The withdrawal from three offshore wind-power projects by Japan’s Mitsubishi Corp. comes as a blow to the energy import-reliant nation’s plan to expand renewable energy production, just as similar projects face setbacks worldwide. While some worry that the retreat by Japan’s largest trading house could trigger a domino effect that leads other operators to drop out, Mitsubishi’s case might be unique, and the implications might be limited, some researchers argue.
The withdrawal from three offshore wind-power projects by Japan’s Mitsubishi Corp. comes as a blow to the energy import-reliant nation’s plan to expand renewable energy production, just as similar projects face setbacks worldwide. While some worry that the retreat by Japan’s largest trading house could trigger a domino effect that leads other operators to drop out, Mitsubishi’s case might be unique, and the implications might be limited, some researchers argue.
The withdrawal from three offshore wind-power projects by Japan’s Mitsubishi Corp. comes as a blow to the energy import-reliant nation’s plan to expand renewable energy production, just as similar projects face setbacks worldwide.
While some worry that the retreat by Japan’s largest trading house could trigger a domino effect that leads other operators to drop out, Mitsubishi’s case might be unique, and the implications might be limited, some researchers argue.
On Wednesday, Mitsubishi announced it would terminate operations in three offshore areas, citing unexpected costs in a changing economic environment.
“The business environment for offshore wind power has significantly changed worldwide due to factors such as tight supply chains, …
... more [truncated due to possible copyright]The withdrawal from three offshore wind-power projects by Japan’s Mitsubishi Corp. comes as a blow to the energy import-reliant nation’s plan to expand renewable energy production, just as similar projects face setbacks worldwide.
While some worry that the retreat by Japan’s largest trading house could trigger a domino effect that leads other operators to drop out, Mitsubishi’s case might be unique, and the implications might be limited, some researchers argue.
On Wednesday, Mitsubishi announced it would terminate operations in three offshore areas, citing unexpected costs in a changing economic environment.
“The business environment for offshore wind power has significantly changed worldwide due to factors such as tight supply chains, inflation, exchange rates and rising interest rates,” Mitsubishi, which reported a ¥52.4 billion loss from these projects in fiscal 2024, said in a Wednesday statement.
“We have determined that establishing a viable business plan is not feasible given the current conditions,” it added.
Since 2020, the government has designated 10 offshore areas to promote wind power projects, and has initiated three rounds of tenders to select the operators.
Mitsubishi was selected to develop three of these areas in December 2021. The sites are located offshore from the city of Noshiro, the town of Mitane and the city of Oga, all located in Akita Prefecture, as well as the city of Yurihonjo in Akita Prefecture and the city of Choshi in Chiba Prefecture.
Following Mitsubishi’s withdrawal, it will forfeit a ¥20 billion security deposit and lose eligibility to participate in the next round of bidding.
Mitsubishi’s retreat isn’t a big surprise, according to researchers, as the company bid low before inflation really kicked in. It has reasons for doing so that don’t really apply to other selected operators, they said.
“Japan was still stuck in deflation, and everyone believed deflation would continue. From that perspective, nobody anticipated such a sharp rise in costs,” said Yasushi Ninomiya, executive researcher and manager of the Institute of Energy Economics, Japan’s clean energy unit.
“Of course, there are negative factors affecting all of them, but unlike Mitsubishi’s case, the second and third rounds shouldn’t have been a total surprise — they knew what was coming. That’s the key difference.”
The government’s strategic energy plan, approved by the Cabinet in February, aims to raise the share of renewable energy in total power generation from the current 15.2% to between 40% and 50% by fiscal 2040.
Wind power serves as a pillar of that goal, as the government aims to develop 10 gigawatts of offshore wind projects by 2030 and 30 to 45 gigawatts by 2040, expanding its share in all renewable energy generated from the fiscal 2023’s 1.1% to between 4% and 8%.
A Mitsubishi-led group won the bid under a fixed-price system, which was changed for bidders from the second bid onward to a system that allows it to sell power in accordance with market prices.
The government has taken some steps to address the rising cost for Mitsubishi as well. It revealed a plan to provide subsidies for already-awarded projects based on market electricity prices, and considered extending the period allowed for use of the sea areas, which had in principle been limited to 30 years.
At a meeting with Mitsubishi CEO Katsuya Nakanishi on Wednesday evening, industry minister Yoji Muto said he felt “disbelief” at the company’s decision. “It betrays the expectations of the local community, and could undermine public trust in offshore wind power as a whole,” the minister said.
Mika Ohbayashi, policy director at Renewable Energy Institute, said there’s more that could have been done between Mitsubishi’s first bid and its announced withdrawal, such as reducing the cost of transmission lines and vessels and the cost of upgrading port capacity for such projects.
“Profitability can be improved by reforming policies and regulations around operations. That could have been done during those four years, and it would have made offshore wind projects more financially viable,” Ohbayashi said.
“People tend to focus on bidding frameworks and financing, but improving the surrounding conditions is also crucial. And ultimately, that’s the government’s responsibility.”