While the foundation for commercial offshore wind development is in Europe (and will remain the largest market across the region for offshore wind activity over the next decade), the rapid development of the vast East Asia and Pacific region brings both opportunities and some challenges to the supply chain.
According to World Bank data, East Asia and the Pacific region has a technical potential of over 15,000 GW, of which about 27% is suitable for fixed-bottom foundations and the rest for floating technologies. 90% of the potential is concentrated in seven countries: (in descending order) Australia, China, New Zealand, Japan, South Korea and Taiwan. Of these countries, only New Zealand currently has no offshore wind activity.
China
East Asia and the Pacific region is the dominant market, with domestic tier 1 suppliers increasingly turning to international markets.
As of the end of 2023, the region's operational offshore wind capacity will reach just over 32 GW, the majority of which is grid-connected in China, the region's largest offshore wind market and the world's largest offshore wind market. Growth in China's installed capacity and domestic supply chain has been rapid, primarily in the bottom-fixed segment.
While China's supply chain generally meets most of its domestic demand, large Chinese manufacturers are playing an increasingly important role in international markets. Increasingly large Chinese-made turbines and foundations are being supplied to projects in key European and emerging East Asian markets. Cable makers Hengtong, Ningbo Orient Cable and ZTT also supply to European projects.
Of particular note is that while the three major Western turbine OEMs (Vestas, Siemens, and GE) are focused on commercializing ±15 MW turbines, Chinese OEMs are developing 16 MW to 20+ MW models. Despite some reluctance from Chinese companies to supply European projects, performance, price, and delivery time are all critical, so we expect to see a growing role for Chinese supply chains in European and East Asian markets.
Ship demand in China is largely dependent on domestic supply. Chinese shipyards also maintain a strong position in the international ship newbuilding sector, both in construction and logistics/support vessels.
Taiwan, Japan, Korea
Taiwan, Japan, South Korea – High expectations, but barriers of cautious development and high local content are dimming the opportunity
Although initially buoyed by a clear development plan to support annual installations of around 1.5 GW to reach around 20.5 GW by 2035, Taiwan’s offshore wind market is beginning to face increasing challenges, with only half of the 2035 capacity target currently given. Around 5.1 GW of capacity is operational or under construction. Development is lagging behind targets due to local weather and ground conditions, high local content requirements, a one-year delay in the commissioning and grid connection deadline for allocation round 3.1, and a difficult bidding process. The gap between reality and targets is impacting the supply chain, which is looking to other East Asian markets to fill its order book. In the short to medium term, this means Japan and South Korea. Both markets are planning to open tenders by the end of 2024 to reach targets of 10 GW and 14.3 GW by 2030, respectively. These two markets have long-term potential for both fixed-bottom and floating wind technologies, but annual tender allocations remain relatively small (less than 1.5 GW) and local supply chains are expected to continue to demand more project activity to justify capacity investments. As with Taiwan, projects in Japan and South Korea are expected to require high levels of local content.
Japan, South Korea and Taiwan all have plans to develop floating wind. While Japan and Taiwan’s efforts can be categorized as technical and pre-commercial stages, South Korea plans to auction commercial-scale floating capacity in its eastern part by the end of 2024, and South Korean EPCI contractors and shipyards are preparing to meet the challenge.
All three countries are home to domestically built, owned and operated fixed-bottom construction vessels. South Korea is also a major builder of international construction vessels. Given the relatively weak oil and gas vessel sectors in these three countries, it remains to be seen whether floating wind auction activity will spark domestically targeted wind vessel newbuild programs.
Vietnam
High hopes but slow development
Until now, Vietnam has featured only intertidal projects that do not rely on traditional offshore wind supply chains. Central plans aim to deploy 6GW of fixed-bottom offshore wind capacity from the north to the south of the country by 2030. However, it has been slow to put in place the necessary legal and regulatory framework to support this goal.
Vietnamese shipyards are already active in building offshore wind support vessels for the European market, and the bottom-mounted project is expected to rely on the backing of regional construction vessels supported by the domestic offshore support vessel sector.
Australia
Emerge as a potential major regional market
Australia is rapidly becoming a market with great 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 granting offshore wind licences. Victoria was the first state to set offshore deployment targets of at least 2 GW by 2032, 4 GW by 2035, and 9 GW by 2035, with 12 projects recently granted seven-year feasibility licences. Victoria's first wind farms will feature bottom-fixed technology, while the expected feasibility licences in New South Wales will require floating wind solutions.
As with domestic oil and gas projects, the supply of construction vessels is expected to be provided primarily from the international fleet, while logistics and operational & maintenance support will be handled by domestic shipowners.
Philippines
Notable People
The Philippines has emerged as a potential market for the rest of this century and into the next decade. The country aims to build its first offshore wind farm by 2030 and install around 20 GW of capacity by 2040, creating conditions to work with developers to advance projects.
