The large earthquakes felt earlier this year were an unnecessary reminder of the need for alternative energy sources in Japan. Coupled with the Governments move to shift away from Russian oil, renewable fuels such as offshore wind energy (OSW) have never looked more attractive. However, the developing Japanese OSW market, which has recently seen the entry of several big-name players, presents its own unique challenges.

OSW building momentum in Japan

OSW development in Japan has made serious strides in recent years. In 2018, the precisely named Act on Promoting the Utilization of Sea Areas for the Development of Marine Renewable Energy Power Generation Facilities established the legal framework for occupying outside port areas that have potential for OSW. The Act sets out the stages for the selection, designation and auction of areas for OSW projects (summarised below):

Significantly, 2021 saw the first winners of OSW auctions (Stage 5 above the first stage when an OSW project can be said to have intrinsic value for a developer) announced: in June 2021, a consortium led by Toda Corporation won the first floating OSW auction (for Goto City, Nagasaki Prefecture); and in December 2021, consortia led by Mitsubishi Corporation stunning their rivals and the wider market by offering unexpectedly low tariff rates won all three of the first bottom-fixed OSW auctions (two in Akita Prefecture, one in Chiba Prefecture).

With a number of other areas already designated a promotion zones (Stage 4 above), and an ambitious 30-45 GW target of OSW output capacity by 2040 set by the Japanese Government, the OSW space will be an exciting one to watch in the years ahead.

Unique features of Japans OSW market

In our experience advising international clients on OSW deals, we have noticed the following somewhat distinctive features in the Japan market:

The future is bright for Japan OSW, but new entrants to the market should be aware of the unique challenges to navigate, as well as the opportunities. Both regulation and market practice of the OSW selection process continues to change year-by-year, and we expect the market to continue to evolve in what will be a defining decade for renewable energy in Japan.

Continued here:

Unique features of the offshore wind market in Japan - Lexology