Japan's Mitsubishi pulls out of three offshore wind farm projects. They are too costly

Japanese company Mitsubishi has announced that it will end its involvement in three offshore wind farm projects. The company said the cost of building offshore wind farms has risen significantly since 2021, when it won the projects in auctions there. The company’s representatives no longer see a way to make the projects economically viable. The Japanese government will now put the sites for offshore wind farms up for auction again.

The offshore wind sector has faced tough times in recent years, with a sharp rise in costs leading to the cancellation of many projects. Mitsubishi’s projects will now join their ranks. In 2021, the company won auctions for three projects with a total installed capacity of 1.76 GW. The wind farms were scheduled to begin operations between 2028 and 2030.

“We carefully examined every possible measure, but compared with our assumptions when bidding in the auction, costs have more than doubled, making even a return on investment impossible,” said Mitsubishi executive Katsuya Nakanishi.

According to Nakanishi, even various cost-saving measures, such as restructuring the supply chain, would not save the projects. The company therefore concluded that “total expenditure, including maintenance and operating costs, would exceed revenues from electricity sales, making it difficult to continue with the project.”

Japanese Industry Minister Yoji Muto said the projects’ withdrawal was deeply regrettable and would slow the development of offshore energy in Japan. Japan currently plans to reach 10 GW of installed offshore capacity by the end of the decade. By 2040, this figure is expected to rise to 45 GW.

“This withdrawal betrays local expectations and risks undermining public confidence in offshore wind power,” Muto said, adding that the government plans to put the three sites up for auction again.

The Japanese Ministry of Economy, Trade and Industry is also considering easing the terms for developers to make projects more attractive, according to Reuters. The offshore wind sector is facing a worldwide downturn, with a number of projects cancelled in recent years because of sharp cost increases.