Japan aims to ease offshore wind cost pressures with lease revisions

Japan's industry and land ministries on Tuesday proposed revising guidelines to extend offshore wind project leases by 10 years, from the current 30 years, to help developers manage soaring construction costs and complete projects.

The proposal was submitted to a joint expert panel of the Ministry of Economy, Trade and Industry (METI) and the Ministry of Land, Infrastructure, Transport and Tourism (MLIT).

Under current operational guidelines for public tenders in general maritime areas, operators must remove their facilities within the 30-year permit period, after which a new tender is held. The proposed revision would allow operators to renew their permits if they meet certain conditions.

Because current guidelines require construction, operation, and decommissioning to be completed within 30 years, actual operations typically last only about 20 years.

Extending the period would boost electricity sales, improve cash flow for project-finance loan repayments, attract a broader range of equity investors, and allow for earlier capital recovery, some panel members have said.

The new guidelines will apply from the next auction round, a land ministry official said, adding that no decision has been made on whether it will cover the past three rounds. Japan's government has been expected to sweeten terms for developers to build a large-scale offshore wind sector as it seeks to revive ambitions derailed by soaring costs and global project delays.

The government aims to have 45 gigawatts of offshore wind capacity by 2040 to cut reliance on imported coal and gas, reduce carbon emissions, and bolster energy security. It had 0.3 GW at the end of 2024.

But progress has stalled after three major auction rounds. Trading house Mitsubishi Corp, the winner in the first auction in 2021, warned in February that surging costs had forced it to reassess its plans. Despite the planned lease extension, a Mitsubishi-led consortium is preparing to withdraw from three offshore wind projects due to profitability concerns, several Japanese media reported late Tuesday.

(Reporting by Yuka Obayashi; Editing by Sharon Singleton)