BY JAPAN NRG TEAM
Three years in, the direction of the Long-Term Decarbonized Power Sources Auction (LTDA) is clear: nuclear provides the backbone, while battery storage supplies the flexibility, chiming with the government’s twin priorities of securing dispatchable generation while preparing the grid for a much larger share of intermittent renewables.
Nuclear was the largest winner within the decarbonized category by capacity, but battery energy storage systems (BESS) dominated by project count. Storage projects accounted for roughly 60% of all successful bids in the FY2025 tender, the long-awaited results of which were released May 13.
By 2040, Japan’s energy strategy sees renewables accounting for 40-50% of the national power mix, driven mainly by an expansion of solar and wind. That shift will require far more storage and grid flexibility to absorb intermittent output.
At the same time, AI-driven growth in power demand, delays in restarting nuclear plants, and concerns that renewable deployment may fall short of official targets are convincing policymakers that dispatchable thermal generation cannot yet be phased down too quickly.
The LTDA increasingly reflects this balancing act. Rather than functioning as a conventional renewable-energy support scheme, the auction is evolving into a financing mechanism for capital-intensive technologies that struggle to secure private funding on purely merchant terms. In exchange for stable support over two decades, developers accept limits on upside market revenues – effectively trading profitability for predictability.
That dynamic helps explain the composition of this year’s winners. Technologies with large upfront costs, uncertain future revenues, or unresolved fuel supply featured prominently. Hydrogen and ammonia projects are a case in point: Despite substantially improved support conditions in Round 3, only four projects bid. All four were selected, compared with an overall auction award rate of 67%, suggesting a still-limited project pipeline.
Overall, OCCTO awarded 7.299 GW of capacity from 10.856 GW of bids. Of the 32 successful projects, 28 fell into the “decarbonized power source” category, totaling 4.261 GW, while four LNG-only thermal projects accounted for another 3.038 GW.