Comment Mitsubishi Corp’s Withdrawal from Offshore Wind Projects Underscores the Need for Institutional ReformThe Government Must Act Swiftly and Decisively

in Japanese

(Japanese original published on 1 September 2025)

Mitsubishi Corporation has announced its withdrawal from three large-scale offshore wind projects, originally awarded in late 2021 through a consortium with affiliated company of Chubu Electric and local partners. The projects in Akita and Chiba total 1.7 GW.

For a leading trading house to abandon projects of this scale—despite JPY20 billion penalty payments—is highly unusual in Japan.

Mitsubishi Corp cited worsening profitability caused by soaring equipment and construction costs.¹ In fact, nationwide, the prices of materials, labor, and transportation have surged since the bidding stage, driving overall construction costs up by more than 20%. Turbine prices—estimated to account for around 20% of total project costs—are said to have doubled during the same period. Because Japan lacks a fully developed domestic supply chain, the projects remained heavily dependent on imports, leaving them highly exposed to currency fluctuations.

Rising costs are a shared challenge globally, and even in Europe’s offshore wind frontrunners, project withdrawals and zero-bid auctions have occurred. The COVID-19 pandemic and Russia’s invasion of Ukraine have exacerbated labor shortages and driven fossil fuel prices sharply higher, exerting deep impacts on the sector. Yet in response, governments have acted swiftly, reforming their frameworks by revising auction designs and price caps, and by clarifying project pipelines to improve visibility—thereby sustaining momentum for new project development. Ambitious capacity targets remain firmly in place.

The UK, under the Conservative government at the time, faced a complete absence of offshore wind bids in its September 2023 CfD Round 5.² In response, it implemented a bold revision³, raising the ceiling price for the next round in 2024 by 66%—from £44/MWh to £73/MWh. Even so, concerns persisted that inflation risks were still not fully covered. As a result, further revisions were made in CfD Round 7 this year, including another increase and an extension of contract terms from 15 to 20 years.⁴ Denmark is also considering similar system changes for tenders following zero bids. These cases demonstrate that establishing a flexible institutional framework is essential for expanding offshore wind power.

The government states it will conduct a re-tender after thoroughly examining the reasons for withdrawal. However, speed is also crucial. In light of this situation, it must promptly outline a roadmap for the future, including the re-tender, to maintain the industry's overall enthusiasm and momentum for development.

It is undeniable that Mitsubishi’s initial projections were overly optimistic. Compared with the average bids submitted by its competitors, the consortium’s offer was JPY6 to 9 per kWh lower. The four years lost until the withdrawal announcement represent a significant setback—not only delaying the commissioning of the three sites but also depriving Japan of an opportunity for fundamental debate on its auction system.

Meanwhile, the need to address the subsequent projects has become increasingly urgent. Developers in Rounds 2 and 3, forced into zero-premium bids under intense price competition, now face even harsher conditions than Mitsubishi. Because earlier operation dates were weighted heavily in the evaluation process, four projects are scheduled to commence within four years, with one as soon as three. Unless corrective measures are introduced, there is a real risk that similar turmoil will unfold in succession.

In Denmark, when zero-bid outcomes occurred, the government conducted detailed hearings with developers to identify the reforms required, and signaled its intention to boldly revise the auction framework for subsequent rounds.⁵ In Japan as well, institutional reforms must be pursued on the basis of careful and substantive dialogue with project developers.

Unlike Europe, Japan also faces structural challenges such as the complexity and protracted nature of the licensing system, the cost burden of grid expansion and port infrastructure, and the shortage of construction vessels due to cabotage restrictions. Many of these obstacles can be mitigated through adjustments in institutional arrangements, and addressing them should be treated as an even more urgent priority than auction reform itself.

In June this year, the government enacted the revised Renewable Energy Marine Area Utilization Act, significantly expanding offshore wind development beyond conventional general sea areas into exclusive economic zones and paving the way for floating offshore wind development. In addition, the introduction of a Japanese-style centralized system in general waters is beginning to ease the burden on developers, signaling gradual but steady progress in regulatory design.

Offshore wind is not merely a key technology for Japan’s energy transition but also a foundation for new industrial growth. Given the breadth of its supply chain, embedding offshore wind firmly in Japan’s economy will help strengthen the nation’s overall industrial competitiveness.

Expectations for investment in this sector must not be allowed to shrink at this juncture. The withdrawal of Mitsubishi Corp. is not a failure of offshore wind power itself, but rather a test for Japan—an unmistakable call to deliver meaningful and effective institutional reform.