Japan Poised to Revamp Offshore Wind Strategy Amid Global Industry Headwinds

 Tokyo, May 26, 2025 — Japan is preparing to recalibrate its offshore wind power policy as part of a broader effort to revive its ambitious clean energy goals, following significant setbacks caused by escalating costs, delayed projects, and the global retreat of major energy firms from offshore wind ventures.

The Japanese government aims to install 45 gigawatts (GW) of offshore wind capacity by 2040—a cornerstone of its strategy to reduce dependence on imported fossil fuels, lower carbon emissions, and enhance national energy security. However, the rollout has faltered following three rounds of development auctions, prompting policymakers to consider substantial regulatory and contractual reforms to reignite industry momentum.

Among the most affected players is Mitsubishi Corporation, which emerged as a key winner in Japan’s inaugural offshore wind auction in 2021. The company issued a warning earlier this year, citing ballooning project costs and logging over $300 million in offshore wind-related losses, leading it to reassess its plans. Construction on the awarded projects has yet to begin.

This setback follows the exit of Denmark's Orsted  from Japan in 2023 as part of its global restructuring, and the reported downsizing of Shell’s offshore wind team in the country, signaling waning investor confidence.

Industry Calls for Reform

In response, the Ministry of Economy, Trade and Industry (METI) has initiated confidential talks with industry stakeholders to identify mechanisms that could ease financial pressure and reduce risk for developers. According to sources familiar with the discussions, proposed measures include:

• Extending project life spans from 30 to 40 years, allowing for more favorable returns on investment.
  
  

Clarifying cabotage laws to permit the use of non-Japanese flagged vessels for construction and maintenance of offshore wind infrastructure.

• Revising auction frameworks to enable long-term power purchase agreements (PPAs), offering pricing stability to utility and industrial buyers.
  
  
• Exploring tax relief or subsidies for large industrial users willing to commit to long-term wind power contracts—although this is considered a politically sensitive proposition, given existing public support schemes.

“There’s a steep learning curve across the board. What’s critical now is that the government remains open and responsive to industry input,” said Yuriy Humber, CEO of Tokyo-based consultancy K.K. Yuri Group.

Policy Adjustment Underway

METI is reportedly considering transitioning the pricing mechanism for early-stage auction winners—such as Mitsubishi—from a Feed-in Tariff (FIT) model to a Feed-in Premium (FIP) system. This would allow developers to benefit from fluctuating market prices, aligning the compensation structure with that used in subsequent auction rounds. A METI official confirmed the proposal is under review but emphasized that it would be a clarification of existing guidelines rather than a formal policy revision.

The potential shift comes as Japan has auctioned just a fraction—roughly 10%—of its targeted offshore wind capacity. Despite its late entry into the sector, Japan attracted significant international interest, with operators such as Germany’s RWE, Spain’s Iberdrola, and BP securing rights in later auction rounds.

Still, progress remains sluggish. Industry insiders estimate Mitsubishi faces delays of at least two years across its projects, originally slated to begin operation between 2028 and 2030. The company stated that it is closely monitoring discussions with METI and adjusting its business strategy accordingly.

A Recalibrated Energy Outlook

Compounding the challenge is rising domestic electricity demand, driven by the growth of data centers and semiconductor manufacturing, prompting METI in February to forecast a more than 10% increase in LNG imports—up to 74 million metric tons annually by 2040. This marks a reversal of Japan’s previously declining LNG trajectory.

Despite the uncertainty, some foreign developers—including Equinor and TotalEnergies—have maintained a strategic foothold in Japan, eyeing potential future opportunities as regulatory clarity improves.

“Those looking to enter once the landscape becomes more stable will likely face higher barriers to entry,” said Humber.

With Japan’s clean energy transition at a critical juncture, the success of these upcoming policy changes may determine whether the country can reclaim momentum in one of the world’s most challenging offshore wind markets.