Episode 27: Accelerating wind energy in Asia Pacific featuring GWEC

The transcript highlights below have been edited for clarity. 

Mark Lee

We're going to be exploring aspects of what's going on in renewables space, focusing on wind energy. I have two great guests with me to have that conversation. Feng Zhao is with us from the Global Wind Energy Council (GWEC) where he is the Chief Research Officer. Also with me from inside ERM is Breanne Gellatly, a partner in our renewables business. Breanne and Feng, please introduce yourselves, explain your role and what you do.

Breanne Gellatly

I’ve been at ERM for about two years, I work in the renewables practice. I've been working in the wind industry onshore and offshore for the last 20 years, including working for suppliers to the wind industry. I'm one of four hundred people in the renewables practice at ERM and my projects typically focus on strategy markets and growing work in supply chain topics.

Mark Lee

Breanne, with 20 years of experience, what's different about working on renewables today than when you started?

Breanne Gellatly

I started in onshore wind, and it's funny, because at the time, offshore wind seemed like this crazy idea that no one would ever actually do. And then maybe 10 years later, I found myself working in offshore wind in the innovation space, looking at how to drive down the cost. Of course these were all fixed bottom projects. And again, at that time floating offshore wind seemed crazy. And so now, here I am 20 years later, and we're talking about floating projects being commercially competitive. So, it's been an interesting 20 years just to see the evolution of the wind industry.

Mark Lee

Feng, please introduce yourself, your own history in the field, and tell us about the Global Wind Energy Council.

Feng Zhao

I've been with the Global Wind Energy Council for almost six years. We are a membership organization and NGO. Our job is to promote renewables and help the industry to grow. Looking at the GWEC membership, we work with stakeholders across the entire value chain. We have hundreds of people across the globe. I've been working with wind since I moved to Denmark. I received my education here and have been working and living in Denmark for more than 20 years.

Current challenges of accelerating wind energy development in Asia Pacific

Mark Lee

We're going to key in today on the state of the wind industry in the Asia Pacific (APAC) region. We have talked on other episodes of the podcast about the Global Renewables Alliance target for 2030 to triple renewables and double efficiency. Feng, please give a bit of context for the state of wind energy in APAC into that global goal and the contribution it's making.

Feng Zhao

Before I start, I just want to mention, GWEC, our organization, is one of the initiators for this double down, tripling up target. We launched this initiative a year ago. I remember it was September last year. I was in New York with my colleagues and also industry organizations. We launched double down, tripling up at the headquarters of Orsted, the world leading offshore wind developer, they have big office in New York.

Luckily, we had nearly 200 countries sign the pledge at COP 29 at Dubai. This absolutely built the momentum for the renewables industry, specifically for wind, because looking at the future energy mix, either by 2030 or by 2050, we will see renewables, primarily wind and solar, play dominant roles. Looking at new information, in 2023 we had the best year ever, 117 gigawatts were installed. It's absolutely fantastic if you compare it to how many gigawatts were installed 20 years ago.

But is this enough? No, it's not. If you're looking at the IRENA (International Renewable Energy Agency) or IEA (International Energy Agency) 2030 or 2050 scenario to achieve 1.5°C energy pathway, the new information states that by 2030 we need to achieve, according to IEA, 320 GW and for IRENA it’s even higher at 350 GW. But we are only at around maybe one third of that now, so that's why we said we need to triple renewables or triple wind power by 2030 to achieve this target.

For APAC, we have China and India, those two markets are the largest markets. China specifically is number one in terms of onshore and offshore wind. India is also a reigning star as well, they are going to be key drivers in terms of onshore wind, even though they don't have offshore wind installed, they have some planned in the pipeline.

Mark Lee

And Breanne, what kinds of barriers stand in the way of more rapid wind development in APAC?

Breanne Gellatly

As far as the challenges that we think are being faced by some of the APAC countries to roll out this triple installation that Feng mentioned earlier, one that came up in our study was localization. Which on its surface seems like a responsible thing for governments to create jobs, to keep investments in their countries. But when you think of the scale of installations needed to hit our net zero targets, we need regionalization, countries cannot build a full supply chain to serve their projects.

There is a huge opportunity if they supply regional demand instead of national demand. And this was something that we looked at in our study and consultations. Companies need to have a strong investment case to scale up, or if it's a company that isn't in wind that has the potential to pivot some of their operations towards the wind industry, they need that demand to justify the investments to hit the scales that we're talking about, to start tripling installations by the end of the decade.

Tackling wind supply chain and installation bottlenecks in APAC

Mark Lee

Breanne, you referenced the study that has just been completed. ERM and the Global Wind Energy Council have just completed some research. What was that all about? What did we cover?

Breanne Gellatly

This is a GWEC project that they brought us into that was presented in Korea a few weeks ago. We looked at the onshore and offshore wind supply chains across all of APAC. It was an exciting study because we did a bottom-up assessment of the suppliers in the regions and not just the existing suppliers. We looked at transition companies as well, which we defined as companies which had relevant operations, so it could be automotive, it could be electronics, it could be ship building. Some of these industries that could pivot towards wind to meet this huge demand that we see for wind installation.

The study looked across the region. We looked at where there's existing supply. We did a bottleneck analysis as well. We looked at the regional supply and demand and then we also looked at countries specifically and how well suited they were to meet the demand. I think one of the interesting parts of the study was that considering China and India, a lot of the demand can be covered, but as soon as you take those countries out of play, then the impact of concentration risk is very prominent. In addition to that, we looked at where there could be strengths in some of these other countries to fill more of the supply chain. And there's huge experience and expertise in the region to grow a supply chain in a regional way, in time to scale up to the installation targets that we're aiming for.

Mark Lee

Feng, I'm intrigued by Breanne's comments about regionalization and it makes perfect sense, but countries approach energy as a security issue. We don't always play nice across borders when it comes to energy development and distribution. So, can you talk to how we make that happen effectively and how it is happening in APAC already?

Feng Zhao

The APAC region faces the same challenges as other regions in terms of permitting and infrastructure, and also we have the social consensus issue as well. We believe between now and 2030, the APAC region is expected to make up over 50% of the new wind capacity built worldwide. To get there, we believe that we cannot afford to miss China, as the largest market and also India, the second in this region. But to achieve the climate target, are we going to simply rely on a few countries? No. For the energy transition or climate change pathway, we cannot afford to miss anyone. So, when looking at the APAC region, for this to start, we are looking at all countries outside of the two key markets (China and India) that can grow. That's why we're promoting information in new markets in this region, to make sure that countries can benefit from the energy transition in general. We're looking at how countries can leverage their own strengths and can collaborate, so countries can play complementary roles to support each other. That's how we see regional growth.

This report talks a lot in terms of local country requirements, but we cannot afford to have each market build entire value chains. This will never happen and we don't have enough time either, so therefore we want to make sure that countries understand each other, they know the weaknesses and the strengths. By working together across the border, we can achieve a lot economically and make the supply chain efficient. That's a goal for us to promote.

Mark Lee

Breanne, can you give an example of where the regional cooperation is strongest currently?

Breanne Gellatly

I guess an example could be Vietnam. We have seen situations where there have been Korean suppliers that have set up factories in Vietnam, so they're taking the best of one country and the best of another country to expand some of the supply chain. Similarly, we've looked at countries that don't have wind pipelines, like Singapore, but have huge shipbuilding expertise and actually have supplied a lot of wind projects, including projects in Europe. And so why not bring them into the mix, they don't have projects, but they have huge expertise that the region can benefit from. Those are two examples.

One challenge on vessels is also going into this localization or cabotage rules, and we see that with the Jones Act in the US, this is something that is not unique to APAC. But considering the cost and the time it takes to build these vessels, I think this is a good example of where a regional approach could make sense. Especially looking at weather patterns and the way that APAC is geographically, having vessels work more uptime would also make the business case stronger for those investments and better returns for those companies that are providing the vessels. This is another example of where a more regional approach could actually help with having more bespoke vessels for the region and unlocking the investment to build these huge assets.

Mark Lee

Breanne, just to help our listeners, can you explain what kinds of vessels you mean?

Breanne Gellatly

I mean the installation vessels, the ones that have to jack down and have cranes that are huge to install the foundations in the turbines. These are not possible to build in every country. That's not the most efficient way of doing it so it's those kinds of vessels. But the argument also extends to other vessels as well. You need the vessels to install the projects, but then you also need the service vessels. And so there could also be more sharing of those vessels between countries as well.

Mark Lee

What about the supply chain side of it, what's needed in the pipeline to develop these assets?

Breanne Gellatly

One of the challenges right now for making those investments to develop the supply chain is we’re seeing countries putting targets out and that's very encouraging. And some countries are taking that a step further and making auction schedules that are quite transparent and longer looking in time. The challenge though, is that often companies do not feel that they can invest in projects until they are being awarded, and so there's a little bit of hesitation for the scale up until that security of supply and demand meet. So, suppliers and industry are looking at the market seriously, but there's a little bit of hesitation until there's a credible, more reliable pipeline. This is another reason why regionalization is attractive because if you know that the auction schedule across various countries is going to provide a huge number of opportunities, that also increases your appetite of investing and scaling up.

Opportunities for APAC countries to scale up wind supply chains

Mark Lee

Feng, keeping going on the topic of the research, it keyed in on strengths and opportunities in a half dozen markets. So, Australia, Indonesia, Japan, Philippines, South Korea and Vietnam; and the ways that those might be scaled up or transitioned to better supply to the industry. Can you pick out one or two examples about how each of these countries can help scale up supply chains?

Feng Zhao

For South Korea, looking at the project pipeline even though offshore wise I think by the end of 2023 they only had 150 plus megawatts installed, it's not impressive compared with big markets like Europe or China, however this market does have a liquid supply chain, for onshore and offshore turbine assembly. At the same time, they have two vessels already available, but for South Korea we are looking at potential.

South Korea has three key shipyards like HD Hyundai, Samsung and Hanwa Ocean, they are top three shipbuilders across the globe. For example, Hanwa Ocean, the Korean conglomerate, is building two new vessels for a European vessel operator.

South Korea also has a strong supply chain for steelmaking, for example foundation suppliers are already exporting piled jacket foundations to support offshore wind projects in Taiwan. Also, they have the cable industry like LS cable, they are one of the world’s largest. In APAC, they do not just support the project work for offshore wind in the home market in Taiwan, they are building their own momentum in Europe, not just for offshore wind, they are also supplying HVDC cables for the interconnections between the countries neighboring the North Sea. Also in this market, they have the supply chain available for electronic components, so they can produce the generators and power converters. So, there is a lot of stuff they can produce, however they cannot do everything, but we definitely believe that they have their own strengths.

Looking at other markets, Breanne mentioned Vietnam. To complete the consultation to support this project, I was in Ho Chi Minh City two months ago. I joined some of the developers and the local stakeholders. In Vietnam for example, they don't have real offshore installed, but this country has really strong expertise in the oil and gas industry. That's where they already win orders. I visited the PetroVietnam headquarters, their subsidiary company called PTSC is offering the whole set of steel structures used for offshore wind. They build the foundation substation for projects in Taiwan and have started exporting their products for developers in Europe, so that's absolutely amazing. Also, they have a shipyard over in Norway and have set up joint ventures in this market as well.

So far, they cannot build the big jack up vessels that South Korea can build, for example Samsung, Hyundai or Hanwa, but in Vietnam the shipyards can build service vessels and crew transfer vessels. It's amazing going through the journey to see the strengths of each market and how good they are. If we put these strengths together, they can build a really strong supply chain to support growth in APAC. Actually, not just in APAC but potentially they can cover the gaps across the entire global wind supply chain.

Mark Lee

How many more vessels do we need? What percentage of the capacity necessary to develop what we need to make our 2030 and 2050 targets do we have or where are we in vessel development?

Feng Zhao

Looking at the APAC regions, Japan and South Korea have their own vessels and potentially can support their own demand. But looking at the Taiwanese market, they only have one vessel. One vessel means that they can build a maximum of one gigawatt offshore wind turbine per year. But looking at the pipeline and their target, they want to build 1.5 gigawatts on average between now and 2035. So where are they going to get the vessels?

Right now, it's fine because we have relatively flat growth in Europe so they can leverage or borrow the vessels from Europe. But when the inflation picks up in Europe, those vessels will need to be recalled from Taiwan or somewhere else in APAC, back to support growth at home. So, then there are going to be troubles for markets like Taiwan.

Again, looking at this ecosystem in terms of a supply chain, of course you may argue that without a foreign project pipeline, it is dangerous to make huge investments because that’s what’s costly. One single jack up vessel costs around 300 to 400 million U.S. dollar per vessel.

Also, the technology is changing dramatically. So, by the time your vessel is delivered, you don’t want it to be out of date, because the turbines are growing year after year, and that's another change for the industry. I think to support the growth, we have to be smart to achieve a delicate balance otherwise in one way we cannot get enough vessels, and in another way you make the investment but it's a huge waste.

How different stakeholders can collaborate to reach APAC wind targets

Mark Lee

The study talked about how industry, government, civil society, finance, community, all these actors need to do their specific part to make the APAC wind targets a reality, it's a collective system change challenge. Breanne, how does that happen? What are the top one or two priorities for the collective group of stakeholders to collaborate on?

Breanne Gellatly

I think one is this kind of balance between innovation and standardization. I think the wind industry has been spectacular at driving down the cost of energy through accelerated innovation and new ideas across construction and operations, so definitely commending the industry on what they've done in a very short period. However, we are at a point in the sector that we need to shift towards standardization. This is hard on the supply chain when the latest turbine design changes on an almost yearly basis.

We need the industry to align on certain standards so the supply chain can scale up with technology that is going to stay the same. Maybe it doesn't have to stay the same forever, but at least for a certain period when these projects are being built. So that would be one priority. This is one piece on standardizing the technology, but if you're coming back to regionalization being the second priority, standardization also extends to health and safety, ESG and design code. I think all these things should be a priority to really capitalize on the benefits that a regional scale up would bring.

Mark Lee

Feng, how do you view the collective challenge, the social consensus challenge? What needs to be focused on to have everybody welcome the development necessary to deliver the renewables that we're counting on?

Feng Zhao

The answer is simple. We need to do it and make sure we do it right at the very beginning, because there are so many lessons to learn across the industry, not just in APAC like markets in Taiwan - that's the where the offshore wind started back in 1991. Looking at the APAC region, we need to get everything right, primarily focusing on this ecosystem.

We want to make sure the wind industry, the government, the services side, the financial community, understand why we’re building the supply chain. Of course, we have the tripling target and the climate target but to get the capacity is one thing. Another thing is when we build this capacity, build up the supply chain to achieve the actual offshore wind deployment, we need to make sure that the supply chain is sustainable.

But how can we make sure the supply chain is sustainable? That's where the industry needs to work together with the government. We need to make sure that we are doing the mining, production, and information equally, and that we follow ESG to a high standard. We need to make sure that countries, which are primarily vulnerable communities, will benefit from the energy transition.

When we talk about APAC, China and India are relatively mature, Japan and South Korea are relatively developed markets, but we still have a long list of countries in this region. There are a group of global South countries that need the support of the global financial community. They have the natural resources for mining, but again, who is going to provide the finance? So, providing finance is one thing but we have to think about environmental control, making sure that there is a standard for ESG, having human rights and that people have fair pay to achieve the just transition.

I think there are so many things that need to be done together by the industry. We have a target, it's clear. I think it's a matter of how we get there. That's the important thing. That's what we keep saying. We keep telling the policymakers to understand that this is a huge opportunity, but to capitalize on this opportunity, we have to make sure that this is an equal transition, that markets, countries, people will mutually or equally benefit from the entire energy or renewable deployment. I think that's the goal.

Without achieving this kind of ecosystem, even if we get the target installed, I still believe that's a failure. So, we need a collective approach to get there, but we’re not there yet, but I’m confident we will if we work together. GWEC has been working with industry, for example GOWA (Global Offshore Wind Alliance), Ocean Energy Pathway and other initiatives like the Global Renewables Alliance. The goal is to make sure that we get there, to make sure we achieve the just energy transition.

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