The government of Japan has been re-auctioning three large offshore wind farms where Mitsubishi Corporation had earlier abandoned its construction because of the skyrocketing costs of construction. The 1.7GW projects, initially planned to be commissioned in 2028-2030, were abandoned since the costs increased more than two times after the 2021 bidding process. This contravention increases the gap between offshore wind capacity in Japan to 2.2GW, or 38% of Japan’s 5.7GW target by 2030, which explains the difficulties in reaching renewable energy targets.
Japan stands to face a serious capacity gap with Mitsubishi’s withdrawal
Mitsubishi Corporation will pull out of three offshore wind projects in Japan, and the withdrawal will likely make a huge difference in the near-term 2030 targets of the country, according to the Energy Institute. It blamed rising costs as the rationale to exit the Noshiro-Mitane-Ogas (479 MW), Choshi city (390 MW), and Yurihonjo (819 MW) projects off the coasts of Akita and Chiba prefectures, Japan, with target commissioning dates of 2028 and 2030.
As the Mitsubishi Chief Executive Katsuya Nakanishi said in the announcement of 27 August, cost increases had long since surpassed expectations, including construction prices rising by more than a multiple since the 2021 bidding stage. It is also predicted that the withdrawals will have a major effect on the offshore wind targets of Japan in the short term of 2030.
The difference between the current pipeline and the target total of 5.7 GW in Japan, consisting of ongoing capacity, projects which are under construction, and awards received through the Round 2 and 3 auction, now stands at 2.2 GW (or 38% of the entire target) based on the current Westwood Energy analysis.
Government examines causes before proceeding with the re-auction process
The Japanese government has indicated that it intends to re-auction the three sites, although it has not yet determined whether to re-auction the sites first or to go ahead with its fourth auction, already scheduled to open as soon as fall 2025. Reuters, Yuichi Furukawa, who works as the wind energy policy director at the Japanese industry ministry, will then look at what caused Mitsubishi to withdraw from proceeding with re-auctioning the sites.
The objective of the re-auction strategy is to meet the systemic bidding issues
The Japanese government intends to re-auction the three offshore wind farms that Japanese conglomerate Mitsubishi Corporation recently withdrew, subject to local consent, according to Reuters. The conglomerate had previously indicated its withdrawal from building the three sites, which would have comprised 1.7GW of capacity, earlier this week. Mitsubishi must withdraw JPY 20 billion of auction deposits, and will not be allowed to take part in the following round of auctions.
Nevertheless, this temporary decline might not be a good indicator of the future rounds, according to Hui Min Foong, Senior Analyst – Offshore Wind. She proposes that it is an opportunity offered to the government to use Round 1 as a learning exercise, reconsider its strategy, and redirect its energies towards future auctions, such as Round 2 and Round 3.
The future of long-term floating wind is bright despite the disappointments
Japan also has a high reliance on fossil fuels to serve its existing energy requirements. The country is seeking to have a fast development of its offshore wind resources as a part of a commitment to stop reliance on fossil fuels, with the government envisioning the establishment of 10GW offshore wind by 2030 and 30-45GW of offshore wind capacity by 2045.
The offshore wind re-auction policy of Japan is a decisive point for the renewable energy interests of the country. Although Mitsubishi poses difficulties in the short term, the government’s effort to redefine the bidding procedures and enhance business conditions is resilient. The re-auctions planned, as well as the continuing development of port infrastructure and long-term floating wind capacity, will help Japan to overcome the setback and ensure significant growth in its offshore wind capacity.