Frost & Sullivan: Wind Energy Market Set to Boom in Japan

The wind energy industry, one of the key growth engines amongst renewable energy technologies slipped into a slowdown in 2012 plagued by Europe’s and other developed countries’ economic woes, its first since witnessing double digit growth rate y-o-y since 2009.

Amidst this, the wind energy industry is likely to regain its lost sheen back in 2013 with the extension of federal tax credit in the US and Japan’s recent announcement to invest in offshore wind farms in Fukushima. Despite falling prices and technological advancements, the wind power market growth continues to be fuelled by extensive government support.

According to Suchitra Sriram , Program Manager, Energy and Environment, Frost & Sullivan: “The shutdown of Japan’s nuclear reactors in the aftermath of the earthquake and tsunami has changed the perspectives towards renewable energy technologies.”

“The compelling need for energy self sufficiency and energy security has driven Japan to tap its offshore wind potential despite high costs and challenges in connecting to the power grid. Furthermore, Japan’s investments in developing its onshore wind power projects have been dismal since 2008 due to complicated construction guidelines and grid connection issues,” she added.

Unlike the European markets that led the offshore wind power development globally, the Asia Pacific region has been slow progressing. However, with Japan’s plan to aggressively promote offshore wind projects in the country, the focus of developing offshore wind farms is expected to shift from the West to the East.

“A prime example is the Fukushima offshore wind power project with a mammoth planned capacity of 1 GW. The project has proved how wind power can be harnessed effectively even to replace nuclear power plants that are currently mired in safety concerns,” said Sriram.

“Besides, it highlights the role played by such renewable energy technologies in locations that are highly susceptible to develop nuclear power plants. This project, once commissioned has the potential to push Japan as one of the leading wind power markets in the Asia Pacific region,” she added.

Japan’s government commitment and support has played a crucial role to propel the offshore wind power industry as this ambitious project – off the coast of Fukushima – is estimated to have very high construction cost. The feed-in-tariff system introduced in July 2012 requires utilities to purchase electricity produced from offshore wind farms at up to Y42 per kWh which is not only twice the rate of onshore wind farms but also considered to be the highest in the world.

A lull in the country’s onshore wind power market during the recent years had driven some Japanese wind turbine manufacturers to focus on overseas European and US markets. However, this scenario is likely to change because of growing interest in developing offshore wind farms in Japan. This is expected to attract not only home-grown engineering and construction companies but also global wind turbine manufacturers to re-enter Japan.

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Press release, January 23, 2013; Image: MHI