Japan to Revitalise Offshore Wind Sector Amid Industry Hesitations

Japan is preparing to enhance terms for developers to build its offshore wind farm sector, aiming to achieve 45 gigawatts of capacity by 2040. However, progress has been stalled after three significant rounds of auctions to develop this capacity.

Mitsubishi (TYO: 8058), which secured the first auction in 2021, has not yet commenced any projects owing to escalating costs.

To reinvigorate the sector, the Japanese government plans to offer improved terms for developers. These improvements might include extending project durations to 40 years, clarifying cabotage laws, and allowing capacity auctions with multi-year contracts. The offshore wind industry is also seeking tax relief or subsidies for industrial users under long-term contracts.

Moreover, Japan is considering shifting its tariff system from a “feed in tariff” (FIT) to a “feed in premium” (FIP) system to provide better incentives for the development of offshore wind farms. METI has also indicated that Japan might need to increase its liquefied natural gas imports by more than 10% by 2040, highlighting the importance of diversifying energy sources.

Mitsubishi is closely monitoring ongoing discussions with METI regarding possible rule changes, and it is reviewing its business strategies accordingly. Despite not having won any sites, companies like Equinor and Total continue to maintain their presence in Japan.

To date, Japan has auctioned only a tenth of its targeted offshore wind capacity, indicating a significant gap between current progress and future energy goals.