Japan Plans to Ease Offshore Wind Rules as Project Development Slows

Japan is set to relax regulations for offshore wind developers as delays and soaring costs threaten its goal of reaching 45 gigawatts (GW) of offshore wind capacity by 2040. The move aims to jumpstart sluggish projects and support the country’s shift away from coal and gas, cutting carbon emissions and strengthening energy security.

Despite three major auction rounds, Japan has awarded contracts for only around 10% of its targeted capacity. Mitsubishi, which won the first auction in 2021, has reported losses exceeding $300 million and has not started construction on any offshore wind farms. Other key players, including Denmark’s Orsted and Shell, have either scaled back operations or exited Japan’s offshore wind market entirely, citing global challenges like rising construction expenses and supply chain disruptions.

Officials are now in talks with industry leaders to explore ways to reduce risks and lower costs. Proposed changes include extending project timelines from 30 to 40 years and adjusting cabotage laws to permit foreign-flagged vessels in wind farm zones. Developers are also pushing for capacity auctions that allow long-term power purchase agreements (PPAs) instead of annual contracts, offering greater financial certainty.

Additionally, the industry is calling for tax breaks or subsidies for large industrial users committing to long-term wind power deals. However, the government’s ability to provide such incentives remains unclear, given its existing financial support for households facing high energy prices. Another potential shift involves replacing the fixed feed-in tariff (FIT) system with a feed-in premium (FIP) model for early auction winners like Mitsubishi. This would let developers benefit from market price shifts, a system already used in later auctions.

Japan’s offshore wind sector has gotten off to a slow start, with Mitsubishi’s projects now facing multi-year delays. The Ministry of Economy, Trade and Industry (METI) warns that if renewable targets aren’t met, Japan may need to boost liquefied natural gas (LNG) imports by over 10% by 2040—reversing a previous decline.

While challenges persist, some foreign firms, including Equinor and Total, remain active in Japan’s market, though they have yet to secure auction wins. Analysts note that late entrants may face steeper costs due to growing complexities and risks.

With Japan’s offshore wind industry still in its early stages, regulatory changes signal the government’s commitment to growth in the sector. Upcoming policy adjustments will play a crucial role in speeding up development and reducing dependence on imported fossil fuels.

Source: Reuters (Katya Golubkova and Yuka Obayashi, May 27, 2025)