First movers boost offshore wind industry

SOUTHEAST ASIA JAPAN’S FIRMS CRY OUT: DITCH COAL PLANS JAPAN

1 in 5 firms want to ditch coal

As Japan mulls opening more coal-fired power plants, a poll by Reuters shows that Japanese attitudes are changing: 62% of firms urge the government to curb coal-fired power projects, 20% said coal plans should be ditched altogether, and a third said this would harm their business. A manager at a manufacturer said, “I don’t think we should give it up immediately, but Japan must clarify its energy policy in the way that will reduce environmental burdens in the medium to long term.”

With limited resources and especially after the 2011 Fukushima nuclear disaster, the government feels it needs all options and coal is cheap and abundant. Backers of coal-fired power argued that a resource-poor Japan has no choice but to stick with coal plans for the time being, the survey showed.

However, Environment Minister Shinjiro Koizumi told a United Nations conference last month that global criticism of Japan’s “addiction to coal” was hitting home, even as Japan remains a big financier of new coal plants in Southeast Asia and the only G7 nation still building coal plants at home.

“Critics merely base their argument against coal-fired power on their outdated technology that emits CO 2 . Such a cry that lacks objective and scientific viewpoints is nothing but ‘environmental fascism’, which is even dangerous,” a wholesaler manager wrote.

Side effects of abandoning coal A third of the Japanese firms that said abandoning coal plans would harm their business raised the issue of electricity bills and squeezing profits. “It could increase electricity costs and sacrifice the stability of power supply to a degree, but these can be technically resolved eventually,” a machinery maker manager wrote in the survey.

Whilst 60% saw no impact at all from abandoning coal, the remainder expected it to bring positive effects. Prime Minister Shinzo Abe’s cabinet approved a plan last year to cut greenhouse-gas emissions, including support for hydrogen and carbon capture technology, but made no mention of coal financing.

A study by Global Energy Monitor also showed Japan plans to finance $4.8b of investment in coal plants in Vietnam, Indonesia and Bangladesh.

The Reuters Corporate Survey was conducted from 25 December to 10 January by Nikkei Research and canvassed 502 big and midsize non-financial companies. Roughly half of them answered questions on coal plans on condition of anonymity to express opinions freely.

Growth could be sustained in the next 10-20 years.

First movers boost offshore wind industry

Offshore wind is shaping up to be one of Vietnam’s growth drivers for achieving its power generation target of 130GW by 2030, thanks to its resource-rich coasts, and a steady oil & gas supply chain to support future power plants. The local industry will not be the only one steering the wheel with an increasing number of investors seeing Vietnam as an opportunistic space. Elise Do, associate director at Augusta, talked to Asian Power about the motivations of these investors for investing in Vietnam’s offshore wind market, the government’s direct involvement in incentivising investment, as well as a glimpse into the process of facilitating transactions in the market. VIETNAM

Elise Do

How great is the potential for investment and return in Vietnam’s offshore wind sector? We’re looking at power generation that is currently at 47,000MW, and Vietnam will need to reach 60,000MW by 2020 and even double that by 2030. This rising underlying demand for power is obviously a huge enabler for renewable energy, but more specifically offshore wind, which can bring large increases in capacity in little time.

The offshore wind sector offers scale, but what is also important is that you need to have good wind resources, which Vietnam has. It also needs benign sea conditions and proximity to load. Vietnam, with its long coastline, has a lot of the ingredients needed to make the offshore wind sector work. Another interesting point is that its oil and gas supply chain is already established and that’s a good base from which to build the new industry of renewable energy.

You mentioned that Vietnam has extremely high growth figures for its power sector and offshore wind. How long is this growth period likely to last? In terms of timing, renewable energy capacity, construction and grid capacity hasn’t quite caught up with the targets in place; these have been increased, but more capacity is needed. The regional renewables sector has only just started, and I wouldn’t be surprised if in the next 10-20 years we see sustained growth.

Which factors will support that growth? The Vietnamese government is heavily involved in making renewables investments attractive. There is a 20- year feed-in tariff (FIT) in place, and the government works to approve and review infrastructure, especially offshore wind farms.

Efforts have also been made to facilitate direct power purchase agreements (DPPAs), with a pilot setup in place to support industrial power demand and guide firms towards clean energy. All in all, however, there is still more work to be done. I know that they’ve also done some direct power purchase agreement (DPPA) work. They have a pilot setup for DPPAs to support the demand structure and the industry that has a high need for power and also to guide them into clean energy.

Can you describe the profile of the European and US investors with whom you have interacted? European renewables are pretty welldeveloped and a lot of the players are looking towards Asia, initially Taiwan, and now other markets, to continue their growth. It really depends on the type of investor and their appetite.

For the utilities, it’s more of a question of diversifying into new markets. For IPPs, this is also a yield play, as they are looking to increase their yields and returns on investment. Asia does offer that and it’s becoming more and more interesting for investors. Taiwan has been a key growth region, and now people are looking for the next market. Although it’s still developing progressively, I think people look at Vietnam as something of an opportunistic space that might not be one of their primary markets.