Tokyo Electric Power Company, Japan’s largest utility, is wooing Ørsted to its shores, as the leading Danish offshore wind developer ponders its future in Taiwan.

Tepco and Ørsted signed a memorandum of understanding last month, while the developer weighed whether to go ahead with 900 megawatts of offshore wind capacity in a wind farm off Taiwan’s Changhua County. The future of the project was thrown in doubt when the Taiwanese government slashed its feed-in tariff by 6 percent.

Henrik Poulsen, Ørsted’s chief executive, told the Financial Times that his board would make a final decision on the Changhua project in the second quarter of this year.

“The task at hand is to go back and look at the economics of the project, and talk to our supply chain partners and see what it can be done to make this an investable project,” he said.

In the meantime, Tepco is looking to consolidate its relationship with the offshore giant. Last month’s memorandum was for Tepco and Ørsted to work together on extending Choshi, a single-turbine offshore wind pilot near Tokyo.

Tepco pursues a strategic partnership

Since last November, Tepco has been carrying out a seabed survey to examine the feasibility of expanding the project, which began commercial operations at the beginning of this year. The survey was due to end last week.

On completion, “we will look to put a commercialization plan in place as soon as possible,” said Yoshiko Matsuda of Tepco’s global communications group.

Tepco and Ørsted are also planning to evaluate other offshore wind development sites around Japan, she told GTM. More widely, Tepco is hoping to develop a strategic partnership that will allow it to participate in Ørsted projects outside Japan.

The partnership will help Tepco fast-track its ambition of becoming an offshore wind leader.

Last August, company president Tomoaki Kobayakawa said Tepco was planning to invest 100 billion yen ($8.98 billion) on up to 7 gigawatts of national and overseas renewable generation, with a focus on offshore wind and hydro.

The announcement followed a shift in strategy for the company, first unveiled in February 2018, from a nationally focused, predominantly thermal- and nuclear-based utility to a developer of global renewable energy projects.

Matsuda confirmed that within 10 years the company is expecting to have developed between 2 gigawatts and 3 gigawatts of offshore wind in Japan and across Asian and European markets. Ørsted is the perfect partner for such a path.

The Danish company, which was known as Dong Energy up until November 2017, has built more than 25 offshore wind farms in Europe. It has a leading position in the nascent U.S. market, where it is developing the 2-gigawatt Bay State Wind and 1-gigawatt Ocean Wind lease areas.

It had also been counting on Taiwan as a beachhead to upcoming Asian markets including Japan or South Korea, where Wood Mackenzie forecasts there will be 13 gigawatts of offshore wind by 2030.

Bullish on Japan

With the viability of the Taiwanese market now in doubt, and South Korea already looking crowded with local players such as Doosan and Hyosung, Japan is emerging as a promising destination despite having been slow to develop.

However, even by the best estimates Japanese offshore will still take a while to take off, not least because a steeply falling continental shelf will likely require the development of floating foundations before projects can achieve commercial scale.

Wood Mackenzie predicts Japan will be a rather minor player in Asia-Pacific offshore wind until at least 2027. Overall the region is expected see twentyfold growth between 2017 and 2027, but most of that will be in China, which is effectively off limits to foreign developers.

As of last October, Wood Mackenzie was forecasting that Taiwan would account for around 20 percent of all Asia-Pacific offshore wind capacity by 2027, versus 4 percent for Japan, 3 percent for South Korea and 1 percent for India.

Nevertheless, many in the industry are "quite bullish about Japan,” said Ben Backwell, CEO of the Global Wind Energy Council.

“The market has taken a while to mature, but they've got good conditions for offshore wind, a first-class marine industry and big manufacturing companies with the right capacities. This is a natural fit for them."