Analysts believe offshore wind could benefit from a renewables diversification plan announced last month by Japanese energy giant Tokyo Electric Power Company (Tepco).
While offshore wind “is still not in the plan” for Tepco, according to Bikal Pokharel, principal analyst for Asia-Pacific power and renewables at Wood Mackenzie, “they are looking at investments.” Tepco’s major acquisitions in Japanese renewables will be a mix of solar and offshore wind, he predicted.
Tepco President Tomoaki Kobayakawa in February pledged “a dramatically new path for the company as it navigates the challenges posed by deregulation of Japan’s energy markets, the country’s declining population and the need to continue cleanup work at Fukushima.”
The company’s youngest-ever leader promised the moves would transform Tepco from a local utility to an innovative global energy and technology company. Pokharel said many of the changes had been underway for the last few years.
Between 2011 and 2012, for example, Tepco built up its Japanese solar generation capacity from almost nothing to 30 megawatts, spread across two plants in Kanagawa Prefecture and one in Yamanashi Prefecture.
In the last year, Tepco has also upped efforts to diversify into more exotic alternative energy technologies. Last April, the utility spent GBP £500,000 (around $700,000) on an equity investment in Moixa Energy, a U.K. residential battery company.
Tepco followed that up in July with a €3 million ($3.5 million) Series A investment in Conjoule, a German startup developing peer-to-peer energy markets enabled by blockchain technology.
In December, Tepco turned its gaze to the U.S. energy storage market, buying a 50 percent stake in Battery Utility of Ohio, a Renewable Energy Systems Americas-owned battery system firm providing frequency regulation services to transmission network operator PJM.
The same month, Tepco started testing virtual power plant technology in its home market, working with Californian behind-the-meter battery startups Sunverge and Stem.
Against this backdrop of increasingly varied energy investments, a push into offshore wind hardly seems out of the question.
Japanese lawmakers have been mulling how to develop offshore wind for some years, and this month the cabinet approved legislation that would allow developers to place competitive bids on selected zones in Japan’s territorial waters.
The law still has to go through Japan’s bicameral legislature, the National Diet, in a process that could take a couple of months. Uncertainties remain, such as who will pay for grid connections, but the law signals that the Japanese government is keen to get on with building an offshore wind industry.
“The government hopes to reduce the cost of offshore wind power generation, currently at some ¥36 [$0.34] per kilowatt-hour, which is three to six times higher than in Europe,” The Japan Times reported.
Simon Nicholas, energy finance analyst at the Institute for Energy Economics and Financial Analysis, said he expected changes in legislation to prompt Tepco to invest in wind as well as solar.
Wind power development has been subdued in Japan due to planning restrictions, he noted.
“The future for wind power in Japan looks more positive,” he said, “as some regulations have been relaxed, particularly for offshore wind, which is only just beginning development in Japan but can play a significant role going forward.”
Renewable energy today still makes up just a tiny fraction of Tepco’s domestic electricity generation, although the utility already has some exposure to renewables in international markets through its investments and through JERA, a joint venture with Chubu Electric Power.
Apart from investigating solar and offshore wind in Japan, Tepco would likely step up its presence in international renewable energy markets, Nicholas said, “as this can help replace lost revenue at home.”
Tepco has enormous costs relating to the Fukushima disaster and also has to cope with the fact that its nuclear power plants are offline, he said.
“The nuclear shutdown, market deregulation leading to increased competition, and declining electricity demand in Japan means growth domestically is likely to be limited for Tepco,” Nicholas said. “Significantly, Japan’s Foreign Minister has recently called for increased commitment to renewable energy and a shift away from both coal-fired and nuclear power. It remains to be seen how this influences energy policy going forward.”
