India’s Suzlon Energy Ltd. may seek a Japanese partner to make offshore wind turbines, attracted by access to cheap yen loans as projects at sea get costlier and more complex.
Suzlon, whose German unit Senvion SE is the third-biggest supplier of offshore turbines, is in talks with Japanese companies about forming a potential joint venture, Suzlon Chairman Tulsi Tanti said in an interview in Mumbai this week.
“This type of business is very capital-intensive so you must leverage the lowest cost of funds,” said Tanti. “Where is that? Japan and the U.S.,” he said, adding that Japan is also attractive because it introduced an offshore-specific tariff for wind power this year.
The pressures of costly investments and high technology risks are prodding companies into partnerships as global offshore capacity expands sixfold to 42 gigawatts by 2020, according to a Bloomberg New Energy Finance forecast. Mitsubishi Heavy Industries Ltd. and Denmark’s Vestas Wind Systems A/S teamed up last year, followed by Areva SA and Spain’s Gamesa Corp Tecnologica SA in January. General Electric Co.’s acquisition of Alstom SA’s power assets is expected to reinvigorate its offshore activities, according to Bloomberg Intelligence analyst James Evans.
Tanti declined to name the Japanese companies Suzlon has approached. Fuji Heavy Industries Ltd., Hitachi Ltd. and Mitsubishi Heavy Industries Ltd. had supplied turbines for about 20 megawatts of the world’s 7,110 megawatts of offshore projects as of 2013, according to data compiled by Bloomberg.
“You can’t ship offshore turbines, they’re too big,” said Tanti. “You have to manufacture there,” and Japan’s low borrowing costs could make that attractive.
Japan’s diversification away from nuclear power since the Fukushima disaster in 2011 is opening up opportunities for clean energy. Prime Minister Shinzo Abe’s government introduced a fixed rate, known as a feed-in tariff, for offshore wind power in April.
That rate of 36,000 yen ($347) a megawatt-hour is double the tariff Germany offers and 85 percent higher than Denmark, according to data compiled by BNEF. That still may not be enough, the London-based researcher said in April, estimating that investors could require about 25 percent more to make a project viable.
Lakes in North America may also offer potential for offshore farms, which could send their power to big U.S. and Canadian cities lining their shores, Tanti said.
Copyright 2014 Bloomberg
Lead image: Offshore wind via Shutterstock