Contents

Introduction: This Is Not Just About One Company

On December 23, 2025, Japan’s Ministry of Economy, Trade and Industry (METI), together with the Ministry of Land, Infrastructure, Transport and Tourism, released an official analysis examining why offshore wind projects awarded in Round 1 were ultimately withdrawn.

The significance of this report does not lie in reviewing the business decision of a single developer.
Rather, it represents a rare and explicit reflection by the government on whether Japan’s offshore wind auction system was designed to ensure project completion in its early phase.

This article draws on METI’s analysis and reorganizes its implications from DeepWind’s perspective, focusing on what happened, why it happened, and what this means for future auction rounds.

While this article focuses on a specific topic, those looking to understand Japan’s overall offshore wind policy and regulatory framework should also read our comprehensive summary here:
👉 Japan’s Offshore Wind Policy & Regulatory Framework: Laws, Permits, and Support Schemes

Why the Round 1 Withdrawals Were Treated as a Systemic Issue

All three Round 1 promotion zones—Akita (Noshiro–Mitane–Oga), Yurihonjo, and Choshi—were awarded to the same consortium and were later withdrawn.

In response, the government did not limit its review to post-event reporting. Instead, it examined:

The auction evaluation framework
The balance between price and project feasibility
The system’s resilience to post-award market shocks

This framing makes clear that Round 1 was not treated as an isolated failure, but as a stress test of Japan’s offshore wind policy design itself, intended to inform future reforms.

Core Issue ①: A Scoring System Dominated by Price

One of the clearest conclusions in METI’s analysis concerns the outsized impact of price scoring.

In Round 1, the scoring framework allocated:

120 points to price
120 points to project feasibility

On paper, this appeared balanced. In practice, however:

Price score gaps exceeded 30 points
Feasibility score gaps were typically below 10 points

As a result, even bidders ranked higher on feasibility could not overturn the advantage created by lower bid prices.
The system effectively rewarded the lowest price above all else, a structure METI now explicitly recognizes.

Core Issue ②: Limits of Project Feasibility Assessment

The report also highlights limitations in how project feasibility was evaluated.

Feasibility criteria included:

Financial and revenue plans
Construction schedules
Risk identification and mitigation
Technical and execution plans

However, these elements were grouped into broad categories. The outcome was a concentration of bidders rated as “middle runners,” with limited differentiation between proposals.

METI’s analysis suggests that financial robustness, sensitivity analysis, and financing certainty could not be sufficiently assessed under the Round 1 framework, limiting the effectiveness of feasibility scoring.

Was Cost Escalation Truly “Unforeseen”?

The primary driver of withdrawal was a sharp increase in project costs.

According to the report, cost escalation resulted from a combination of factors:

Inflation
Yen depreciation
Global supply chain constraints
Design and construction revisions following detailed seabed surveys

These factors led to construction costs significantly exceeding original assumptions.

The key issue, however, was not the external shocks themselves.
It was that under a fixed-revenue structure, cost increases translated directly into deteriorating project economics, with no effective buffer.

Withdrawal After Considering Available Policy Options

Importantly, METI’s report notes that, during the reassessment process, the project sponsor examined various policy-related options, including:

Transition to the FIP scheme
Price adjustment mechanisms
Improved predictability of sea-area occupation periods

Even after considering these measures, the sponsor concluded that securing economic viability remained infeasible, leading to the decision to withdraw.

This point is critical: the withdrawals are positioned not as a lack of policy discussion, but as a business judgment made after reviewing available institutional options.

DeepWind’s View: Could This Happen Again in Rounds 2–4?

Does this mean the issue is now behind us?

From DeepWind’s perspective, some structural risks remain:

Strong price competition continues to dominate auctions
Cost uncertainty has not been fully eliminated
Quantitative evaluation of completion probability remains unresolved

While the policy has improved since Round 1, the fundamental question persists:

Should auctions prioritize the lowest price, or the highest probability of completion?

This remains a central challenge for Japan’s offshore wind expansion.

Conclusion: Not a Story About the Past

METI’s Round 1 withdrawal analysis is not intended to assign blame.

Instead, it raises deeper questions about:

How much risk auction systems should absorb
What “feasibility” truly means in early-stage offshore wind markets
How offshore wind can be established as a durable, bankable industry in Japan

As Japan moves forward with Rounds 2, 3, and 4—and future policy reforms—this report will remain a key reference point for investors, developers, and policymakers alike.

References

This article is based on the following official publication by Japan’s Ministry of Economy, Trade and Industry (METI) and the Ministry of Land, Infrastructure, Transport and Tourism (MLIT).

Agency for Natural Resources and Energy (METI) / Ministry of Land, Infrastructure, Transport and Tourism
“Analysis of Withdrawal Factors for Offshore Wind Projects Awarded in Japan’s Round 1 Auction”
(December 23, 2025)

For a broader understanding of Japan’s offshore wind legal system, policy structure, and support measures, be sure to check out our pillar article:
🌊 Japan’s Offshore Wind Policy & Regulatory Framework: Laws, Permits, and Support Schemes