million/MW by 2030. 

Wood Mackenzie expects the average capex costs of floating offshore wind plants in the three pioneering markets to decline by around 40 percent to USD 2.6 – 4 million per MW by 2025-2030.

Despite the cost challenge, governments in Japan and South Korea have set out support policies for the sector. In Japan, a feed-in tariff is available for floating projects compared to grounded offshore projects which are moving to price discovery through auctions. A small-scale 22-MW floating wind auction in the Goto Islands is also testing whether prices can be lower than the current feed-in tariff. In South Korea, floating offshore projects can be awarded higher weightings of renewable energy certificates depending on the distance between interconnection facilities.

“The Japanese and Korean governments are keen to establish a floating offshore supply chain hub for the region and potential future exports to other markets. This could also contribute significantly to lowering costs,” Liew added.

Concluding that “floating offshore represents perhaps the largest frontier for wind power in Asia Pacific in the long-term. There is significant future upside as almost all markets in Asia Pacific have coastlines and floating offshore can unlock wind resources near coastal cities even in low wind speed areas. Despite the limited scale today, floating offshore wind offers almost limitless potential.”