Mitsubishi Corp announced Wednesday it will pull out of three Japanese offshore wind power projects, citing soaring costs, a move that undermines Japan’s energy security ambitions and its efforts to lessen reliance on imported fuel.
In 2021, a Mitsubishi-led consortium secured the initial state auctions for three wind farms located in Japan’s Chiba and Akita prefectures.
These farms are anticipated to have a combined capacity of 1.76 gigawatts and are projected to commence operations between 2028 and 2030.
Withdrawal and financial impact
On Wednesday, Mitsubishi Chief Executive Katsuya Nakanishi announced that cost increases, particularly construction prices, have significantly surpassed initial projections, more than doubling since the 2021 bidding phase, according to a Reuters report.
“We thoroughly examined every possible measure, but compared to our bidding assumptions, costs more that doubled, making even investment recovery impossible,” he told a briefing.
Even with countermeasures such as supply chain restructuring, we concluded that total expenditures – including maintenance and operational costs – would surpass electricity sales revenue, making project continuation difficult.
Mitsubishi recently recorded a charge of 52.2 billion yen ($354 million) on these projects.
This week, their partner, Chubu Electric Power, announced an anticipated loss of approximately 17 billion yen for the current fiscal year due to their withdrawal.
Nakanishi reaffirmed Mitsubishi’s commitment to decarbonisation but did not confirm the company’s re-entry into domestic offshore wind projects. He stated that Mitsubishi must carefully consider its future steps.
Japan is actively pursuing a significant expansion of its offshore wind farm capacity, setting ambitious targets of 10 GW by 2030 and a substantial 45 GW by 2040.
To achieve these goals, the nation has already initiated auctions for a portion of the targeted capacity, demonstrating a commitment to renewable energy.
Prominent international energy companies such as RWE, Iberdrola, and BP have emerged as winners in these competitive offshore auctions, indicating strong global interest in Japan’s burgeoning wind energy sector.
This strategic push is crucial for Japan’s energy security and its efforts to decarbonise its power grid, positioning it as a key player in the global offshore wind market.
On Wednesday, Minister Yoji Muto announced that the Ministry of Economy, Trade and Industry intends to re-auction the three sites previously vacated by the Mitsubishi consortia.
Japan’s offshore wind ambitions and future outlook
On Wednesday, RWE CEO Markus Krebber stated that the German company was not interested in acquiring the Mitsubishi projects.
Our project pipeline is well filled overall. We are therefore not currently focusing on further projects in Japan.
To counteract the global downturn affecting offshore wind farm projects due to escalating costs and delays, the ministry is considering easing regulations for developers. This initiative aims to stimulate the construction of a large-scale offshore wind farm industry.
Last year, Denmark’s Orsted withdrew from Japan as part of a global restructuring effort.
“If the projects from consequent rounds are able to move forward, this should not be seen as an apocalyptic event for wind energy in Japan,” Yuriy Humber, CEO of Tokyo-based consultancy Yuri Group was quoted in the report.
Mitsubishi bid aggressively (in the first round), but macro and other factors went against them. Now there is a rebalancing and, I believe, the sector will emerge stronger in Japan.
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