The UK has long been at the forefront of large-scale commercial offshore wind and governments in the emerging markets of Asia value that experience. Significantly, there are numerous opportunities for UK companies to help build that supply chain as the offshore wind power industry is set to ramp up in Asia-Pacific, according to industry body the Global Wind Energy Council (GWEC).
The APAC region is likely to make up 59% of the total offshore wind power capacity expected to be added worldwide between 2024 and 2030, taking its total offshore wind installations from 41 GW to 172 GW by 2030. This would see Asia’s offshore wind sector rivalling Europe’s by the early 2030s, underscoring the scale of the opportunity.
However, scaling up the local supply chain is critical to unlocking growth potential in the region and the newer APAC markets can take some key learnings from the UK. Offshore wind supply chain development in the region remains extremely uneven; only China has enough capacity to cope with the expected growth and bottlenecks are likely to occur elsewhere.
This presents opportunities for European players, particularly those from the UK and Denmark, where offshore wind sectors have been booming, according to GWEC. Indeed, export credit agencies from both countries are already starting to forge pathways for offshore wind players in the frontier markets of APAC.
Petra Manuel, a senior analyst at consultancy Rystad Energy, told Energy Voice that there are some offshore wind sub-sectors where the UK is quite experienced, given the UK’s long history in oil and gas.
“These sub-sectors include array/dynamic cable manufacturing and installation, supply vessels, mooring lines manufacturing, anchor handling, offshore substation manufacturing, and engineering, procurement, construction and installation (EPCI) execution – which have quite an extensive overlap with floating wind and a somewhat limited overlap with the bottom-fixed market. Prominent companies in these sub-sectors include Petrofac, Wood, and Subsea7,” said Manuel.
“We see that UK companies have more opportunities to gain global market share in the floating wind market, although with more uncertainty given very few floating projects have been sanctioned so far,” he added.
In APAC, Rystad forecasts South Korea will be the hotspot for floating wind, followed by Japan.
European players needed for supply chain diversification
Liming Qiao, head of Asia at the Global Wind Energy Council (GWEC), told Energy Voice that it is crucial to diversify the supply chain in Asia Pacific to help make the nascent offshore wind power sector more competitive. Significantly, “European developers and supply chain companies can leverage their expertise in renewable energy and energy transition to take advantage of opportunities in Asia.”
“Given the demand for clean energy is so great, it opens up a big opportunity for the rest of Asia to step up and play a bigger role in the supply and manufacturing chains, which is currently dominated by China, and to a lesser extent India,” said Qiao.
Governments across the region – from Vietnam and the Philippines to Taiwan, Korea, Japan and Australia – are seeking to build offshore wind power industries and attract foreign direct investment from the UK, especially given its experience developing a world-class industry. Investment in offshore marine services and support vessels, heavy-lift equipment, as well as the supply of key equipment and components (areas where the UK excels) are all urgently needed.
Asia is also expected to require experienced UK contractors and consultants, who can enable the local supply chain to develop its own skills faster through technology transfer.
To date, partnerships with European players have been successful in Taiwan, and similar success is likely to be achieved in South Korea and Japan, noted GWEC. Other markets in the region, where offshore wind is in the early stages of development, are still facing the challenge of developing a local supply chain while building the necessary skills and workforce.
Various investment opportunities exist. For instance, a UK company could open a manufacturing facility in Vietnam or Korea, and integrate that business development with emerging offshore wind projects in those countries, and the wider region.
Rystad’s Manuel said that, although there have not been “big investments from UK companies in APAC’s offshore wind market so far, some UK companies have started moving into the APAC market via partnerships, such as Technip’s partnership with South Korean Young Chang and Sarens for the South Korea market in general, Subsea7/Technip/Samkang in the FEED project for South Korea’s Gray Whale, and Seaway 7’s joint EPCI contract with Sumitomo Electric in the Japanese market.”
Meanwhile, industry analysts believe supply chain diversification will help lower the risks associated with the global wind industry being largely dependent on one country – China – for manufacturing. This is true for Europe, as well as Asia.
While concentration risk in China is not as high in the wind industry as it is in solar PV, the concentration of component manufacturing is of significant concern due to a historical tendency in Europe – and to an even higher extent in the US – to outsource gearbox, converter and generator manufacturing, cautioned GWEC.
For resilient wind scaling, Qiao said efforts are needed to ensure more local suppliers of these components. Europe must at least double its existing capacity by 2030, while the US needs to establish local industries from scratch to meet domestic demand.
Energy transition at risk without supply chain investment
In its recent report Mission Critical: Building the Global Wind Energy Supply Chain for a 1.5°C World, GWEC warned that the future outlook for wind supply chains is uncertain and likely to become more challenging without more investment. Indeed, without supply chain diversification, energy transition aspirations are at risk.
GWEC believes that fair and transparent trade is essential to achieving the goals of the global energy transition and delivering its economic benefits. Unnecessary trade frictions in the global wind supply chain could pose a risk to climate, energy security and just transition goals, added Qiao.
“Maintenance of global supply chains requires healthy relationships amongst trading partners and cooperation within the global trading system,” said Qiao.
GWEC found in its recent supply chain analysis report that global scenarios involving heightened protectionism, restrictive trade regimes, and distorted forms of competition will likely result in slower wind market growth, higher wind energy costs, and lower financial sustainability for wind suppliers.
Still, “collaborative actions taken now to diversify the manufacturing and supply chains will help foster a highly resilient and even more cost-efficient solution to decarbonise the world,” noted Qiao.
Courting investors from the UK
GWEC hopes UK offshore wind players will send delegations to the Asia Pacific Wind Energy Summit in South Korea on 26-28 November 2024, where potential investors can learn first-hand about the opportunities in the region’s emerging markets.
Notably, GWEC will release two different supply chain reports in the fourth quarter of this year that will provide crucial intelligence and pathways for investors and governments alike.
One report analyses the wider regional APAC market and will be released at the summit, while the other report examines the supply chain in the Philippines market, which is on the cusp of accelerated growth. The Philippines is expected to have its first offshore wind auction in 2025.
China leads UK in offshore wind development
Significantly, China led the world in yearly offshore wind development for the sixth year in a row with 6.3 GW commissioned in 2023, making up 58% of global additions and bringing its total offshore wind installations to 38 GW – 11% higher than Europe – reported GWEC in its Global Wind Report 2024. The UK remains the largest offshore wind market in Europe and the second largest in the world. As of May 2024, 12.3 GW was under construction and more than 100 GW was at different stages of development.
While China and the UK dominate global offshore wind, emerging markets in APAC – such as Australia, Japan, South Korea, Vietnam, the Philippines and India – all present new opportunities for UK developers and supply chain companies to expand their business.
Crucially, there are numerous opportunities for UK players to partner with both the private and public sectors in APAC, as the region’s installed offshore wind capacity looks set to surge with energy security and net zero decarbonisation goals becoming increasingly vital.
