In a year when the western offshore wind markets have faced considerable challenges with auction no-shows in the UK and developers scrapping power purchase agreement (PPA) deals along the US Atlantic coast, Asia-Pacific markets have grown brighter on industry radars.
However, commercial-scale projects have been slow to take shape in regional waters, as no country outside of China and Taiwan in the region has so far succeeded in an industrial-scale rollout.
Asia Pacific did overtake Europe last year with the biggest fleet of offshore wind, and the region is expected to be the largest contributor to the global build-out to 2035, spearheaded by Chinese projects that currently constitute more than 90% of installed capacity in the region.
The region could still present substantial opportunities. Aegir Insights forecasts that Asia-Pacific offshore wind markets, excluding China, will account for around 15% of offshore wind worldwide by the end of the next decade – if their governments can resolve longstanding issues around regulatory regimes, route to market and grid congestion.
Taiwan tops the table
Taiwan – which has experienced issues of heavy local content requirements, lack of transparency and problems with project financing and delays – currently stands apart from emerging Asia-Pacific players as the only market outside of China with utility-scale offshore projects in the water. It has the 376MW Formosa 2 moving into full operation in 2023 and more than 3GW under construction.
The remaining Asia-Pacific offshore wind markets are still working on getting their first large-scale arrays connected. Several are showing progress, including South Korea, which recently launched a 1.5GW PPA auction.
This marks a significant step forward in terms of auctioned capacity in the country and comes as the 532MW Anma – South Korea’s first utility-scale offshore wind project – recently received an environmental impact assessment greenlight from Seoul.
Yet, even with yearly PPA auctions now planned, the market still has a reputation for a complex regulatory scheme while limited grid capacity in certain areas also threatens the many projects angling to start producing electricity toward the end of the 2020s.
Australian 'mega-zones’ and Manila's road-map
In Australia, the rollout of declared offshore wind development 'mega-zones’ has picked up pace with two initial areas – Gippsland and Hunter – already unveiled and a further four to follow. The two initial zones have a combined potential of 15GW of capacity. Australia’s merchant market needs to keep up momentum to ensure developer confidence is maintained.
In the Philippines, key steps have been taken since an offshore wind road map with the World Bank was released in April 2022.
A new sector policy framework was enshrined in June 2023 and Manila has expressed its intent to include offshore wind in its power purchase agreement auctions next year, with more than 70 projects already having received initial permits for site exclusivity.
However, the Philippine market is still marred by lack of transparency, a nascent regulatory and permitting system, and issues with its planned grid expansion.
India and Japan to hold auctions
Governments in the highly fancied Japanese and Indian offshore wind markets are also in the process of either starting or finalising large-scale leasing.
Tokyo is slated to announce the results of its latest lease and support auction round in early 2024, while New Delhi is planning its first offshore wind lease auction in Tamil Nadu in the same timeframe.
However, both markets have experienced significant delays compared with their original timelines, and both countries’ regulatory schemes are still in a nascent stage with many uncertainties.
Well-known issues persist across APAC
Despite the tangible progress of offshore wind in Asia-Pacific, notorious regulation and permitting issues persist, slowing project development. This impacts route-to-market which, in new markets, is often dependent on a clear pipeline of support or offtake auctions to ensure economic feasibility and lower financial risk.
Grid capacity is another abiding problem, region-wide. The smooth integration of utility-scale offshore wind into a country’s onshore power network is essential.
Some of the most promising emerging markets, including the Philippines, Vietnam, India and South Korea, are still in the early stages of upgrading their grids to accommodate future generation from offshore plants.
A decade off course?
Even though several Asia-Pacific markets are on track to reach commercial take-off in the late-2020s, there is every likelihood most will now see project delays, resulting in the combined regional deployment goals for 2030 not being reached until the end of the next decade.
Simon Engfred Schlichting is senior research analyst, regional lead APAC, at Aegir Insights