Japan’s METI Introduces Three Measures to Ensure Completion of Offshore Wind Projects
At a joint expert meeting held on 19 November (the combined session of the Offshore Wind Promotion Working Group and the Offshore Wind Promotion Subcommittee), Japan’s Ministry of Economy, Trade and Industry (METI) announced three new policy measures aimed at improving the business environment to ensure the completion of offshore wind power projects. These include:
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participation in long-term non-fossil power auctions,
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retroactive application of the price-adjustment mechanism at the start of public tenders, and
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flexible responses to changes in occupancy plans for tendered areas.
Since June, the joint meeting has discussed ways to strengthen the investment environment for offshore wind. The withdrawal of developers from the first round of projects has highlighted the urgency of securing successful completion for Round 2 and Round 3 projects. Based on this need, METI presented new measures targeting projects currently in early development stages.
Participation in Long-Term Decarbonized Power Auctions
Under the existing system, offshore wind can participate in long-term non-fossil power auctions. However, participation has been restricted during periods when FIT or FIP support is applied, to avoid double recovery of fixed costs. METI clarified that for offshore wind projects issued under the Offshore Renewable Energy Act—where FIP is mandatory—projects without a premium component do not face this double-recovery issue (aside from balancing cost support).
After reviewing policy necessity, competitive impacts, and implications for tender integrity, METI concluded that allowing Round 2 and Round 3 projects to participate in long-term decarbonized power auctions would significantly improve project completion certainty. This measure, however, will not apply to future tender rounds beyond Round 3.
Retroactive Application of the Price-Adjustment Mechanism
The price-adjustment mechanism reflects material price fluctuations and other cost changes in base costs or procurement prices. It will be introduced starting with the next tender round following the 2024 system review. METI will also allow the mechanism to apply to already-selected projects if developers choose to adopt the new system—subject to increased security deposits. For fairness and public cost neutrality, only future price fluctuations (after adoption) will be reflected.
Developers had requested that all price fluctuations since the start of the tender be reflected, but the government rejected this, stating:
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the policy impact would be limited to one project,
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retroactively covering already-known inflation contradicts the mechanism’s risk-sharing purpose, and
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expanding base-price adjustments would distort evaluation assumptions and increase public burden.
Thus, applying the mechanism retroactively to cover past price increases for previously selected projects is considered difficult.
Flexible Adjustment of Occupancy Plans
Given the importance of completing Round 2 and Round 3 projects, METI stated that changes to occupancy plans will be permitted when unavoidable to maintain project viability. This includes:
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participation in long-term non-fossil energy auctions,
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changes in wind turbine suppliers,
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revisions to cash-flow plans, and
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schedule delays that may reduce evaluation scores.
Background: Commodity Inflation and Currency Volatility
A Mitsubishi Corporation-led consortium was unable to secure profitability in Round 1 due to surging commodity prices, a weak yen against the U.S. dollar and euro, and rising interest rates. As a result, procurement costs for turbines, offshore construction, and onshore works more than doubled compared to assumptions at the time of bidding. Rounds 2 and 3 are facing similar challenges, prompting the consortium to seek modifications to its occupancy and development plans.
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