Op-Ed: Japan’s Offshore Wind Dream Hits a Wall – Can Industry Reform Save It? – CleanTechnica

---

Support CleanTechnica’s work through a Substack subscription or on Stripe.

---

When Mitsubishi Corporation walked away from three massive offshore wind projects in August, paying ¥20 billion in penalties rather than proceeding, it sent shockwaves through Japan’s renewable energy sector. For a trading giant to abandon 1.7 gigawatts of capacity — enough to power 1.3 million homes — it signaled something more than a corporate retreat. It exposed a fundamental crisis in how Japan approaches its offshore wind future.

This story developed post Japan Mobility Show, when the discussion swerved to how 360° energy utilization will happen in Japan when the country’s energy mix is primarily based on fossil fuels (61%) like coal (28%), oil (2%), and natural gas (31%), whereas its low-carbon sources like hydropower (8%) and biomass (5%), particularly solar (11%) and nuclear power (10%), make up the remaining 39%.

Now, as the country lags dramatically behind its Asian neighbors in renewable deployment and major developers abandon projects and auctions falter, a new industry blueprint warns Japan risks missing its clean energy moment. This white paper from the Global Wind Energy Council (GWEC) is sounding the alarm: without immediate and comprehensive reform, Japan’s offshore wind ambitions may be dead in the water.

The Promise That Faded

The numbers tell a sobering story. Japan aims to reach 10 gigawatts of offshore wind capacity by 2030 and 45 gigawatts by 2040. Current installed capacity? Just 0.3 gigawatts. While China added 8 gigawatts of offshore wind in 2024 alone, and Taiwan, South Korea, and Vietnam are racing ahead with ambitious buildouts, Japan’s three auction rounds have produced more cautionary tales than turbines.

Round 1’s sole winner withdrew. Round 2 and Round 3 winners are struggling with severe financial challenges. The government even postponed its fourth auction indefinitely in October to reassess the entire framework. Even before the delays, developers warned they were “at the brink of whether this business can continue.”

This isn’t just an industry problem — it’s an economic and strategic one for a nation that imports most of its energy and has pledged carbon neutrality by 2050. Japan’s electricity costs remain among Asia’s highest, its fossil fuel dependence near 70%, and its renewable energy share trails embarrassingly behind global peers. While wind provided just 1% of Japan’s electricity in 2024, it averaged 11% across other G7 nations.

“Japan holds vast offshore wind potential and cannot afford to miss its chance to become an offshore wind leader, especially within the Asia-Pacific region,” says Takeshi Matsuki, GWEC’s Japan Country Manager. The urgency in his assessment is palpable — and justified.

The GWEC white paper, Unlocking Japan’s Offshore Wind Potential, produced in partnership with renewable energy consultancy OWC, dissects what went wrong and maps a path forward through three critical reform areas.

Auction Framework

Japan’s current auction design creates a perfect storm of uncertainty. Price-focused evaluation criteria drove developers to submit unrealistically low bids — some at near-zero premiums — just to win projects. But winning means little when project economics don’t work.

The centralized survey model, while intended to reduce developer risk, hasn’t provided the certainty needed. Meanwhile, complex evaluation processes and academic-heavy review committees lack input from developers with “hands-on experience from the front lines,” according to the report.

The solution? Establish a dedicated public-private forum that supplements existing government working groups. Optimize evaluation criteria to better balance price and non-price factors. In the longer term, introduce two-stage auction structures that give developers clearer pathways from selection to financial close.

The Revenue Certainty Crisis

Here’s where the system truly breaks down. Japan uses a Feed-in Premium (FIP) scheme tied to volatile market prices on the Japan Electric Power Exchange, where spot prices averaged ¥9-16 per kilowatt-hour in 2025 — well below the ¥12-15/kWh needed for early offshore wind projects to pencil out.

Even when Mitsubishi secured FIP rates ranging from ¥11.99 to ¥16.49/kWh across its three projects, those levels proved insufficient as construction costs ballooned by more than 20% and turbine prices doubled. Material costs, labor shortages, and currency fluctuations combined to make even supposedly “winning” bids economically untenable.

The white paper strongly advocates transitioning to either a two-sided Contract for Difference (CfD) or Feed-in Tariff (FIT) — mechanisms that provide stable, predictable revenue streams and lower the weighted average cost of capital. The UK, facing similar auction failures, raised its CfD ceiling price 66% in 2024 and extended contract terms from 15 to 20 years. Denmark followed suit after receiving zero bids.

Japan also needs to review and raise price caps to align with current market realities while introducing lower limits closer to break-even points to prevent destructive underbidding. Greater access to Corporate Power Purchase Agreements, potentially backed by credit guarantees, could unlock additional financing.

Death By A Thousand Cuts

Beyond auctions and revenue structures, developers face a gauntlet of obstacles that make projects unbankable. Certification requirements lack transparency. The permitting process is byzantine. Grid curtailment — particularly in high-potential regions like Hokkaido, Tohoku, and Kyushu — threatens project returns without compensation mechanisms.

Perhaps most critically, Japan sets pipeline development targets rather than Commercial Operation Date (COD) targets. This creates phantom progress: projects awarded but never completed. COD-based targets would force accountability and enable the supply chain visibility that manufacturers and investors need to commit capital.

A Region Leaving Japan Behind

The contrast with neighboring markets is stark. In 2024, global offshore wind auctions awarded 56.3 gigawatts of capacity. China awarded 17.4 gigawatts. Europe awarded 23.2 gigawatts. South Korea awarded 3.3 gigawatts, Taiwan 2.7 gigawatts. Japan? Just 1.4 gigawatts.

The Asia-Pacific region expects to account for 61% of new wind capacity built worldwide between 2024 and 2030, with total onshore and offshore wind capacity potentially reaching 1,206 gigawatts by decade’s end. Japan has the offshore potential to be a major player in this transformation — its exclusive economic zone alone offers massive developable areas — yet it’s squandering that opportunity.

The economic costs of this failure extend beyond missed megawatts. Japan spent ¥3.7 trillion subsidizing electricity and gas bills between January 2023 and May 2024 due to fossil fuel price volatility. Every delayed offshore wind project is another year of import dependence, price exposure, and foregone job creation in manufacturing, installation, and operations.

The Window Is Closing

GWEC and OWC presented their findings to the Ministry of Economy, Trade and Industry (METI), Ministry of Land, Infrastructure, Transport and Tourism (MLIT), and Ministry of Environment (MOE) in late October. The government agencies expressed strong interest.

Interest, however, isn’t implementation. As the white paper notes, meaningful reform requires both short-term fixes — adjustments to Round 1 re-tendering and the upcoming auction that can be made without legislative changes — and long-term structural reforms envisioned for Round 5 and beyond.

“Japan stands at a pivotal moment in its clean energy transition, and offshore wind has emerged as a central pillar of its strategy,” says Masataka Nakagawa, OWC’s Japan Country Manager. “To enable stable and scalable deployment, Japan needs to address three critical areas: auction framework, offtake mechanisms, and other market bottlenecks.”

The question is whether Japan will act decisively enough, quickly enough. Other markets have shown that offshore wind can recover from setbacks with the right policy responses. But timing matters. Developers are increasingly mobile, directing capital to markets with clear, stable frameworks. Supply chain partners need demand visibility to justify investments in local manufacturing.

As GWEC prepares a detailed plan for the proposed public-private bridging forum, the message is clear: reform isn’t optional. It’s existential. Without it, Japan risks watching its offshore wind potential remain just that — potential — while the rest of Asia builds the clean energy infrastructure of the 21st century.

For a nation that pioneered hybrid cars and led in solar deployment before feed-in tariffs lapsed, that would be more than an industrial missed opportunity. It would be a strategic failure at precisely the moment when energy security, economic competitiveness, and climate leadership demand bold action.

The turbines are waiting. The question is whether Japan’s policymakers will build the framework to support them.