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11 November 2019
Identification and designation of promotion zones
Selection and appointment of operators
FIT programme application and occupation licence
In April 2019 the Act on Promoting the Use of Marine Areas for the Development of Marine Renewable Energy Generation Facilities came into force.
Although Japan has significant offshore renewable energy output potential, a number of issues – both systemic and technological – have hindered efforts to develop its offshore renewable market. With the introduction of the act, the government aims to develop such offshore renewable energy capacity and encourage and facilitate the development of offshore renewable projects in Japan. In its Energy Plan 2015, the government announced a target energy mix that includes 22% to 24% of renewable energy sources by 2030, 1.7% of which will be comprised of wind power projects.(1) It is estimated that 10GW of wind capacity will be required to meet this target.
The act is significant because it addresses some of the key systemic issues affecting offshore renewable projects, such as:
This article discusses the key amendments to the offshore renewable project regime introduced by the act, as well as the various issues that remain outstanding.
Under Japanese law, the government owns the ocean floor of Japanese territorial waters. Japan's coastal waters which are governed by the Ports and Harbours Act are generally classified as 'port areas'. The Ports and Harbours Act was amended in May 2016 to establish a regulatory framework to develop offshore renewable projects in these port areas.
Prior to the introduction of the Act on Promoting the Use of Marine Areas for the Development of Marine Renewable Energy Generation Facilities, general waters – which comprise the vast majority of Japanese coastal waters – were not subject to any national property management-related laws, such as the Ports and Harbours Act.
The Act on Promoting the Use of Marine Areas for the Development of Marine Renewable Energy Generation Facilities addresses this issue by establishing a nationwide regime for the occupation of general waters for the development of offshore renewable projects, which includes:
Under the act, the Ministry of Economy, Trade and Industry (METI) and the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) will be responsible for the identification and designation of promotion zones. In assessing whether a particular area should be designated as a promotion zone, METI and the MLIT will consider the following criteria:(2)
In addition, the act provides that prior to designating any promotion zone, METI and the MLIT will engage in a formal consultation process with local stakeholders via the establishment of what the act refers to as 'councils'. These councils will be comprised of:
The purpose of the council is for METI and the MLIT to share opinions among stakeholders in order to achieve a consensus regarding the treatment of the proposed site. The act provides that all stakeholders represented must respect the determinations of the council. However, it is important to note that the act does not prescribe the format for these discussions or define a 'consensus' for these purposes.
Further, METI and the MLIT are expected to integrate the determinations of the council into the public tender offer guidelines to be issued for each contemplated offshore renewable project development within a promotion zone (referred to in the act as "occupancy guidelines").
In accordance with the act, parties interested in developing offshore renewable projects within project zones (so-called 'developers') will be appointed via a public tender offer process. METI and the MLIT will prepare and issue occupancy guidelines for each offshore renewable project development within a promotion zone. The act provides that occupancy guidelines must stipulate, among other things:(3)
Developers that wish to develop and operate a renewable project in a promotion zone in response to any occupancy guidelines must submit an occupancy plan(4) to METI and the MLIT. Occupancy plans must describe:(5)
METI and the MLIT are responsible for the evaluation of occupancy plans and the appointment of developers. They will first assess whether each occupancy plan satisfies the following requirements:
METI and the MLIT will then assess each occupancy plan against the criteria set out in the occupancy guidelines. The specific evaluation methodology has yet to be published; however, the process is expected to largely resemble a FIT bidding process, in that the pricing proposed by prospective developers will be a significant factor. In general, METI and the MLIT will look to appoint the developer most capable of delivering a long-term, stable and efficient power generation business at the site.
The appointed developer will be required to comply with its occupancy plan and any failure to do so will result in the appointment being revoked.(6)
Once appointed, a developer will, in accordance with the procedures prescribed in the occupation guidelines and the developer's occupation plan:
The act permits the MLIT to offer developers occupation licences for up to 30 years.(7) The aim is that this 30-year period will be sufficient to cover the development stage, operations (ie, the 20-year FIT period) and the facility's ultimate decommissioning.
The act does not address all issues applicable to the development of offshore renewable projects, including as follows.
In December 2018 METI and the MLIT launched a joint committee to consider the implementation and operation of the act – in particular, the process by which promotional areas are to be identified and the specifics of the developer appointment process. It is anticipated that METI and the MLIT will prepare and publish guidelines on the operation of the act based on the conclusions of this joint committee.
In parallel with the foregoing discussions and the preparation of guidelines on the operation of the act, promotional area designation has already commenced. On 8 February 2019 METI and the MLIT began collecting information from prefectural governments regarding candidate general waters areas for designation as promotional areas. It is anticipated that the first promotional area will be determined during fiscal year 2019 and that the first public offering for the development of such promotional area in accordance with the new act will take place in 2020.
The offshore wind projects envisaged by the new act are considerably larger in scope than those contemplated under existing renewable energy project programmes. METI and the MLIT are hopeful that the new act will continue to encourage interest in the Japanese offshore wind market, having acknowledged that participation will require large upfront capital costs, as well as sophisticated technology and know-how on the part of candidate developers. It remains to be seen how the METI and MLIT guidelines on the act will be received by the market and whether they will achieve their objective of continuing to encourage interest and participation in the growing Japanese offshore wind market.
For further information on this topic please contact Maya Ito, Amane Kawamoto or Peter G Armstrong at Nishimura & Asahi by telephone (+81 3 6250 6200) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Nishimura & Asahi website can be accessed at www.jurists.co.jp.
(1) Further information is available here.
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