TOKYO :Mitsubishi Corp will withdraw from three Japanese offshore wind power projects because of soaring costs, it said on Wednesday, dealing a blow to Japan’s energy security goals and efforts to reduce its dependence on imported fuel.
A Mitsubishi-led consortia won the first state auctions for the three wind farms in Chiba and Akita prefectures in 2021. The farms had projected capacity of 1.76 gigawatts and were set to start operations around 2028 to 2030.
Mitsubishi Chief Executive Katsuya Nakanishi on Wednesday said cost increases had far exceeded projections, including construction prices more than doubling since the 2021 bidding phase.
“We thoroughly examined every possible measure, but compared to our bidding assumptions, costs more that doubled, making even investment recovery impossible,” he told a briefing.
“Even with countermeasures such as supply chain restructuring, we concluded that total expenditures – including maintenance and operational costs – would surpass electricity sales revenue, making project continuation difficult.”
Earlier this year, Mitsubishi logged a charge of 52.2 billion yen ($354 million) on the projects. On Wednesday, partner Chubu Electric Power said it expected a loss of around 17 billion yen this fiscal year due to the withdrawal.
While reaffirming Mitsubishi’s commitment to decarbonisation, Nakanishi stopped short of saying the company would re-enter domestic offshore wind projects, adding only that it must carefully consider its future steps.
Japan wants offshore wind farm capacity to reach 10 GW by 2030 and 45 GW by 2040, and has auctioned around a tenth of targeted capacity. Winners of other offshore auctions include RWE, Iberdrola and BP.
The Ministry of Economy, Trade and Industry plans to re-auction the three sites vacated by the Mitsubishi consortia, Minister Yoji Muto told reporters on Wednesday.
RWE CEO Markus Krebber said on Wednesday the German company had no interest in taking on the Mitsubishi projects: “Our project pipeline is well filled overall. We are therefore not currently focusing on further projects in Japan.”
The ministry has been discussing relaxing rules for developers to encourage the construction of a massive offshore wind farm sector against a global slump in which projects have been hit by soaring costs and delays.
Denmark’s Orsted decided to withdraw from Japan last year as part of a global restructuring drive, and sources told Reuters in May that London-headquartered Shell shrank its team focused on Japan offshore wind as it scales back low-carbon operations.
“If the projects from consequent rounds are able to move forward, this should not be seen as an apocalyptic event for wind energy in Japan,” said Yuriy Humber, CEO of Tokyo-based consultancy Yuri Group.
“Mitsubishi bid aggressively (in the first round), but macro and other factors went against them. Now there is a rebalancing and, I believe, the sector will emerge stronger in Japan.”
($1 = 147.3300 yen)
