The Renewable Energy Law Review: Japan
Japan is a country with limited natural energy resources and, as such, its major power generation sources have been thermal power and nuclear power. These are provided by 10 major utility companies in areas across Japan. However, because of the Great East Japan Earthquake and the subsequent accident at the Fukushima Daiichi nuclear power plant in March 2011, the government had to change its energy policy and structure drastically. After the earthquake, all 54 nuclear plants, which generated about 30 per cent of the power at that time, suspended their operations and, as at 31 March 2021, only seven of 36 nuclear plants are operational.
Under these circumstances, the feed-in tariff scheme (the FIT Scheme), under which the total volume of electricity generated by renewable energy resources should be purchased at a fixed price (the FIT Price) for a fixed term (the FIT Term), was introduced in 2012 to address the need to secure alternative energy sources to replace nuclear power. Renewable source energy generation – solar power generation in particular – has been rapidly expanded since then. Set out below is recent data on the share of total renewable energy generation (including self-consumption) in Japan.2 As shown in the chart, solar power generation has been the most popular source from the outset of the FIT Scheme.
Further, since the introduction of the FIT Scheme, the following three material changes have been observed.
First, the FIT Price of solar power has decreased continuously, mainly because of sudden drops in the costs of facilities, such as the price of solar modules.
Second, there have been frequent reports of problematic businesses having been certified to sell electricity under the FIT Scheme without having secured the necessary land required for energy generation, ultimately resulting in delays to the commencement of their operation (and, in some cases, entities would secure the entitlement to sell electricity for the sole purpose of transferring or selling that entitlement to another party). In response, amendments have been made to better ensure the certainty of projects and the prompt commencement of their operation.
Third, a rapid increase in renewable energy generation has caused a lack of transmission line capacity in some areas. As a result, there are currently new solar and wind power projects operating in certain areas where there are no restrictions on the output from renewable energy generation facilities. Although utility companies have recently adopted policies on expanding transmission line capacity, the issue has yet to be fully resolved.
The year in review
The Act on Promotion of Utilisation of Sea Areas for the Development of Marine Renewable Energy Generation Facilities was enacted in 2018 and came into force on 1 April 2019. This Act allows the long-term use (up to 30 years) of certain general sea areas for offshore wind power projects under permits issued by the METI. The Act is expected to promote offshore wind power projects, which have not been so popular in Japan to date. In 2020, the METI began a bidding process to select an operator for each of four designated sea areas, which are located off the coasts of:
- the Goto Islands, Nagasaki Prefecture;
- Choshi, Chiba Prefecture;
- Noshiro, Mitane and Oga, Akita Prefecture; and
- Yurihonjo, also in Akita Prefecture.
The operators will be selected in 2021.
In addition, in 2020 it was decided to introduce the feed-in premium scheme (the FIP Scheme), whereby the Ministry of Economy, Trade and Industry (METI) will prescribe certain premiums to be paid for certain types of electricity in addition to the market price. The FIP Scheme will go into effect on 1 April 2022. This will have a significant impact on the renewable energy market in Japan. Please see Section III.ii for further details.
The policy and regulatory framework
i The policy background
The Japanese government revised its strategic energy plan (the Fifth Strategic Energy Plan) in July 2018.3 The plan calls for nuclear energy to account for 20 to 22 per cent of power generation by 2030, with 22 to 24 per cent coming from renewable energy sources, while coal's share will be reduced to 26 per cent, liquefied natural gas's to 27 per cent and oil's to just 3 per cent. This clearly indicates that the government aims to convert renewable energy into a major power source.
ii The regulatory framework
Main source of law and regulation
In Japan, the main source of law and regulation is the Act on Special Measures concerning the Procurement of Renewable Energy Sources by Electric Utilities (the Renewable Energy Act).
Under the Renewable Energy Act, renewable energy subject to the FIT Scheme is currently limited to certain renewable energy sources: solar, wind, water (currently statutorily limited to small and medium hydroelectric generators with an output of less than 30,000kW), geothermal and biomass.
The energy industry in Japan, which encompasses electric power, gas and other energy resources, is regulated by the METI or, more specifically, the Ministry's Agency for Natural Resources and Energy. As such, the Renewable Energy Act is administered under the supervision of the METI. For example, under the FIT Scheme, the METI grants certification for generation businesses, and determines the FIT Price and the FIT Term on an annual basis.
Outline of the FIT Scheme and the introduction of FIP Scheme
In summary, the FIT Scheme ensures that the total volume of electricity generated by renewable energy generation facilities is purchased by utility companies (in most cases, one of 10 major utility companies) at the FIT Price for the FIT Term.
The steps to be undertaken by an entity (a Generator) to be able to generate and sell electricity under the FIT Scheme can be summarised as follows:
- the Generator executes an interconnection agreement with one of the utility companies for the Generator's renewable energy generation facility (the first step);
- the Generator obtains certification by the METI of the Generator's renewable energy generation facility for its generation business in accordance with the requirements of the Renewable Energy Act (the second step); and
- the Generator executes a power purchase agreement (PPA) with one of the utility companies for the Generator's duly certified renewable energy generation facility (the third step).
The FIT Price, the FIT Term and the FIT Scheme process outlined above, along with a relatively new regulation concerning commercial operation deadlines, are discussed in detail below.
Further, in June 2020, a bill to amend the Renewable Energy Act was passed by the Diet. This amendment introduced the feed-in premium scheme (the FIP Scheme). While the FIT Scheme separated renewable energy generators from the market by obligating utilities to purchase all of the electricity that those generators produced at a fixed price, under the FIP Scheme renewable energy generators participate in the wholesale electricity market and receive an additional premium corresponding to sales volumes and market prices.
The FIP Scheme is a framework that provides investment incentives for renewable energy generators by allowing them to receive a premium in addition to sales revenue from market transactions at a wholesale power exchange or through over-the-counter transactions. The premium is calculated by deducting a reference price based on the market price (Reference Price) from the designated base price (FIP Price). The FIP Price is determined in advance as a fixed amount for each fiscal year. There are two ways to determine the FIP Price: a decision by the METI Minister or via a bid system. The Reference Price is determined based on the average wholesale price of electricity during a certain period, taking into consideration, among other things, expected seasonal and hourly supply and demand fluctuations (Reference Period). This amendment contemplates that the Reference Period will be prescribed by an ordinance of the METI, which will be enacted by 1 April 2022. Because the current FIT Scheme will continue to exist independently of the FIP Scheme, operators of projects that obtain certification from the METI after this amendment comes into force (i.e., 1 April 2022) should keep up to date on upcoming plans and discussions.
FIT Price and FIT Term
The FIT Price and the FIT Term for each fiscal year (from 1 April to 31 March) are determined annually by the METI, based on the opinion of an independent advisory committee. The independent advisory committee is composed of five neutral third-party members appointed by the METI with the consent of both houses of the Diet.
As an exception to this (provided certain circumstances are met), the METI may determine the FIT Price by an auction system. This auction system is applicable to facilities producing (1) solar power of 250kW or more from the fiscal year starting from 1 April 2020 (this figure was 2,000kW or more until the fiscal year starting from 1 April 2018 and 500kW in the fiscal year starting from 1 April 2019); and (2) biomass power (generated by certain wood or agricultural products with a capacity of 10MW or more or by biomass liquid fuel). In the most recent auction conducted in January 2020, the weighted average price for solar power was ¥12.57/kWh, while there was no successful bidder for biomass power.
Set out below are the changes in the FIT Prices as well as applicable FIT Terms from the outset of the FIT Scheme. In relation to solar power, as a reflection of, among other things, the sudden drop in the price of solar modules, the FIT Price is falling (see the tables below). In contrast, measures have been taken to establish favourable pricing for, and support investment in, offshore wind power and existing headrace tunnel-type medium and small-scale hydroelectric power generators.
|Source typeInstalled capacityFIT Price (excluding tax)FIT Term|
|Solar power||<10kWh||¥25–¥30 based on device used||¥25–¥28 based on device used||¥24–¥26 based on device used||¥21||¥19||10 years|
|≥10kWh <50kWh||¥21||¥18||¥14||¥13||¥12||20 years|
|≥50kWh <250kWh||¥21||¥18||¥14||¥12||¥11||20 years|
|≥250kWh <500kWh||¥21||¥18||¥14||Price set through an auction system||Price set through a bid system||20 years|
|≥500kWh <2,000kWh||¥21||¥18||Price set through an auction system||Price set through an auction system||Price set through a bid system||20 years|
|≥2,000kWh||Price set through an auction system||Price set through an auction system||Price set through an auction system||Price set through an auction system||Price set through a bid system||20 years|
|Wind power||Onshore wind power|
|Onshore wind power|
|Onshore wind power|
|¥21||¥20||¥19||¥18||Price set through a bid system|
|Onshore wind power (replaced)*||¥18||¥17||¥16||¥16||¥15|
|Offshore wind power† (floating)||¥36||¥36||¥36||¥36||¥36||20 years|
|Offshore wind power† (bottom mounted)||¥36||¥36||¥36||Price set through an auction system||¥32||20 years|
|Geothermal power||<15,000kWh||¥19–¥40 based on device used||¥19–¥40 based on device used||¥19–¥40 based on device used||¥19–¥40 based on device used||¥19–¥40 based on device used||15 years|
|≥15,000kWh||¥12–¥26 based on device used||¥12–¥26 based on device used||¥12–¥26 based on device used||¥12–¥26 based on device used||¥12–¥26 based on device used||15 years|
|Hydroelectric power||<200kWh||¥34||¥34||¥34||¥34||¥34||20 years|
|≥200kWh <1,000kWh||¥29||¥29||¥29||¥29||¥29||20 years|
|≥1,000kWh <5,000kWh||¥27||¥27||¥27||¥27||¥27||20 years|
|≥5,000kWh <30,000kWh||¥20||¥20||¥20||¥20||¥20||20 years|
|Existing headrace tunnel-type medium and small-scale hydroelectric power‡||<200kWh||¥25||¥25||¥25||¥25||¥25||20 years|
|≥200kWh <1000kWh||¥21||¥21||¥21||¥21||¥21||20 years|
|≥1,000kWh <5,000kWh||¥15||¥15||¥15||¥15||¥15||20 years|
|≥5,000kWh <30,000kWh||¥12||¥12||¥12||¥12||¥12||20 years|
|Biomass power§||¥13–¥40 based on material used||¥13–¥40 based on material used||¥13–¥40 based on material used||¥13–¥40 based on material used||¥13–¥40 based on material used||20 years|
|* For those that are interconnected via the interconnection capacity of existing power generators that are scheduled to be abolished (i.e., 'replaced'), special prices have been established since FY2017 due to the low business risk and low cost of replacement, as compared to new installations.|
† Offshore wind power: generators that require a vessel for access for construction and operational maintenance.
‡ Existing headrace tunnel-type medium and small-scale hydroelectric power: generators that utilise existing headrace tunnels with renewable electric power equipment and hydraulic steel pipes. § Excluding biomass power generated by certain wood or agricultural products with a capacity of 10MW or more and biomass power generated by biomass liquid fuel, which are subject to an auction system.
Grid connection process (first step)
To sell electricity to a utility company under the FIT Scheme, power generation facilities must be connected to the utility companies' electricity grids. A grid connection agreement therefore must be entered into with the utility company. As the grid connection agreement is required to obtain certification by the METI, an application for a grid connection agreement should be completed prior to making an application to the METI. Each major utility company has, and posts on its website, standard terms for its grid connection agreement, which may be subject to negotiation in each project, although it is not practically possible to drastically change the standard terms.
Prior consultations with the relevant utility company are not mandatory but are customary and are conventionally expected. The consultations with the utility company take the form of a preliminary consultation and a follow-up detailed consultation.
Certification granting process (second step)
Certification by the METI is the core element of the FIT Scheme. To obtain the certification, a plan of the generation business shall be submitted to the METI along with certain supporting documents. The plan shall include detailed information on, among other things, the Generator, facilities, project site, maintenance system and estimated costs. Specifications for the facilities such as manufacturer and model number of solar modules must also be described in the plan.
The METI will grant the certification when it judges the plan and power generation facilities to be appropriate in light of various criteria. Among the key points are the ability to secure a grid connection agreement, and the project site. Having a grid connection agreement and a project site would indicate that the renewable energy generation facility is at a much more certain stage of development, and more likely to obtain the certification. These criteria were introduced to address the past issue of certification being obtained without sufficient resources in place resulting in delays to the commencement of operations (as mentioned above in Section I).
According to the website of the Ministry's Agency for Natural Resources and Energy, it will take about three months for the METI to grant the certification (but four months for biomass power projects).
After the certification is granted, the METI's authorisation is required to amend the plan – except for minor amendments, for which a post-fact notification to the METI is required. For example, if a Generator would like to change the manufacturer or model number of the solar modules indicated in the plan, it should obtain the METI's authorisation.
In addition, even after the certification is granted, the METI may cancel the certification if it finds that the business is not conducted in accordance with the plan, the plan is no longer able to satisfy one of the criteria for the certification, or the Generator does not comply with the METI's orders.
Power purchase agreement (third step)
Under the Renewable Energy Act, utility companies are obliged to enter into a PPA with a Generator who has obtained the required certification and applies for a PPA, unless certain exceptions apply. As for the grid connection agreement, each utility company has posted on its website the standard terms for its the power purchase agreements, which may be negotiated on a project-specific basis. In practice, however, it is not possible to drastically change the standard terms.
Commercial operation deadline
To address the past issue discussed above, of certification being obtained without sufficient resources in place resulting in delayed commencement of operations, the Renewable Energy Law was amended to introduce a deadline for renewable energy projects to reach the commercial operation stage (the Commercial Operation Deadline).
The FIT Term commences from the day following the Commercial Operation Deadline, therefore if a Generator fails to meet the Commercial Operation Deadline, the project will not be able to fully utilise the FIT Term (for example, one month's delay triggers a one-month deduction from the FIT Term). The project will thus directly incur a loss as a result of the delay in commencement. To be specific, the Commercial Operation Deadline shall be (1) three years for solar power projects with an output capacity of 10kW or more; (2) with the exception of item (4) below, four years for wind power, biomass power and geothermal heat projects; (3) seven years for hydroelectric power projects; and (4) eight years period for wind power projects and geothermal heat projects requiring an environmental impact assessment.
The Commercial Operation Deadline applies to solar power projects that enter into grid connection agreements or receive certification by the METI on or after 1 August 2016, and other renewable energy projects that receive certification by the METI on or after 1 April 2018.
To supplement this regulation, a new regulation entered into force as from December 2018. The new regulation applies to solar power projects that are not subject to the Commercial Operation Deadline. More specifically, this regulation applies to solar power projects for which certification was granted between April 2012 and March 2015, and for which grid connection agreements were entered into before 1 August 2016. Under the new regulation, an application for the start of the grid connection construction (GCCA) must be received by the utility company by 31 March 2019, and operations must commence by 31 March 2020 (or, if the GCCA is received after 31 March 2019, one year after the GCCA is received by the utility company).
Further, the 2020 Bill proposes more straightforward and drastic sanctions against projects that do not commence operations. After the Commercial Operational Deadline, Generators will be given a final expiry date for commencement of operations and if the Generator still fails to commence operation by the final expiry date, the Generator's certification will be revoked. If the 2020 Bill is passed, these amendments will have a considerable impact on projects.
Electricity Business Act
Under the Electricity Business Act, to construct certain power generation facilities (i.e., geothermal power, hydroelectric power, solar power of 2,000kW or more, wind power of 500kW or more, and biomass power of a certain size, depending on the type), a notification of the construction plan for the power generation facilities must be submitted to the METI in advance.
Before the commercial operation date, a Generator that has submitted a notification of a construction plan must conduct a self-check of its power equipment and report the results to the METI. In addition, to ensure the safety of the maintenance and operation of the facilities, the Generator must (1) establish an internal safety regime and submit details of this to the METI, and (2) appoint a chief engineer, who will be in charge of supervising the safety of the maintenance and operation of the facilities, and must notify the METI of his or her appointment.
After the commercial operation date, the Generator shall maintain its felicities to ensure that they conform to the technical standards established by the METI.
Environmental impact assessment and prior consultations
The Environmental Impact Assessment Act applies to projects of 7.5MW or more for wind power projects, of 112.5MW or more for biomass power projects, and of 7.5MW or more for geothermal power projects, but the Act does not apply to solar power projects. However, the Act is expected to be amended to cover solar power projects of 40MW or more (and solar power projects of 30MW or more, depending on the case). If the Act applies, a survey, forecast and evaluation of the possible environmental changes caused by implementation of the project must be prepared; it will take a considerable time to complete this process and the commercial operation will be affected accordingly.
In addition, some local governments maintain their own environmental impact assessment rules and often require the securing of various permits and licences, depending on the applicable circumstances.
Land-related laws and regulations
There are several laws, including local government rules, that restrict the use of land in certain areas. Under the Crop Land Act, for example, permission from the prefectural governor is required to use land designated for agricultural crops for any purpose other than for crops. Therefore, careful due diligence should be conducted before obtaining project sites.
Renewable energy project development
i Project finance transaction structures
Typical project financing structure and principal participants in Japan
In typical renewable energy project financing transactions, a project owner is a special purpose company (SPC). An SPC acquires ownership or leasehold of the project site, builds and operates power generation facilities, and receives the electricity sales proceeds from a utility company under the power purchase agreement.
In Japan, there are two types of limited liability companies that can be used as the SPC: the stock company and the limited company (GK). However, a GK is much more common because (1) it is less time-consuming and less costly to set up, because of its simpler structure, and (2) it is more favourable for lenders in that a GK is not subject to the Corporate Rehabilitation Act, under which foreclosure of collateral may be prohibited. For the purposes of this chapter, it is assumed that the SPC takes the form of a GK.
Lenders usually request that a general incorporated association (in Japanese, an ippan shadan houjin (ISH)) be a member of the GK and manage the GK's operations to eliminate the project sponsor's influence on the GK. The ISH is owned and managed by an independent third party (such as a public accountant) and there are accounting firms that provide professional services to set up and manage the GK and the ISH.
A project sponsor injects equity into the GK by way of a silent partnership (TK), which is explained in detail below. Also, the project sponsor is required to submit a sponsor letter to lenders in which the project sponsor agrees to directly indemnify the lenders against damages arising in certain events. The scope of the indemnification should be a key point in the negotiation between the project sponsor and the lenders.
The debt finance is provided by lenders to the GK to fund construction costs and operational costs. There are various lenders that may provide the debt finance to renewable energy projects in Japan, including the Development Bank of Japan Inc, commercial banks (such as Mizuho Bank, Ltd, Sumitomo Mitsui Banking Corporation and MUFG Bank, Ltd), trust banks, international banks, regional banks and life insurance companies.
In addition, the following entities play important roles in projects:
- an asset manager to the GK is responsible for the management of the GK's assets pursuant to an asset management agreement (the AM Agreement);
- an operation and management contractor is in charge of operation and management of the facilities pursuant to an operation and management agreement (the O&M Agreement);
- an engineering, procurement and construction (EPC) contractor constructs and delivers facilities to the GK usually on a turnkey basis pursuant to an EPC agreement (the EPC Agreement);
- a utility company purchases electricity from the GK under the PPA; and
- an insurance company provides insurance to cover damage to facilities caused by natural disaster, etc.
For renewable energy project finance transactions, the main documents needed consist of finance documents and project documents. Finance documents include a loan or facility agreement, security documents, an inter-creditor agreement if multiple lenders are involved, a sponsor letter, or hedging agreements if an interest rate swap is taken. Project documents include an AM Agreement, an O&M Agreement, an EPC Agreement, a grid connection agreement, a PPA, an EPC Agreement, insurance policies, a lease agreement of the project site if the SPC leases it, or a TK agreement.
Typical debt finance structure and security package
The debt finance is typically arranged such that it is repaid entirely from the cash flows of the project, namely electricity sales proceeds from a utility company. The project sponsor owes indemnification obligations only to the extent specified in the sponsor letter. The typical tenor for term debt is linked to the FIT Term and thus 18.5 to 20 years in the case of solar and wind power projects.
All the assets and contractual rights and positions of the GK are provided to the lenders as security. In other words, the security package includes mortgages over project sites, assignments as security over facilities, pledges over bank accounts, insurance proceeds and equities (i.e., membership of the GK and TK interests in the GK), and assignments as security over contractual rights and positions set out in project documents.
Equity structure (the TK structure)
The TK structure is unique to Japan. A TK is a contractual and bilateral relationship between two entities (rather than creating a separate legal entity), in which one party (the TK Investor) contributes to the other party (the TK Operator) for the TK Operator's business, and the TK Operator distributes profits earned by the business. In renewable energy financing transactions, a project owner becomes the TK Operator and a project sponsor usually becomes the TK Investor.
The key feature of the TK is that the TK Investor must not be involved in the operation of the business of the TK Operator. In other words, in project finance transactions, it should be ensured that (1) the project sponsor (as the TK Investor) has no rights to administer or operate the business of the GK (as the TK Operator), and (2) the project sponsor (as the TK Investor) has only a passive right to receive distributions of profit from the business of the GK (as the TK Operator).
The TK structure is quite common in renewable energy financing transactions and other project or asset financing transactions, mainly for tax reasons. That is, distributions to the TK Investor are included in the deductible expenses of the TK Operator, thereby reducing the corporate tax to be imposed on the TK Operator. That said, careful analysis should be made in the case of cross-border TK structures in which the TK Investor is not tax-resident in Japan and the TK Investor is not considered to have a permanent establishment in Japan through the TK Operator.
Infrastructure fund market
Investors in renewable energy projects are basically limited to professional corporations who have expertise in these kinds of projects. However, it has been recognised that the scope for suitable investors should be expanded to promote renewable energy projects. In April 2015, the Tokyo Stock Exchange established an infrastructure fund market that enables the listing of funds that invest in renewable energy generation facilities. Currently, seven funds investing in solar power projects are listed on the market. The market provides opportunities for a broad range of investors, including retail investors, to invest in renewable energy projects and adds an exit option particularly for developers who develop large-scale power generation facilities.
ii Distributed and residential renewable energy
With a view to expanding residential renewable energy, the METI and local governments have taken the following actions in addition to the FIT Scheme.
First, certain local governments subsidise a portion of the cost of installing renewable energy facilities and related equipment. For example, Tokyo Metropolitan Government subsidises the whole cost (up to ¥100,000 per 1kW) of installing solar power generation facilities and related energy storage on residential apartments.
Second, a special tax treatment reducing property tax on power generation facilities for three years is available under certain conditions.
Third, the Japan Finance Corporation, a wholly owned subsidiary of the Japanese government, may extend loans to fund the installation cost of renewable energy facilities.
While in the past we have seen house or building owners becoming Generators through ownership of solar modules, the rooftop lease arrangement is currently becoming more popular. In this case, the Generator leases the roof and installs its own solar equipment on the roof, then sells the electricity to a utility company under the FIT Scheme. In addition, it is reported that recently more and more local governments are renting the rooftops of public buildings such as schools and public halls to Generators for solar power generation.
iii Non-project finance development
Project companies have been seen to develop renewable energy projects through full equity finance, corporate finance or finance lease. Another, relatively new, structure is crowdfunding. Crowdfunding is a scheme whereby retail investors contribute to a crowdfunding business operator by way of a TK arrangement and the crowdfunding business operator uses the contribution to extend loans to a Generator operating renewable energy projects.
Renewable energy manufacturing
There are various Japanese companies manufacturing renewable energy equipment such as solar modules, power conditioning systems and biomass boilers. For example, Sharp Corporation and Kyocera Corporation have held certain market shares in solar modules.
However, many non-Japanese renewable energy equipment manufacturing companies are expanding their market share in Japan mainly because of their low prices. According to a report by Nikkei on 9 July 2018, South Korea's Hanwha Q Cells ranked the top in market share of solar modules in 2017 (12.9 per cent), followed by Canadian Solar (12.2 per cent), Kyocera Corporation (12.2 per cent) and China's JinkoSolar (12.2 per cent).
In addition, in relation to wind turbines, Hitachi Ltd and the Japan Steel Works Ltd announced their withdrawal from wind turbine production in 2019, one after the other. On the other hand, according to a report by Nikkei on 24 May 2021, JFE Plant Engineering Co Ltd, Toshiba Corporation, and other Japanese companies are focusing on producing certain components of offshore wind turbines, such as nacelles and wind turbine foundations called 'monopiles'.
Conclusions and outlook
After several years of rapid growth of solar power generation following the introduction of the FIT Scheme in 2012, there has been an observable backlash against solar since 2016 and it has been said that the 'solar power boom' in Japan is over. However, Japan is in a transitional phase, which could be characterised as a process of trial and error. The FIP Scheme that is to be introduced from 1 April 2022 (as mentioned in Section III.ii) should be considered part of this trial-and-error process. The current FIT Scheme has been greatly improved and solar power projects have become established over the past few years. Solar power projects are expected to continue to constitute the majority of new projects, although more cost-effective approaches will be sought. Nonetheless, there remains room for growth in wind power projects, and offshore wind power projects in particular, as Japan is an island nation. The newly enacted Act on Promotion of Utilisation of Sea Areas for the Development of Marine Renewable Energy Generation Facilities (as discussed in Section II) will play an important role in promoting offshore wind power projects.