Green Giraffe Director Sophie Cherrier held a presentation at the 3rd Asia Offshore Wind Day in Tokyo, Japan, looking at the industry-wide lessons from Europe, bankability of offshore wind projects, and the challenges and opportunities the Japanese offshore wind sector is facing.
Sophie Cherrier pointed out the importance of a well-set and stable regulatroy framework as a facilitator of viable offshore wind developments. She highlighted several recent regulatory changes in European countries that led or will lead to cheaper offshore wind power and installation of large-scale projects. Here, Cherrier referred to the first subsidy-free offers at the first competitive tender in Germany, the first subsidy-free tender launched in the Netherlands, the third French tender being based on a “competitive dialogue” process, the electricity market reform in the UK, and Balgian new LCOE regime.
On an example of Germany, Cherrier showed how the country enabled stable remuneration for a decade, setting the ground for drop in LCOE.
Furthermore, Green Giraffe Director showed that renewable energy assets are trading at high prices as investors competitively chase yield, pushing down Internal Rates of Return (IRRs). Such IRR compression makes onshore wind and solar assets less attractive to yield-seeking investors and they are now switching their focus to offshore wind, that has higher but increasingly understood risks.
Speaking of key factors for success, Sophie Cherrier stressed that stable framework and support schemes allow for the supply chain learning curve and attract investors as well as banks to support the industry.
On the bankability of projects, Cherrier said the offshore wind projects are bankable when risks are well identified and tackled appropriately, in each phase.
Green Giraffe identifies Japan’s strengths and opportunities in its energy transition being focused on offshore wind, attractive feed-in tariff, strong local supply chain, and a mature market for project finance. On the other hand, offshore wind faces the challenge of needing to persuade government planners as offshore wind prices are high for now. Other challenges for offshore wind in Japan are limited grid and onshore infrastructure, some natural predispositions such as earthquakes and typhoons, and long consenting process.