The Japanese government has backed offshore wind projects totalling 4.6 GW since 2021, but Mitsubishi Corporation has cast doubt on the future of a 1.7 GW trio of projects and the economics of the sector in Japan, according to a report from news agency Tamarindo. Mitsubishi is reviewing the economics of a trio of projects totalling 1.7 GW, while the government plans to focus more on non-price criteria in future tenders.
In late 2020, Japan committed to install 10 GW of offshore wind projects in its waters by 2030 and 45 GW by 2040. It has since amended its 2030 goal to 5.7 GW – in its Sixth Strategic Energy Plan in October 2021 – but the long-term target remains intact. Japan has long talked about offshore wind as a way to boost renewables in its energy mix.
The country has since run three major offshore wind tenders. In December 2021, it awarded consortia led by Mitsubishi the rights to develop a trio of projects: the 819 MW Yurihonjo, the 479 MW Noshiro Mitane Oga, and the 391 MW Choshi. The government reported it had received five bids each for Yurihonjo and Noshiro Mitane Oga, and two for Choshi. In the end, however, it opted for groupings with the same lead developer.
In December 2023, the government awarded the rights to develop three of four projects in its second tender round. Mitsui, RWE and Osaka Gas won rights to the 700 MW Murakami-Tainai project; Sumitomo and TEPCO won rights for the 424 MW Saikai-Enoshima; and JERA, J-Power, Itochu and Tohoku Electric won rights to the 336 MW Oga-Katagami-Akita. In March 2024, it awarded Japan Renewable Energy, Iberdrola and Tohoku Electric Power the rights to develop the fourth project in this tender: the 356 MW Happo-Noshiro.
On 24 December 2024, the ministry of Economy, Trade & Industry and ministry of Land, Infrastructure, Transport & Tourism named two winners in the country’s 1 GW third tender.
JERA, Green Power Investment and Tohoku won rights to develop the 615 MW Aomori South project; and Marubeni, Kansai Electric, BP, Tokyo Gas and Marutaka won rights to develop the 450 MW Yuza. A 1GW auction round would be small for most countries, but this consistent tender activity shows Japan is seeking to build a solid base for offshore wind, with support awarded for a total of 4.6 GW in these three tender rounds.
Yet the growth of Japanese offshore wind looks set to be slower than previously hoped owing to an over-reliance on Mitsubishi in that first tender.
Mitsubishi questions project economics
On 3rd February, Mitsubishi Corporation announced that it was reviewing its plans for the first three projects totalling 1.7 GW – Yurihonjo, Noshiro Mitane Oga, and Choshi – because ‘the business environment for offshore wind’ has ‘significantly changed’ in recent years. This has cast doubt on the assumptions Mitsubishi made in that tender, just as the changing economics of offshore wind has delayed projects in the US, UK and beyond.
Mitsubishi cited the impacts of Covid-19 and Russia’s invasion of Ukraine on supply chains and energy markets. It also said the business environment for offshore wind “is continuing to change worldwide due to factors such as inflation, depreciation of the yen, tight supply chains, and rising interest rates”.
“As a result of these unexpected changes, we are currently reviewing the business plans for these projects. We will consider the appropriate next steps after thoroughly examining the results of our review,” according to the company’s statement.
Mitsubishi is not the only developer to be caught out by inflationary pressures in offshore wind after bidding aggressively in tenders in the early 2000s. One of the highest-profile victims has been Denmark’s Ørsted, which has seen its share price fall by over 80% since its peak in 2021. Vattenfall has been publicly open about its challenges too, and it seems likely that others are also suffering. but there is a sense in the industry that others are suffering too but are continuing to develop schemes.
Mitsubishi’s intervention highlights a weakness in tender processes driven mainly by cost, such as the depression of bidding prices and the domination of some individual companies owing to economies of scale.
The Japanese government has said it will put greater weight on non-price criteria in its upcoming fourth offshore wind tender.
For example, it intends to give greater support to developers of projects with a shorter lead time between winning the tender and potential commissioning; and that is will also prioritise projects that can demonstrate their financial viability.
