Whereas the foundations of commercial offshore wind development are found in Europe (and Europe will remain the largest overall regional market for offshore wind activity in the coming decade), the rapid development of the large East Asia and Pacific region provides both opportunities and some challenges to the supply chain.
According to World Bank data, the technical potential for the East Asia and Pacific region amounts to over 15,000 GW, of which ~27% is suited to bottom-fixed foundations and the balance floating technologies. 90% of the potential is found in seven countries, which are (in descending order) Australia, China, New Zealand, Japan, South Korea, and Taiwan. Of these countries, only New Zealand does not currently have offshore wind activity.
CHINA
The dominant East Asia and Pacific market, where domestic Tier 1 suppliers are increasingly looking to international markets
At end of 2023, operational offshore wind capacity in the region amounted to just over 32 GW, of which the majority was grid connected in the regions offshore wind powerhouse and world’s largest offshore wind market, China. Growth in the Chinese installed capacity and the domestic supply chain has been rapid, mainly in the bottom-fixed segment.
Whereas the Chinese supply chain generally meets the majority of domestic requirements, leading Chinese manufacturers are playing an increasingly important role in the international market. Increasingly large Chinese made turbines and foundations are being supplied to projects in the major European market and the emerging East Asian markets. Cable manufacturers Hengtong, Ningbo Orient Cable and ZTT have also supplied European projects.
Of particular note, where the three dominant western turbine OEMS (Vestas, Siemens and GE) are focusing efforts on commercializing ±15 MW turbines, Chinese OEMS are developing a range of models from 16-20+ MW. There has been some resistance to the Chinese players supplying European projects, but where performance, price and delivery times all count, we anticipate an increasing role of the Chinese supply chain in the European and East Asian markets.
Vessel demand in China relies mainly on domestic supply. Chinese yards also maintain a strong position in the international vessel new building segment, both for construction and logistics/support vessels.
TAIWAN, JAPAN, SOUTH KOREA
Taiwan, Japan and South Korea – much promise but measured development and high local content barriers have taken some of the shine of the opportunity
After much initial excitement, underpinned by a clear development plan to support the deployment of ~1.5 GW per year to achieve ~20.5 GW by 2035, Taiwan’s offshore wind market has begun to face increased challenges, with only half of the 2035 capacity aspiration currently awarded. ~5.1 GW of capacity is either operational or under construction. Local weather and ground conditions, high local content requirements, a one-year delay in the Allocation Round 3.1 commissioning and grid connection deadline, and a challenging auction process have resulted in development being behind the aspiration. The gap between reality and aspiration is impacting the supply chain which is looking to other East Asian market to fill order books. In the short- to mid-term, this means Japan and South Korea. Both markets are planning auctions before the end of 2024 to support their respective 10 GW and 14.3 GW aspirations by 2030. Despite the longer-term potential in these two markets, both for bottom-fixed and floating wind technologies, annual auction allocations remain comparatively small (below 1.5 GW), and we anticipate that local supply chains will continue to demand more project activity to justify capacity investments. As with Taiwan, we anticipate that projects in Japan and South Korea will require high levels of local content.
Japan, South Korea and Taiwan all feature floating wind development plans. Whereas as Japan and Taiwan’s efforts can be classed as technology and pre-commercial scale, South Korea is moving to auction commercial scale floating capacity in the east of the country by the end of 2024, and South Korean EPCI contractors and shipyards are gearing up to meet the challenge.
All three counties are home to domestically built, owned and operated bottom-fixed construction vessels. South Korea is also a major builder of international construction vessels. Given the comparative weakness in the oil & gas vessel segment of these three countries, it is still to be seen if floating wind auction activity will trigger domestic newbuilding programs of targeted wind vessels.
VIETNAM
Much promise but slow development
Till now, Vietnam has only featured intertidal projects that do not rely on traditional offshore wind supply chains. Central planning aspires to deploy 6 GW of bottom-fixed offshore wind by 2030 from north to south of the country. However, there have been delays in adopting the necessary legal and regulatory frameworks to support the aspiration.
Vietnamese yards are already active in building offshore wind support vessels for the European market. We anticipate that bottom-fixed projects will rely on the support of regional construction vessels supported by the domestic offshore support vessel segment.
AUSTRALIA
Emerging as a potential major regional market
Australia is fast becoming a market with major potential to develop offshore wind capacity. The government has designated a total of six priority offshore wind zones in the country. The government has developed a robust process for identifying and awarding offshore wind licenses. 12 projects have recently received 7-year feasibility licenses to progress the construction and operations planning for projects in the State of Victoria, the first state to set offshore deployment targets – at least 2 GW by 2032, 4 GW by 2035 and 9 GW by 2035. Whilst the initial Victoria wind farms feature bottom-fixed technology, the anticipated feasibility licenses for New South Wales will require floating wind solutions.
As with oil & gas projects in the country, we anticipate that construction vessel supply will be largely provided from the international fleet, but logistics and operations & maintenance support will be met by domestic owners.
THE PHILIPPINES
One to watch
The Philippines is emerging as a potential market for the end of this decade and into the next. The country aspires to deploy the country’s first offshore wind farm by 2030 and to install around 20 GW by 2040 and is working with developers to create conditions to advance projects.