Nation announces controversial changes to major industry: 'Significantly changed business environment'

To ease the financial pressures of inflation and supply chain issues for offshore wind power projects, the Japanese government has decided to modify pricing rules to encourage developers to follow through on their builds, Reuters reported. 

Since 2021, Japan has held three large-scale offshore wind power auctions to select developers to build projects along the coast. 

The first state-run auction saw a Mitsubishi-led consortium win all three sea areas off Japan's coast. Since then, Japan has auctioned off six additional sea areas in Round 2 and Round 3. 

The country hopes to produce 10 gigawatts of power from offshore wind projects by 2030 and 30-40 GW of power from offshore wind by 2040, according to Nikkei Asia. 

Offshore wind power remains a key interest in Japan's mission to reduce the country's carbon pollution. This renewable energy source produces power without contributing to the global carbon output produced by burning dirty fossil fuels, which ultimately creates a "thicker" atmosphere that holds in heat and leads to rising global temperatures. 

Offshore wind leverages Japan's extensive coastline and caters to the country's minimal land availability for large-scale renewable energy projects, making the clean energy transition more feasible. 

Japan recently commissioned a proposal to explore floating offshore wind energy, which could maximize the output capacity of wind turbines. Organizations like J-Power and the Korea Electrotechnology Research Institute are also finding ways to make wind turbines more climate-resilient with earthquake- and lightning-resistant technology. 

These offshore wind projects also create jobs, bolstering the Japanese economy. 

However, with a "significantly changed business environment," including inflation, tight supply chain issues, rising interest rates, and a depreciated yen (Japanese currency), developers like Mitsubishi are rethinking whether these projects are still profitable and worth completing. 

Do you think governments should ban gas stoves? Heck yes! 💯 Only in new buildings 🏢 Only in restaurants 🍔 Heck no! 🙅 Click your choice to see results and speak your mind.

The Japanese government has responded to these hesitations by modifying auction and wind power pricing rules. 

The government will raise the winner's auction deposit from 13,000 yen to 24,000 yen per kilowatt of power generation capability, an industry ministry official said, per Reuters. This will help cover any delays experienced by supply chain issues or other external factors. 

Previously, auction application rules also prohibited price gouging. "If the cost of generation increases after a Japanese auction application, it cannot be reflected in the price of electricity sold," the Reuters report read. 

Now, the Japanese government will allow developers to factor these increasing project development costs into the price of electricity sold, but only up to 40% of capital cost increases. This move will increase profitability on the developers' ends, encouraging them to finish their projects.

Join our free newsletter for good news and useful tips, and don't miss this cool list of easy ways to help yourself while helping the planet.