Japan's Tepco Honing Offshore Wind Bid as Competition Heats Up
(Bloomberg) -- Tepco Renewable Power Inc. is trying to become more competitive in bidding for offshore wind projects after losing out to consortia led by Mitsubishi Corp. in the inaugural round of Japanese government-run auctions.
Japan is aiming to award 10 gigawatts of offshore wind capacity by the end of the decade, spurring a contest for the contracts to build the projects. The Mitsubishi-led grouping made a clean sweep of the first three tenders -- with a combined capacity of around 1.7 gigawatts -- allocated in December.
The renewables unit of Tokyo Electric Power Co., Japan’s biggest utility, will continue to work with current partners -- including Danish company Orsted AS -- for the next round of bidding, according to Tepco Renewable President Masashi Nagasawa.
A ``careful review’’ of its partnerships is necessary, however, especially given the need to lower costs, Nagasawa said in an interview. But Tepco “isn’t willing to take on losses” to develop more domestic offshore wind projects, he said.
Japan is looking to generate around 5% of its electricity from wind -- both onshore and offshore -- by the end of the decade, and wants to be carbon neutral by 2050. The country has very little wind-at-sea generation at the moment, but the technology is appealing for densely populated nations like Japan that don’t have a lot of space for onshore turbines. South Korea is building the world’s biggest offshore wind project off its southwest coast.
See also: Mitsubishi the Big Winner in Japan’s Offshore Wind Auction
Tokyo Electric and Orsted lost out on one of the three tenders -- for a project off the coast of Chiba prefecture -- that Mitsubishi won at a price of 16.49 yen per kilowatt hour. The trade ministry is currently reviewing the auction criteria, pushing back the schedule for the second round.
Mitsubishi’s clean sweep could put even more cost pressure on bidders in future rounds, as the ceiling price per kilowatt-hour is likely to drop, said Petra Manuel, an offshore wind analyst at Rystad Energy in Aberdeen, Scotland.
“Businesses will be discouraged to take part” in offshore wind if competition continues to drive prices even lower, although it’s possible they could bounce back as well, Nagasawa said.
Tepco Renewable is targeting new generation projects -- both in Japan and the wider Asian region -- with a combined capacity of six to seven gigawatts by 2030, Nagasawa said. The company is also looking at selling more green bonds to fund work on hydropower plants, but investors are cautious at the moment due to the war in Ukraine, he said.
“Asian countries are interested in not just hydropower, but also things like geothermal,” Nagasawa said. “We need to work on expanding overseas projects more than ever before.”
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