Japan’s offshore wind ’Round 3’ auction results and proposed changes to the Operational Auction Guidelines13 January 2025

Competitive round

Results for ‘Round 3’ of Japan’s offshore wind auction process have been announced by the Japanese Ministry of Economy, Trade and Industry (“METI”) and Ministry of Land, Infrastructure and Transport and Tourism (“MLIT”). The results for this very competitive round were released on 24 December 2024, with successful proposals awarded to:

• the Tsugaru Offshore Energy Consortium (JERA, Green Power Investment and Tohoku Electric), selected out of a total of three proposals for the Sea of Japan (South), Aomori project (615 MW); and
• Yamagata Yuza Offshore Wind LLC (Marubeni, Kansai Electric, BP, Tokyo Gas and Marutaka), selected out of a total of four proposals for the Yuza, Yamagata project (450 MW).

Both projects have a committed commercial operations date of June 2030 and will provide power at a price of JPY 3/kWh. It is notable that in the reasons provided by METI and MLIT for selecting the successful proposals, neither the proposed price for power nor the proposed commercial operations date were deciding factors for the successful applicants as other applications contained the same proposals. Instead, other factors referred to by METI and MLIT as important to their determination were:

• the development plan submitted;
• the feasibility of the business plan; and
• the capability to consult with and accommodate regional interests such as the fisherman union, local government, etc.

In a challenging global market for both fixed and floating offshore wind, the outcome of Round 3 represents a modest, but nonetheless vital step forward and milestone in the Japanese government’s goal of achieving carbon neutrality by 2050.

Details for ‘Round 4’ not yet announced

Details for the ‘Round 4’ auction have yet to be announced, but it is anticipated to occur in 2025 and the project sites under consideration by METI and MLIT include the areas identified as “promising zones” in Hokkaido. METI has also identified potential sites in Aomori, Chiba and Iwate among other prefectures but they are not expected to be selected for ‘Round 4’ and are more likely to become the focus of later rounds of the auction process.

If ‘Round 4’ will follow a similar structure as prior rounds, the deadline for submissions would be expected to be July and successful proposals expected to be announced in December. The schedule, however, may be influenced by amendments to the Operational Auction Guidelines (being the overarching structure that each set of auction guidelines for a specific auction site is based) expected to take place in 2025.

Potential amendments to offshore wind auction procedures

The Government of Japan is considering changes to the Marine Renewable Energy Act that governs the offshore wind auction process, and in November 2024 METI and MLIT published a call for comments on the proposed 3rd edition of the Operational Auction Guidelines for Occupancy in General Sea Areas (“Operational Auction Guidelines”) governing offshore wind projects.

Some of the key amendments that are proposed are:

• changes to the evaluation of project schedules, including: (a) proposed commercial operation dates and whether early dates will receive favourable consideration; (b) de-risking measures; (c) deposits; and (d) the issue of “zero premiums”;
• changes to the price adjustment mechanic;
• measure for maintaining flexibility in project plans;
• changes to price evaluation (including the proposed definition of “Pre-premium Level”); and
• site surveys to be provided through the Japan Oil, Gas and Metals National Corporation (JOGMEC).

As the 30-day period for public comment ended on 30 December 2024, results of the consultation are not yet evident, but it is important that the amendment process be concluded by the end of March 2025 (being Japan’s fiscal year end) for ‘Round 4’ to proceed smoothly in 2025. We will be watching for updates from METI and MLIT on this process in the coming months.

Associate Jun Irie also contributed to this article.