Mitsubishi reviews Japan offshore wind plans amid 'significantly changed' economics
Japan came late to the party in 2021, and faltering first wave projects will cast doubts on 2030 targets
Mitsubishi Corp has thrown its future development plans for three of Japan’s leading offshore wind projects into doubt, citing a "significantly changed" business environment in the country for a decision to call a review.
The domestic conglomerate which dominated Japan's first state-run offshore wind auctions in 2021 announced the review of its plans in the sector on Monday, raising questions about the future development of areas with a total projected capacity of 1.76GW.
"We will consider the appropriate next steps after thoroughly examining the results of our review," Mitsubishi said in a statement, which blamed "material changes in the macroeconomic environment” for the decision.
Development plans for the areas pointed to start-up dates between 2028 and 2030.
“Since (Mitsubish Corp’s) selection as the operator of these projects in December 2021, we have made progress in our development activities in partnership and consultation with the various parties involved,” the company stated.
"However, in the wake of the pandemic and the Ukraine crisis, the business environment for offshore wind power has significantly changed and is continuing to change worldwide due to factors such as inflation, the depreciation of the yen, tight supply chains, and rising interest rates".
The Japanese government’s longer term decarbonisation aims include a target of 45GW for offshore wind by 2040.
On Monday, Chubu Electric posted an 18bn yen ($116m) loss on the same three Mitsubishi-led offshore wind projects in the April-December period, citing rising surging construction costs, yen depreciation, tight supply chains and interest rates among factors affecting profitability.
Chubu's C-Tech subsidiary is a minority partner in the three Mitsubishi-led consortium groups that acquired seabed rights in 2021.
"C-Tech is reviewing its business plan in cooperation with its business partners, considering various measures to improve profitability," Takehide Horibe, a manager at Chubu Electric, told reporters.
The utility has stakes in other offshore wind projects in Japan, including two with Marubeni and others in the Akita prefecture.
Japan acts
Last week Japan announced a revision of its rules for offshore wind power auctions in an attempt to respond to soaring expenses driven by tight supply chains and inflation.
The review followed a four-month period of consultations with the industry about offshore wind projects.
The measures announced by Japan's trade & industry (METI) and land & infrastructure (MLIT) ministries included an electricity price adjustment scheme and a higher deposit requirement to cover delays.
Currently, an increase in generation costs occurring after a Japanese auction application cannot be reflected in the price of electricity sold.
The amount forfeited will rise incrementally based on the length of the delay, taking into account supply chain disruptions.
The revisions will take effect from the government's fourth auction round, expected to take place later this year, but could also be applied to future cost increases faced by companies that won the first three rounds, provided certain condition are met, the official was quoted as saying.