Japan’s offshore wind targets — 45 GW by 2040 — are under pressure as the sector faces rising costs, delays, and investor uncertainty. The government, recognizing these challenges, is now considering policy shifts to salvage momentum and attract long-term investment, Reuters news report said.
As of 2023, Japan’s installed offshore wind capacity was 153.5 MW. This is a significant increase from 135 MW in 2022, driven by the start-up of commercial offshore wind farms.
Key Challenges:
Cost Overruns & Delays: Mitsubishi’s recent $300 million loss and project delays exemplify the financial strains on developers. Globally, offshore wind projects are facing inflationary pressures, supply chain disruptions, and higher financing costs, and Japan is no exception.
Policy & Regulatory Uncertainty: Despite early enthusiasm, Japan’s auction rounds have exposed structural issues:
Short Contract Durations: Annual contracts make it difficult for developers and buyers to secure stable, long-term revenues, deterring investment.
Cabotage Restrictions: Japan’s laws limiting foreign-flagged vessels hinder access to specialized offshore construction fleets, driving up costs.
FIT vs. FIP: The proposed shift from “feed-in-tariff” to “feed-in-premium” reflects a move towards market-driven pricing, but the lack of clarity is stalling progress.
Government Response – Policy Adjustments in the Works:
Longer Project Durations: Extending project terms from 30 to 40 years could improve the bankability of offshore wind projects by spreading out capital recovery.
Clarifying Cabotage Laws: Allowing foreign vessels could reduce costs and accelerate construction timelines.
Facilitating Long-Term Power Purchase Agreements (PPAs): Encouraging utility and industrial buyers to sign multi-year contracts, potentially with tax incentives or subsidies, would stabilize revenue streams for developers.
Adjusting Tariff Schemes: Revising the FIT/FIP rules for early auction winners could prevent financial distress for key players like Mitsubishi.
Broader Implications:
Japan’s offshore wind struggles mirror a global slowdown in the sector, with major players like Orsted, Shell, and Equinor scaling back. Yet Japan’s energy strategy hinges on the success of offshore wind to cut carbon emissions, reduce fossil fuel dependence, and enhance energy security — especially as it faces rising power demand from data centers and semiconductor manufacturing.
If Japan can resolve regulatory bottlenecks, it may position itself as a late but strong player in offshore wind. However, failure to act decisively risks a prolonged stagnation, forcing Japan to rely more heavily on LNG and other fossil fuels, countering its climate and energy security goals.
What to Watch:
Final decisions on policy adjustments, especially around contract structures, cabotage laws, and tariff frameworks.
Industry response: Will major players like Mitsubishi, RWE, and Iberdrola commit to long-term development under revised terms?
The role of industrial consumers: Can incentives convince them to lock in long-term wind PPAs despite high electricity prices?
In sum, Japan’s offshore wind sector is at a crossroads. The government’s willingness to adapt regulations and share risks will determine whether its 45 GW ambition remains a distant dream — or becomes a cornerstone of its decarbonization strategy.
GreentechLead.com News Desk