Countries Building Protective Barriers for Domestic Wind Power [Domestic Offshore Wind Power Crisis]③

Taiwan Enforces 60% Domestic Content Ratio
Japan Peaks Domestic Supply Chain Operators
U.S. Offers 30% Tax Credit on Investments

Countries around the world are striving to build supply chains for key industries domestically or reorganize them mainly with allied countries. The wind power industry is no exception. Major countries are erecting strong barriers to protect their domestic offshore wind industries. This path differs from that of South Korea, which abolished the Local Content Requirement (LCR) last year.

Taiwan, which established LCR regulations around the same time as South Korea, is promoting offshore wind power to expand the share of renewable energy generation to 20% by 2025. Since 2020, an offshore wind farm with a generation capacity of 5.4 gigawatts (GW), scheduled for completion in 2025, is under construction. Furthermore, the selection of manufacturers for a 15-gigawatt complex to be built by 2035 is underway. Although Taiwan started later than South Korea, it is now the fastest in Asia. This is the result of the government selecting developers according to plans and minimizing development periods by establishing a 'one-stop shop' to shorten the permit process.

Taiwan has set a goal to localize 25 core items across five offshore wind sectors starting in 2026. Accordingly, only projects with a localization rate of over 60% can participate in government bids, and any excess is calculated as bonus points. However, since it is impossible to localize all sectors within a few years, items such as wind turbines, gearboxes, floating bodies, and substation electrical components are excluded from the minimum ratio but are awarded bonus points.

Japan is also operating a private-led offshore wind auction system with a 240-point evaluation criteria. Ten points are allocated to stable power supply and future price reduction categories, and high scores are given to businesses that have formed domestic supply chains in parts procurement and repair. In effect, this encourages the use of Japanese parts.

The United States is strengthening its supply chain through tax credits. The investment tax credit, under the Inflation Reduction Act (IRA), provides a 30% tax credit on investments in wind power plants within the U.S. Additionally, if the domestic parts production ratio exceeds 40% for onshore and 20% for offshore, an extra 10% is granted, and another 10% tax credit is available if the power plant is built in economically disadvantaged areas. The production tax credit provides tax deductions to parts manufacturers. It is maintained at 100% until 2029 and then reduced by 25% annually until 2032. Both are proactive measures to foster the U.S. wind industry.

In Europe, the United Kingdom is considered a latecomer in the wind power industry but is rapidly developing the sector. According to 'Energy Pulse' by the UK renewable energy alliance 'UK Renewables,' the UK has steadily supported the offshore wind industry since 2010 and currently ranks second in the world after China in terms of installed related power generation facilities.

When the UK first entered the offshore wind industry, there were no companies capable of producing wind turbines or significant component manufacturers. The UK adopted a strategy requiring the submission of supply chain plans to receive support under Contracts for Difference (CFD), encouraging foreign companies to establish factories within the UK. As a result, Germany’s multinational technology company Siemens established wind turbine and blade factories, and South Korea’s CS Wind and SeAH Steel set up tower and monopile factories in the UK, respectively. Additionally, while attracting foreign companies, the UK actively supported domestic companies’ entry into the offshore wind industry, driving the growth of companies such as BP, Subsea7, Tekmar, and Zephyr.

A wind industry expert stated, "Supply chains that are overly dependent on specific countries can significantly impact our economy," and suggested, "It is necessary to discuss improvements to the bidding system, such as setting a floor price for price indicators and separating qualification and price evaluations."