The next frontier: offshore wind development in Asia

July 2025 | SPOTLIGHT | SECTOR ANALYSIS

Financier Worldwide Magazine

July 2025 Issue

In the face of significant global headwinds in the sector, green shoots are emerging in 2025 for offshore wind in Asia after a turbulent 24 months.

North Asia is the region’s leader in this area. Despite some projects facing issues during construction, Taiwan remains the benchmark, having successfully attracted international investment through a robust regulatory framework. There is also a clear roadmap for future project development, with corporate power purchase agreements (CPPAs) set to play a key role.

In South Korea, the first commercial scale offshore wind farms have recently come online and several gigawatts (GW) of projects, both fixed and floating, are currently at various stages of development and construction. Japan has also sought to address some of the challenges and delays faced by its early project proponents by revising its offshore wind tender guidelines and making various other adjustments to streamline the development process and enhance investment and bankability.

Interest is also apparent in Southeast Asia. While still in the early stages of development, the Philippines looks poised to take significant steps forward in 2025, underpinned by an engagement-led approach to government policy and supported by the Green Energy Auction Programme (GEAP). Over the slightly longer term, Vietnam is another market to watch, with 6GW of offshore wind targeted by 2035 under Power Development Plan 8.

Key challenges

Developers have to date relied on, and continue to rely on, project finance to address the significant capex requirements of offshore wind farm development. In North Asia, international lenders have tended to lead the way, with significant support also coming from export credit agencies.

Given the unique characteristics of offshore wind as an asset class, these international sources of liquidity have enabled the transfer of experience and knowledge from more mature markets to catalyse capital for offshore wind in the region. While we are seeing domestic lender communities playing an increasingly significant role in each North Asian market, the emergence of multi-sourced financing structures will be key in Southeast Asia.

Historically, the Philippines and Vietnam have been more reliant on local finance providers as well as on concessional finance solutions from multilaterals including development banks and export agencies to support energy and infrastructure projects.

While these markets are opening up to international sources of commercial finance, we anticipate the first wave of offshore wind projects in these markets to accelerate this process as it becomes apparent that mobilising local, international and concessional finance is necessary to support the offshore wind sector in the region.

While the experience of international lenders is welcomed by domestic lenders to help them understand risk in the sector, each source of funding has different levels of experience when it comes to assessing market-based risks, as few international lenders have extensive experience of financing projects in these markets. This dichotomy makes the deployment of blended finance solutions in the region challenging, but also necessary as each liquidity provider has a role to play within the broader finance group to ensure the overall bankability and deliverability of offshore wind projects across Southeast Asia.

So far, project finance with limited sponsor support, limited completion support and an unwrapped, multi-contracting procurement model has been a fundamental feature of offshore wind farm financing packages. Having regard to the high overall capex cost and high degrees of specialisation within each construction package, this approach to offshore wind farm development has, in many respects, evolved from a position of necessity, due to the unavailability of economic, wrapped engineering, procurement and construction solutions.

Across domestic project finance markets in Asia, this approach to financing and procurement will, for the most part, be novel. Sponsors and international lenders will therefore need to work in partnership with domestic lenders and concessionary finance providers to understand, manage and mitigate the associated risks.

Similarly, given the amount of capital that is required to develop an offshore wind project, sponsors are accustomed to recycling development capital from one project to another, which can make tight restrictions on ongoing sponsor ownership of the project difficult to impose in practice despite being customary in some other markets.

Technological advancements over the past decade have, for the most part, enabled rapid reductions in the levelised cost of offshore wind power. Aside from the usual benefits of increased production on cost, ongoing increases in turbine capacity has increased output, while reducing the number of turbines and associated equipment required for the same level of output.

However, the emergence of new cost pressures owing to supply chain challenges, inflation and instability in foreign exchange markets, has placed significant strain on the economic viability of many offshore wind projects around the world. From the perspective of turbine supply, the pool of available suppliers has narrowed. This has meant that while industrial policy settings have favoured the adoption of European turbine technology, it is generally anticipated that the use of Chinese turbines in offshore wind markets outside of China is becoming a matter of ‘when’ and not ‘if’.

This trend seems all the more likely to manifest in the context of floating offshore wind projects where the relative cost difference between European and Chinese turbines could be critical to the economic viability of floating offshore wind projects. Similarly, and having regard to the constraints on the availability of European turbines and the ubiquity of Chinese turbines onshore in countries like the Philippines and Vietnam, we envisage a major role for Chinese turbines in these newer markets.

From a bankability standpoint, the introduction of Chinese original equipment manufacturers will require detailed technical analysis in order to satisfy performance-related considerations. From a contractual perspective, we also envisage the introduction of various mitigants ranging from enhanced bonding arrangements and adjusted payment profiles to more robust defects and performance-related regimes.

Supply chain localisation, as well as the suitability of ancillary infrastructure (including port and grid), remain key focuses across Asia’s evolving offshore wind markets. Taiwan has successfully developed its own domestic supply chain through a combination of regulatory intervention and natural market maturation, as more and more projects come online and benefit from the supply chain investments made by earlier projects and their contractors.

While this does provide some support to other burgeoning North Asian markets such as Japan and South Korea, specialised vessels and other critical infrastructure and components remain scarce from a regional perspective, while mobilising equipment from other markets can be costly and logistically challenging. This makes the case for supply chain localisation in the context of Southeast Asia all the more pertinent as the lack of alternative suppliers for critical components such as turbines, monopiles and substations, as well as vessels, can create bottlenecks.

That said, localisation for localisation’s sake, when imposed by mandated local content requirements, can strain project timelines and further challenge construction budgets if domestic capabilities are insufficient.

Lenders will need to scrutinise supply chain resilience on a case by case basis, and greater contingency may need to be built into project schedules and budgets. However, the ability of supply chains to localise will hinge on the stability of domestic regulatory regimes in their support of offshore wind development into the future to ensure a return on investment from supply chain localisation, as well as on the availability of suitable domestic infrastructure more generally.

In the Philippines, with limited port infrastructure and shallow harbours, the need for significant port upgrades is magnified and has been acknowledged by the government; however, a regionalised grid network, coupled with the dispersion of offshore wind projects throughout the Philippines, means that close collaboration between projects and government could be helpful in ensuring these upgrades are appropriately planned and prioritised under the National Development Plan.

Similarly, the scale of offshore wind means that inherent grid constraints in markets that have relatively low renewables penetration (such as South Korea, the Philippines and Vietnam) will be quickly exacerbated. These issues are generally beyond the control of individual developers and can introduce an element of project on project risk, where construction timelines need to match up with port infrastructure availability, while grid connection timelines need to match up with anticipated first power exports.

Therefore, lenders will need to pay close attention to curtailment related risks as well as to the availability of relief via the project’s offtake arrangements should there be unforeseen delays in any port or grid related upgrades required for the project. Access to land rights to lay transmission cables as well as the apportionment of responsibility to construct transmission infrastructure to the onshore transmission system, will also need to be assessed and managed carefully.

Finally, and perhaps most crucially, a suitably bankable, long-term, offtake arrangement must be sought to enable the maximisation of debt capacity. Asia has followed the example of mature markets by offering competitively tendered, long-term support mechanisms for offshore wind farm offtake. While this support has historically focused on providing price-related support alone through feed-in tariffs or contract for difference (CfD) style arrangements, the introduction of non-price factors in markets such as Taiwan, Japan and South Korea are viewed as an antidote to some of the other headwinds faced by offshore wind projects.

The liberalisation of power markets across Asia also provides some interesting opportunities for future offtake solutions. We are already seeing CPPAs play a central role in the next wave of Taiwanese offshore wind projects as projects are weaned off the Taipower feed-in tariff support regime toward more market-based solutions, following the example set by markets in Europe.

This movement toward market-based solutions will necessitate new approaches to the assessment of bankability, as issues such as concentration risk, offtaker creditworthiness, offtake tenor and revenue stacking materialise in place of the more traditional assessments of guaranteed offtake solutions in vertically integrated power markets across Asia.

While the detailed design of an offshore wind-specific support regime remains to be finalised in Vietnam, the Philippines presents a particularly interesting case for assessment, as it looks to adapt the GEAP to offshore wind.

As a liberalised power market, the Philippines is the exception rather than the rule in Southeast Asia. The Renewable Energy Payment Agreement (REPA) granted under the GEAP principally provides a CfD-like price support mechanism. Developers and financiers alike left to rely on the renewables must dispatch energy market rules for volume support.

The Department of Energy appears to be responding positively to market feedback following earlier GEAP auction rounds and further optimisation to the REPA before the forthcoming offshore wind auction round 5 is anticipated. Of particular interest is whether the Energy Regulatory Commission will seek to impose a ceiling tariff for the offshore auction round.

Conclusion

Offshore wind holds immense promise for Southeast Asia’s energy transition, but realising this potential requires a concerted effort to address financing challenges.

Such efforts may include: (i) governments providing transparent permitting processes, stable tariff regimes and clear grid connection rules; (ii) banks and regulators becoming familiar with the risk profile within the offshore wind sector; (ii) development financial institutions developing offshore wind-specific products and working with local banks to co-finance projects; (iv) investment in local manufacturing, ports and logistics to ensure a robust supply chain and otherwise satisfy local content requirements without compromising timelines; and (v) innovative offtake structures that can help diversify offtake risk and attract competitive demand.

By leveraging blended finance solutions, developing a robust local supply chain and aligning regulatory frameworks with investor expectations, the region can chart a path toward a sustainable and bankable offshore wind market. To help smooth the path to unlocking the next wave of offshore wind across Southeast Asia, stakeholders must collaborate to build an investable sector.

Ben Carrozzi and Nick Merritt are partners and Chris Aird is a senior associate at Norton Rose Fulbright. Mr Carrozzi can be contacted on +65 6309 5320 or by email: benjamin.carrozzi@nortonrosefulbright.com. Mr Merritt can be contacted on +65 6309 5318 or by email: nick.merritt@nortonrosefulbright.com. Mr Aird can be contacted on +44 (20) 7444 2606 or by email: christopher.aird@nortonrosefulbright.com.

Ben Carrozzi, Nick Merritt and Chris Aird

Norton Rose Fulbright