In 2021, Mitsubishi Corp won Japan’s first-ever public tender for large-scale offshore wind farms. Technically, it was picked due to offering the lower price. Many suspected that it was the trading house’s financial muscle, huge network and trusted ties with METI officials that swung the deal.

Fast forward to today and the firm is indicating a potential withdrawal from the three projects it secured, as well as the domestic offshore wind sector in general. Mitsubishi and its partner Chubu Electric claim the challenges and costs they face far exceed their expectations and cannot simply be endured.

On Feb 6, Mitsubishi announced ¥52 billion ($344 million) in writedowns on its three domestic offshore wind projects. Chubu Electric faces ¥18 billion in writedowns on the same.

The common assumption was that if anyone was able to navigate the bureaucratic, technical and financial complexities of building a new sector in Japan it would be Mitsubishi. The challenges have, however, piled up: post-pandemic supply chain shocks; war and sanctions; the weakest yen in four decades; a labor crunch; NIMBY and an anti-renewables backlash.

The result has been massive cost inflation, what Mitsubishi called “material changes in the macroeconomic environment.” Both Mitsubishi and Chubu Electric said they have put the business plans for the three projects under review.

For the government, the threat of a pullout by the operators has grave consequences. The rollout of offshore wind capacity is already behind schedule. The nation’s CO2 reduction goals, enshrined in international commitments, hinge on multi-GW additions of clean power, and offshore wind farms seem to be the only options to deliver on such scale.

None of the options before METI are easy. Can the government offer Mitsubishi and partners additional subsidies? Or more time to complete the projects? If so, what about other auction winners or future bidders? If Mitsubishi does quit, will the next-best bidders take their place? And, most importantly, can Japan afford to leave these projects or let Mitsubishi sink given the message that it would send on offshore wind opportunities in the country?