Is Japan ready for commercial offshore wind?

On a recent trip to Hokkaido in Japan, I had the chance to see the operational Ishikari Bay offshore wind farm, just to the west of Sapporo. At 112MW, it may seem small, at least to those in Europe, but Ishikari is very special for Japan. Upon its Commercial Operations Date on 1 January 2024 it became Japan's largest offshore wind farm. It's also the first to use 8MW turbines (the most recent projects, at the ports of Akita and Noshiro, used 4.2MW models).

Ishikari Bay New Port Offshore Wind Farm, 2024

Despite enjoying 30,000km of coastline, and each gigawatt of offshore wind having the ability to shave an impressive $300m p.a. off the balance of trade figures for imported fossil fuel, Japan's installed capacity of offshore wind now sits at around 280MW, inclusive of test and demonstration projects. By comparison, the UK, another island nation amongst the ten largest EEZs, has almost 14GW.

The gap has two main causes.

Firstly, the UK's seabed topography is more beneficial than Japan's. Many of the UK's 50 offshore wind farms in operation or construction are in the North Sea, which the late (great) Eddie O'Connor once told me to think of as a "wide, shallow lake." Japan, by contrast, has a seabed shelf that drops off swiftly, leaving much of the coast suitable for the floating wind foundation technology that even the UK has installed less than 100MW of. Japan is regularly battered by typhoons, and experiences occasional major seismic events. Because of this, the business case gap has historically been significant, even with the benefit of Japan's enviable engineering and shipping sectors and its ability to cope with natural phenomena.

Secondly, the cornerstone of Japan's energy strategy, and arguably its industrial strategy, lay in nuclear power. By 2010 business powerhouses such as Hitachi, Mitsubishi and Toshiba had built over 50 reactors in their native country. 

Put simply, there was relatively little strategic need to add offshore wind to the strategy, especially with the challenging economic case.

Despite this, Japanese industry has historically had some involvement in offshore wind. The giant keiretsu Mitsubishi Group dabbled in the wind turbine manufacturing business, including for offshore models, through its part ownership via Mitsubishi Heavy Industries in MHI Vestas. It was however dissolved in 2020, having lasted seven years, when the Danes exercised their option to buy the remaining shares. 

Looking ahead to the future, the signs are looking bright for offshore wind in Japan. 

The fall in Japan's enthusiasm for nuclear power has been well documented. The Fukushima disaster in 2011 is an obvious milestone, but less written about is the knock-on effect felt in Japan industry:- 

• In 2016, Toshiba pulled out of developing reactors at another overseas site.
• Also in 2016, Hitachi withdrew from its planned £16bn investments in new reactors in Europe.
• In 2017, Toshiba was removed from the Nikkei 225, the index that it had been a constituent of for over 70 years, due to the bankruptcy of its Westinghouse civil nuclear business. It narrowly avoided being broken up via a private equity rescue. 

Offshore wind, conversely, has since become front of mind for many of Japan's largest companies. At the end of 2022, TEPCO, perhaps most famous overseas for its operation of the Fukushima Daiichi nuclear plant, bought project developer Flotation Energy, whose heritage is closely linked with what was until recently the world's largest floating wind project: the UK's Kincardine wind farm. TEPCO also owns half energy of project developer JERA, which recently bought Parkwind, the Belgian offshore developer, and which went on to beat Norwegian natives Equinor and Statkraft for Norway's coveted first commercial offshore wind lease. Parkwind, now part of JERA Nex, also recently won a key license in Australia's first commercial round.

These acquisitions build upon the many investments by Japan's sōgō shōsha trading houses—including Sumitomo, Marubeni, and Mitsubishi—that have carefully become significant investors in overseas offshore wind farm and associated transmission assets, including in Europe. They have also invested in the supply chain, with a good example being Sumitomo's recent green light to build a UK factory producing HVDC cables, a major bottleneck to the expansion of offshore wind.

Perhaps most significant was the spring 2024 decision of Mitsubishi, Marubeni, TEPCO, Tokyo Gas, the co-owners of the Ishikari Bay project, and eight other Japanese firms, to form a joint industry group to accelerate Japan floating offshore wind. This was announced swiftly after the Japanese government indicated its draft regulation to allow the building of wind farms in Japan's EEZ, rather than just - as with the Ishikari Bay project - in territorial waters.

Aside from these examples of business and policymaking confidence, there are certainly key factors in Japan's favour for Ishikari Bay being the tip of a large iceberg.

Firstly, there is Japan's long experience at building very sizeable power infrastructure projects, with the Shinkansen Bullet Train network—on which I wrote most of this—being a prime example. Starting in the 1960's, the Shinkansen network is still expanding via private funding, involving the large banking arms of the keiretsu conglomerates.

Secondly are the industrial arms of the keiretsu, which form the backbone of the nation's deep and wide manufacturing prowess in everything from steelmaking, chemicals, microelectronics and robotics. Many of the firms involved see the opportunity from rebalancing away from manufacturing aimed at nuclear and fossil fuel power production, another historical strength, and toward offshore wind. Japan also has a modest oil and gas exploration sector, which has been a critical catalyst of UK and Dutch experience in developing a supply chain for offshore wind, and a strong port and shipbuilding sector, also critical to leverage.

Thirdly, as any experienced visitor to Japan's cities will have witnessed, Japanese society is hugely respectful of health and safety practices. A short stretch between a dropped curb and a car park can often be manned by four men—I've only ever seen men—sporting hard hats, x-crossover hi-vis, whistles, and red LED batons. Bath tubs and the ubiquitous TOTO Washlet electronic bidet toilets are bedecked with permanent safety directions and servicing diagrams. Whilst not very reader will immediately consider health & safety critical to a thriving new energy sector, there is an increasing desire amongst insurers and investors for hard evidence of HSEQ credentials, and an increasingly scarce workforce could also be looking for the same. Evidence of policies is no longer enough—backers want to see solid strategies—and Japan's experience in Total Quality Management, a field that Toyota, Panasonic and Sony practically invented, is invaluable.

Fourth and finally, whilst the local seabed bathymetry and topology, metocean and seismic conditions provide challenges, the wind resource and diverse weather systems along its long coastline also provide much opportunity.

As veterans of the North Sea offshore industry will attest that, even with natural and industrial strengths, the journey from 'megaclass to gigaclass' is still incredibly demanding, and the patch work of regulatory and governmental bodies and mechanisms can amplify this, as can citizen sentiment. Closer to home, the similarly growth-phase South Korean offshore wind market bears evidence that similarly industrialised markets can be strewn with obstacles that catalyse delays. Japan does at least benefit from a cohesive mesh of regulation and regulation, even if control of its power grid is relatively fragmented.

Overall, Japan has an impressive opportunity to overcome the decline in its nuclear sector and rid itself of an over-reliance upon expensive and insecure LPG, by leveraging its industrial prowess and long coastlines through the rapid expansion of offshore wind.

I look forward to watching it succeed.