TOKYO -- Japanese oil refiner Cosmo Energy Holdings's renewable energy ambitions met with a cold gust of reality when it lost a bid for an offshore wind project last year. Now, the company needs to prove it has cost competitiveness to reach a goal of quintupling its wind power capacity in less than a decade.
A consortium with partners including Japanese renewable energy company Renova and Tohoku Electric Power was outbid for a project off the coast of Akita Prefecture in northern Japan to a group led by Mitsubishi Corp.
The Renova-led consortium had been seen as the front-runner, but the Mitsubishi camp proposed selling the power at a shockingly low 11.99 yen, or about 9 cents, per kilowatt-hour -- less than half the Renova-Cosmo offer.
"We weren't the main player, but it was still a good lesson for us," said Shigeru Yamada, a director at Cosmo and head of its power and new energy department.
While it lacks the scale of compatriots Eneos Holdings and Idemitsu Kosan in oil refining, Cosmo had been ahead of the competition in wind. It was a leader in wind power generation in Japan with 300,000 kilowatt-hours of installed capacity as of March, topping Eneos, which reached a deal last year to buy Japan Renewable Energy for a leg up in the field.
Many in the industry hold Cosmo Energy's yearslong track record on onshore wind operations in high regard. But Cosmo mostly relied on feed-in tariffs -- above-market fixed prices for renewable power -- that arguably weakened the company's focus on costs.
Yamada indicated that Cosmo is rethinking its strategy for tenders going forward. "We're currently in discussions with construction companies and turbine manufacturers," he said.
A surge in crude oil prices lifted Cosmo's profits to a record high last fiscal year. But with demand for petroleum products expected to dwindle as countries seek to cut carbon dioxide emissions, the company is bullish on wind power.
It targets more than 1.5 gigawatts in installed capacity in the fiscal year ending March 2031, five times its current total. For comparison, its tally increased only about 70% over the preceding five years.
The goal consists of about 900 megawatts from onshore facilities, including some already under development, and over 600 MW offshore. With prime space on land limited in Japan, competition for sites is moving offshore.
Cosmo will need to go beyond its usual focus of generating power and sending it to the grid. As pressure mounts to cut emissions, energy companies are starting to secure customers in advance as part of their strategies. The Mitsubishi consortium includes Amazon.com and Kirin Holdings. Such companies could become electricity buyers.
Future bids for Cosmo will involve competition not just on construction costs, but on supply networks, Yamada said.
In January, Cosmo Energy announced a partnership with Abu Dhabi Future Energy Company PJSC-Masdar, a unit of an Abu Dhabi sovereign wealth fund in the United Arab Emirates. The companies will work together on offshore wind power, hydrogen energy and other fields, according to the release.
Masdar has been involved with offshore wind power projects in the U.K. for over a decade, and has experience with floating offshore wind platforms as well, Ahmed Al Awadi, director of business development and investment, told Nikkei.
"We have this accumulation of experience that we are very keen to bring to Japan and co-develop projects along with our Japanese partner," Al Awadi said.
Offshore wind power could be used to produce green hydrogen and ammonia in the future, Al Awadi also said.