Mitsubishi exits Akita and Chiba offshore wind, testing Japan’s energy plan

Mitsubishi Corporation has withdrawn from three large-scale offshore wind projects in Akita and Chiba, a move that challenges Japan’s renewable energy strategy and prompts calls for urgent government policy reform. The 1.7-gigawatt projects were awarded to a consortium led by the trading house in late 2021.

According to the Renewable Energy Institute, the decision to abandon the developments, despite incurring penalty payments of JPY 20 billion, is highly unusual for a major Japanese corporation. Mitsubishi Corp. cited worsening profitability driven by soaring equipment and construction costs as the primary reason for its withdrawal.

Since the projects were bid for, overall construction costs in Japan have surged. Turbine prices, which account for a significant portion of project expenditure, have reportedly increased in the same period. A lack of a developed domestic supply chain has left the projects dependent on imports, exposing them to severe currency fluctuations.

The Renewable Energy Institute points out that although rising costs are a global issue, governments in Europe have responded swiftly to sustain their offshore wind sectors. After a 2023 auction received no offshore wind bids, the UK government raised the ceiling price for its next auction round by 66 percent and later extended contract terms from 15 to 20 years to improve financial viability. Denmark is considering similar changes after experiencing zero-bid tenders. These actions highlight a flexible institutional framework.

The withdrawal represents a significant setback for Japan, delaying not only the commissioning of the three sites but also a necessary national debate on its auction system. The situation is more urgent for developers in subsequent bidding rounds, who face even harsher economic conditions after being compelled into zero-premium bids by intense price competition.

In addition to auction design, Japan faces structural challenges including a complex licensing system, the high cost of grid and port infrastructure, and a shortage of specialised construction vessels. Experts argue that addressing these institutional obstacles is a critical priority. The Renewable Energy Institute urges the government to act quickly to outline a clear roadmap, including a re-tender for the abandoned projects, to maintain industry momentum.