Mitsubishi Exits Offshore Wind Sites in Blow to Japan Transition
(Bloomberg) -- A group led by Mitsubishi Corp. withdrew from three offshore wind projects in Japan — the latest setback for the sector and the country’s efforts to decarbonize its economy.
“Tight supply chains, inflation, exchange rates, and rising interest rates” have significantly changed the outlook for offshore wind since the consortium won the sites in a 2021 government tender, Mitsubishi said in a statement on Wednesday.
“We examined every possible measure,” Mitsubishi Chief Executive Officer Katsuya Nakanishi said in a press conference on Wednesday. “Even so, construction costs have more than doubled from what we anticipated when we first placed our bid,” he said, adding there’s a risk they could rise further.
The exit is the latest blow to the global offshore wind industry, which has been roiled by cost overruns that have sapped appetite in Europe, and by strong opposition from US President Donald Trump’s administration. And in Japan, where the sector is still nascent, the vote of no-confidence by a major trading house threatens to derail the fossil fuel-dependent nation’s already lagging energy transition.
“Japan was already on track to miss its 2030 renewable energy targets, and this development pushes the country further off course,” said Umer Sadiq, Japan analyst at BloombergNEF. Its “energy mix will remain more carbon-intensive than planned, heightening risks around both energy security and decarbonization commitments,” Sadiq said.
Japan has sought to jumpstart offshore wind to meet it goal of boosting renewables to as much as 40% by fiscal 2040, with wind comprising 4-8% of its electricity mix.
Aside from identifying viable sites and carrying out development tenders, the government has held discussions with companies on improving profitability. It’s also considering allowing firms to extend their site permits beyond the original 30 years.
To attract developers, Japan could consider government-backed power purchase agreements to reduce financing risks, said Yuriy Humber, founder of energy intelligence services firm Japan NRG. It could also streamline the permitting system and reduce the time needed to pass environmental assessments, he said. An analysis by Japan NRG last year found the process takes between three to five years.
Mitsubishi CEO Nakanishi also called for greater business certainty.
“In today’s rapidly changing environment, what we really need is a system that provides greater predictability and allows risks to be managed effectively,” he said.
Mitsubishi said most of the losses caused by withdrawing from the three projects in Chiba and Akita prefectures have already been accounted for and additional losses are set to be limited. The company recorded a 52.2 billion yen ($352 million) loss on its domestic offshore wind business in February, when it first announced a review of the ventures.
Chubu Electric, a partner in the same consortium, expects to see a 17 billion yen charge from exiting the projects, it said in a separate statement on Wednesday.
The Japanese government will re-do tenders for the three sites the consortium exited, Trade Minister Yoji Muto said on Wednesday in a meeting with Mitsubishi executives.
(Updates story throughout.)
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