Japan’s industry ministry has proposed new measures to support the country’s troubled offshore wind sector, after soaring costs prompted Mitsubishi Corp to withdraw from three major projects in a setback to Tokyo’s clean energy ambitions.
The Ministry of Economy, Trade and Industry (METI) said on Wednesday that costs for government-tendered offshore wind projects have more than doubled, and outlined plans to allow some developers to join a long-term decarbonisation power auction designed to stabilise revenues.
The proposal would cover projects selected in the second and third tender rounds in 2023 and 2024, including consortia involving JERA, Mitsui & Co and Sumitomo Corp.
The auction scheme pays winning bidders fixed amounts needed to build and maintain renewable power plants, helping developers forecast long-term profits. Offshore wind projects had previously been excluded because they were covered by separate support mechanisms, but rising construction and labour costs have driven companies to request access.
Japan has cast offshore wind as a central tool for expanding renewable energy, but business conditions have deteriorated sharply.
Mitsubishi, which led consortia that won Japan’s first offshore wind auctions in 2021 for three zones in Chiba and Akita prefectures, said in August that it would exit the 1.76-gigawatt (GW) projects after determining that a viable business plan was no longer feasible amid tighter supply chains, accelerating inflation and shifting interest rates.
Mitsubishi recorded a ¥52.2 billion (US$33.1 billion) charge on the projects earlier this year, and partner Chubu Electric Power said it expects a loss of about ¥17 billion (US$10.8 billion) this fiscal year. The farms had been scheduled to begin operations between 2028 and 2030. Developers had submitted low bids in earlier tenders, where price competitiveness was a key metric, worsening profitability as costs rose.
“Up to now, three rounds of public tenders have been conducted in order to select the most suitable operators capable of carrying out offshore wind projects in a long-term, stable and efficient manner,” said METI’s Agency for Natural Resources and Energy, but added that the withdrawal of Mitsubishi “revealed a number of challenges in the business environment for offshore wind”.
“In light of the above, it may be appropriate to revise future tender arrangements according to the following principles: while continued emphasis will be placed on cost reduction, greater weight should be given to plans that demonstrate a high likelihood of successful project completion,” it explained.
Japan aims to develop a large offshore wind sector to strengthen energy security and curb dependence on imported fuel, targeting 10 GW of capacity by 2030 and 45 GW by 2040.
It has auctioned roughly a tenth of the 2040 goal, but the sector has come under strain as rising costs, delays and global supply-chain pressures challenge project viability.
After Mitsubishi’s withdrawal, METI signalled it would allow flexible changes to business plans where unavoidable, such as adjusting financial projections or switching turbine manufacturers. At the time, however, it said it was not feasible to introduce a mechanism to retroactively account for fluctuations in material prices because only a limited number of projects would qualify.
The strain has deepened as global offshore wind markets grapple with the same economic pressures. Denmark’s Orsted withdrew from Japan last year as part of what it described as a broader global restructuring drive to cope with rising costs and project delays. The exit removed one of the world’s most experienced offshore wind developers from Japan’s pipeline.
Shell has also scaled back its offshore wind activity in Japan, with the London-headquartered firm recently shrinking its team focused on the domestic market as it trims its wider low-carbon operations.
