Mitsubishi’s Sweep to Stumble: How Flawed Policy Design Can Threaten The Clean Energy Transition

Image credit: Ania Korsunska

In late 2021, Mitsubishi Corporation stunned the wind power industry by winning the right to develop all three offshore wind farms in Japan’s first public auction. The company’s clean sweep of these coveted projects — located off the coasts of Akita and China prefectures — seemed to herald Japan’s long-awaited leap into utility-scale offshore wind power.

But then came another shock. On February 3 this year, Mitsubishi announced in a measured press release that it would “reassess the feasibility” of all three projects. The reason? An impairment loss of ¥52.2 billion.

This wasn’t just a company issue. Mitsubishi’s offshore wind retreat is a bellwether for offshore wind everywhere. It’s also a cautionary tale about how flawed policy design can derail large-scale energy infrastructure development. The Japanese government is aiming for 10 GW of offshore wind capacity by 2030 and between 30-40 GW by 2040. Failure of the round 1 offshore wind projects can very well jeopardize these targets.

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“Impairments and other losses of ¥52.5 billion”

In 2021, Japan held its first fixed-bottom offshore wind auction. Consortia led by Mitsubishi Corporation (to be more precise, its subsidiary Mitsubishi Corp. Offshore Wind) swept the auction, winning the rights to build all three offshore wind farms on offer.

These projects were:

• The 819 megawatt (MW) Yurihonjo wind farm off the coast of Akita prefecture

• The 478.8 MW Noshiro Mitane Oga project, also in Akita prefecture

• The 390.6 MW Choshi project off of Chiba prefecture

Status of Japan’s offshore wind farm development and zones as of March 2022. Wind farms 2, 3, and 4 were awarded to Mitsubishi in December 2021 (source: Agency for Natural Resources and Energy, METI)

Since the early 2000s, public auctions have become the preferred way for governments around the world to allocate the right to build and operate offshore wind farms. In an auction, companies submit their bids in a competition to win the rights and public support for developing a wind farm.

If they’re designed properly, there are plenty of benefits to doling out development rights via auctions: they create a structured and fair process for selecting developers and prevent monopolies; they optimize the use of limited sea space — especially in territorial seas close to coastlines; they drive down the levelized cost of electricity through competition and by incentivizing technical innovation; and help align project development with national energy strategies and climate targets.