In August, three major offshore wind projects in Japan — totaling 1.7 GW — were abandoned, casting a long shadow over the country’s renewable energy ambitions. These projects, awarded in Japan’s first offshore wind auction, saw no development progress for four years. Escalating costs following the pandemic and geopolitical instability were central to their failure.
The projects were structured under Japan’s Feed-in-Tariff (FIT) system, which guarantees a fixed price for electricity sold. However, rising costs outpaced the tariff rates. Even switching to a Feed-in-Premium (FIP) model, which allows revenue tied to market pricing, didn’t make the projects financially viable.
Systemic Weaknesses in Policy and Timing
Offshore wind is critical to Japan’s goals for energy security and carbon neutrality. But the nation’s slow policy response and late industry entry have made development costly. While other countries reduced costs by scaling early, Japan’s supply chains and regulatory frameworks remain underdeveloped.
Opportunities to accelerate wind energy in the past — particularly following the Fukushima nuclear disaster — were not fully leveraged. As a result, Japan is now trying to build an entire industrial base under challenging market conditions.
The Fallout and Forecast: Targets at Risk
Japan has set a 2030 target of 5.7 GW of offshore wind capacity. However, projections now indicate a 2.2 GW shortfall. Offshore wind currently generates just over 1% of the nation’s electricity, far below the 4–8% targeted in national energy plans.
Later offshore wind auctions in 2023 and 2024 have also come under pressure. Fierce competition led some winning bidders to offer zero premiums, raising doubts about the financial viability of their projects. These auctions are now seen as vulnerable to the same economic and regulatory constraints that halted earlier developments.
International Context and Government Options
While offshore wind industries in Europe and North America have also faced rising costs, governments in those regions have acted quickly — increasing price ceilings and revising auction frameworks. Japan’s options are more limited due to auction rules, but several policy measures are being explored.
These include extending project lifespans from 30 to 40 years, allowing participation in the capacity market, and supporting utilities with additional costs related to offshore power purchases. The economic case is further complicated by the fact that offshore wind costs in Japan are more than triple those of solar.
Two Roads Ahead: Reform or Retreat
Japan faces a pivotal decision. One option is to double down on offshore wind with public support and strategic investment in local supply chains. The other is to shift focus toward alternatives such as natural gas, hydrogen, and carbon capture technologies.
Despite current setbacks, the situation offers a valuable opportunity for policy reform and market redesign. Rethinking the structure of auctions, improving project economics, and securing investor confidence will be essential if offshore wind is to remain part of Japan’s long-term energy mix.
With the 2030 targets in jeopardy, the coming months will be critical in determining whether Japan can turn its offshore wind ambitions into reality — or if it must look elsewhere to meet its clean energy goals.