
The Ministry of Economy, Trade and Industry (METI) is considering introducing a mechanism to adjust prices for projects awarded in the offshore wind auctions held under the Act on Promoting the Utilization of Sea Areas for the Development of Marine Renewable Energy to account for changes in the cost of materials and other capital expenditures.
The ministry’s Offshore Wind Promotion Subcommittee discussed the trend of developers outside Japan withdrawing from awarded projects due to cost increases after the conclusion of auctions.
To prevent similar cases from happening in Japan and to ensure that offshore wind developers can generate the return they expect when submitting their bid, the committee is discussing adjusting the prices awarded in auction for changes in material costs and exchange rate fluctuations between the time of bidding and construction.
It is proposing both upward adjustment in case of inflation and downward adjustment in case of deflation, within limits to be specified yet.
The new system is expected to be introduced next fiscal year, when the fourth auction round will be held. It is unclear whether the system will also be applied retroactively to projects awarded in the first three auctions held under the act.
In the auction’s first round, three consortia, all led by Mitsubishi Corporation, were awarded two projects totaling 1.69GW. In the second round, consortia led by JERA, Mitsui & Co, Sumitomo Corporation, and Japan Renewable Energy, respectively, were awarded a total of 1.79GW across four projects. The third auction round’s bidding closed in July 2024 with results expected to be announced at the end of the year.
The Act on Promoting the Utilization of Sea Areas for the Development of Marine Renewable Energy went into effect on April 1, 2019. It established a process for the selection of offshore wind project areas. Currently, there are 10 “Promotion Zones,” nine “Promising Zones,” and 11 “Preparation Zones” recognized under the act. The “Promotion Zones” are awarded through auctions organized by METI and the Ministry of Land, Infrastructure, Transport and Tourism.
Correction (November 14, 2024): Previous version of this article incorrectly stated three projects totaling 1.42GW were awarded in the second round, missing a project awarded to a consortium led by Japan Renewable Energy. It also incorrectly stated bidding in the third round closed in September 2024.