In 2021, offshore wind was set to lead the charge for Japan’s decarbonization and energy security efforts, with the Mitsubishi-led consortium winning all three Round 1 auctions. GE Vernova was ready to supply 134 turbines (each 15-MW) and was deep in negotiations with Toshiba to build a nacelle assembly factory.
Despite well-known headwinds for the industry: rising supply chain costs, rewriting the auction rules after Round 1, high-profile market exits and changing political temperature, offshore wind remains a key growth driver for Japan’s energy mix.
Though we aren’t seeing live auctions right now, there is movement behind the scenes. In March, METI, MLIT, and MoE published proposed revisions to the Promotion Zone Designation Guideline and Central Method policy, as institutional preparation for the amended Marine Renewable Energy Act that took effect on April 1.
The regulatory groundwork is ready, but no auction launch date has been announced for either Round 1 rebids or the upcoming Round 4 auctions. According to the ministries, these should come relatively close to each other which means there is a lot of work to be done in development, bid preparation, and – once bids are won – in real project preparation.
So, what happened to the workforce that existed in 2021? It was a nascent sector then, and after a turbulent few years, what resources does Japan have to execute on these goals?
Impact of market exits and slowdowns
Throughout 2020 and 2021, the offshore wind industry attracted many foreign and domestic players alike. Hiring was aggressive; teams were built; expats were sent to Japan. Companies were sending their staff to get educated, certified, and prepared for the industry to come.
In 2022, we saw a hiring slowdown, but there was a shift to growth in strategic and regulatory professionals. In 2023, there were winners in Round 2. Hiring from a project management, project control, and engineering perspective picked up among the winners.
Overall, though, new hiring certainly slowed. Critically, there was still no FID across winning projects, which also resulted in companies hesitating to invest heavily in building out project execution teams.
Conversely, we’ve seen a number of companies exit the market – Orsted, Shell, and Northland Power. Others remain but have kept their teams flat or even seen a reduction, as people have slowly left and not been replaced. Some multinational firms – developers, manufacturers, and advisory – who won’t be named as they’re still active, have seen a reduction in their teams by about 50% from peak level.
So where did the displaced talent go? From our data, we estimate that 50% of those employed by offshore wind players that exited the market subsequently moved within the industry to competitors that they felt were in a stronger position to win projects.
The other 50%, however, opted to move into other asset types that they saw as having less binary risk. Key to this was the fact that a lot of the talent, especially those employed by developers, were not offshore wind career professionals. Rather, many had come from the solar industry, oil and gas, or conventional energy.
Borrowed talent disappears back into the woodwork
We first used the term “borrowed talent” last year when writing about building the workforce for the hydrogen economy. Here, we refer to non-specialized rotating talent typically found in large Japanese organizations.
Whether we are looking at the large Japanese trading houses, power utilities, or EPC companies, the story is the same. When investment cases looked good, these firms rotated a large volume of their talent into the offshore wind industry to ensure they were well prepared and in the best position to win projects and become a long-term player. As auction rounds were delayed and project economics called into question, some teams downsized and rotated talent back into other areas of their business.
There are notable exceptions, such as Kansai Electric continuing to grow its offshore wind workforce; Sumitomo showing positive signs to follow through with a successful bid and continuing to push long-term, as well as Toda, which led the Goto Floating Wind project. Though not an exhaustive list, there are some Japanese domestic players who have shown patience, a long-term commitment, and quietly developed their workforce in this quiet time.
Zooming out, the scale of Japan’s offshore wind ambitions has not shrunk from levels announced earlier in the decade. But there’s now less time, less committed companies, and less people.
Domestic experienced talent shortage
Ideally, four rounds should have now been completed, and we’d have somewhere between a dozen and 20 winning companies. We’d have had a dozen or so projects moving forward with serious development, engineering, and preparation in order to hit COP target dates before 2030. This all would have resulted in a large, growing workforce of talent engaged and gaining experience in the offshore wind industry.
Instead, what we have is a smaller workforce than before, which has still been focused on earlier-stage, more theoretical, less-execution work. Japan still just has a handful of operating offshore wind farms, which are all small in scale.
From a project execution standpoint, we’d expect there to be demand for talent experienced in global markets to help make up the shortfall. Such talents is not limited to Japan, so the case for them to come and work here has to be compelling. That said, some other markets, such as the U.S., have more challenges than in Japan.
So it could be said there is less competition for experienced talent from a global perspective than a few years ago.
Highly skilled workforce needs a highly committed market
Japan is capable of building the workforce needed to deliver gigawatts of offshore wind power. For many key positions — from bid preparation to project management to engineering to O&M — these complex jobs require highly educated, certified, and trained talent.
This type of highly skilled workforce only comes about through education and investment from companies that are confident in the market’s long-term health.
The onus now sits with the government to ensure a clear and attractive roadmap for the sector, as well as a bidding framework that is attractive, and reasonable state support to get the industry to a level of scale where it is self-sufficient.
Better late than never. On the workforce development side, there is plenty of work to be done.
Andrew Statter is a Partner at Titan GreenTech, an executive recruitment agency focused on the clean energy space.