1 Legal and regulatory framework

1.1 What role does the state play in the renewables industry and which national legislative and regulatory provisions have relevance for the renewables industry in your jurisdiction?

The Japanese government is supporting the growth of the renewable energy industry by:

  • establishing policies aimed at achieving carbon neutrality; and
  • enacting laws to further develop renewable energy.

The Basic Act on Energy Policy, enacted in June 2002, is the foundation of Japan's energy policy. Pursuant to this act, the government publishes a Strategic Energy Plan every three years, with the most recent iteration being the Sixth Strategic Energy Plan, published in October 2021.

The Sixth Basic Energy Plan lays out a policy to:

  • achieve carbon neutrality by 2050; and
  • reduce greenhouse gas emissions by 46% by 2030 (compared to 2013 levels).

Additionally, the plan aims for renewable energy to become Japan's primary source of power generation. In 2019, renewable energy represented an 18% share of the energy mix; the government's target is for this to reach 36% to 38% by 2030.

The main legislation relating to the renewable energy industry is as follows:

  • Electricity Business Act: The Electricity Business Act regulates the entire electricity utility industry. All newly developed renewable energy power plants must comply with the regulations regarding power generation and security for electric facilities set out in the Electricity Business Act.
  • Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Utilities ('FIT/FIP Act'): This act came into effect in July 2012 and established a system under which utility companies purchase electricity generated at renewable energy power plants at a fixed price ('FIT Scheme'). Following the introduction of the FIT Scheme, there was a rapid rise in renewable energy generation, which resulted in higher costs for consumers and an over-reliance by power generators on the subsidy scheme. This ultimately led to the amendment of the FIT Act in April 2022. The amendments included the establishment of a new, alternative system to the FIT Scheme, which provides a certain feed-in premium (FIP) over the market price of electricity ('FIP System'). The FIP System is ultimately intended to replace the FIT Scheme over time. Even now in 2023, the FIT Scheme is only available for power plants with low power output – currently, it can still be used for solar projects under 500 kilowatts (kW), onshore wind projects under 50 kW and for biomass projects under 2 megawatts, but the threshold power output is reducing each year. For new projects with larger power outputs, only the FIP System can be utilised.
  • Marine Renewable Energy Facilities Act: Under this law, the government allows power producers that construct and maintain offshore wind farms to occupy designated sea areas for a 30-year period.

1.2 Which bilateral or multilateral instruments or treaties with effect in your jurisdiction have relevance for the renewables industry?

Japan formally deposited its acceptance of the Paris Agreement in November 2016. Based on its commitments under the Paris Agreement, Japan decided its nationally determined contribution (NDC) and submitted its intended NDC to the United Nations in October 2021. Within its NDC, Japan is targeting a similar decarbonisation goal to that set out in the Sixth Strategic Energy Plan.

1.3 Which national regulatory bodies are responsible for enforcing the applicable laws and regulations? What powers do they have and what is their general approach in regulating the renewables industry?

The Ministry of Economy, Trade and Industry (METI) is responsible for enforcing the Electricity Business Act and the Renewable Energy Special Measures Act. In addition, METI and the Ministry of Land, Infrastructure, Transport and Tourism are responsible for enforcing the Act on Promoting the Utilization of Sea Areas for the Development of Marine Renewable Energy Power Generation Facilities

Generally, the government:

  • supports the development of renewable energy power plants by providing subsidies; and
  • regulates operators by revoking their eligibility for subsidies in the event of violations of the law.

In addition, renewable energy generation projects are categorised as power generation businesses and are regulated under the Electricity Business Act.

1.4 What role do regional or local government or public bodies play in the renewables industry?

Various permits are required in relation to land use for, together with the development of, renewable energy power plants. These permits and licences must often be authorised by local governments or other local public bodies.

Many local governments have also enacted their own ordinances that seek to support and/or regulate the development of renewable energy power plants, which operators must consider prior to commencing projects.

2 Renewables industry

2.1 Which renewable technologies are considered relatively mature in your jurisdiction, and which are emerging as potentially new technologies in the market?

In Japan, renewable technologies for solar photovoltaic, onshore wind power and biomass power generation are considered to be relatively mature.

In contrast, certain other technologies are less well developed and are expected to emerge and develop in the near future. These include:

  • offshore wind power;
  • hydrogen power generation technologies;
  • battery storage technology; and
  • green/blue ammonia.

2.2 Who are the key players in the renewables industry in your jurisdiction?

Many companies, both foreign and domestic, have entered the renewable energy industry in Japan.

The key players that have entered the renewable industry include:

  • general electricity utility companies;
  • oil and gas-related companies; and
  • general trading companies.

Additionally, there are a number of companies that specialise in renewable energy generation.

2.3 How much do renewables currently contribute to the domestic energy mix? What are the near-term projections for the role they will play?

The share of renewables as a part of Japan's total electricity generation was about 18% in FY2019. The breakdown at that time was as follows:

  • 6.7% solar;
  • 0.7% wind;
  • 0.3% geothermal;
  • 7.8% hydro; and
  • 2.6% biomass.

Japan aims to increase the share of renewable energy within total generation to reach 36% to 38% of electricity generated by 2030. The breakdown of that total generation is proposed to be approximately:

  • 14% to 16% solar;
  • 5% wind;
  • 1% geothermal;
  • 11% hydro; and
  • 5% biomass.

3 Utility-scale renewables projects

3.1 What utility-scale renewables projects are currently operational or planned in your jurisdiction? What are their key features?

The development of renewable energy power plants is rapidly advancing in Japan. In particular, the number of solar power plants is heavily increasing, primarily due to the ease of equipment installation.

Japan is very mountainous and covered in numerous forests, and has very few remaining flat open areas. Therefore, there is very limited land in Japan which is suitable for the installation of renewable energy power plants. As a result, power producers have often had to develop land located in the mountains and forests in order to prepare such land for the installation of renewable energy power plants.

By way of contrast, Japan is also an island nation surrounded by the sea. Therefore, it is anticipated that this sea area will be heavily utilised and that many offshore wind farms will be installed.

3.2 What authorisations are required for the construction and operation of utility-scale renewables projects in your jurisdiction?

A power plant constructed in Japan must comply with the safety regulations under the Electricity Business Act. Larger power plants are additionally subject to more stringent safety regulations.

For example, operators of solar power plants with an output of 2,000 kilowatts (kW) or more and wind power plants with an output of 500 kW or more must:

  • notify the government of their construction plans prior to commencing construction of the facilities; and
  • not start construction within 30 days of notice being served.

The Ministry of Economy, Trade and Industry (METI) may also instruct that the construction plan is revised or suspended within this period. Further, the power generation facilities must undergo an audit for compliance with the relevant technical standards prior to use.

In addition, where an operator intends to receive financial assistance to sell electricity under the Feed-in-Tariff/Feed-in Premium Act ('FIT/FIP Act') (see question 1.1), the operator must obtain the government's approval for its business plan in advance.

When constructing large-scale power plants, an environmental assessment based on the Environmental Impact Assessment Act must be conducted. Please see question 3.9 for further details.

3.3 Do these authorisations vary in respect of the location of the energy source, the location of the asset or the involvement of a foreign entity?

These authorisations do not vary in principle with respect to:

  • the location of the energy source;
  • the location of the assets; or
  • the involvement of foreign companies.

However, foreign entities must file a notification under the Foreign Exchange and Foreign Trade Act in order to operate a power generation business.

3.4 What is the procedure for obtaining such authorisations? How long does this typically take? Who is responsible for issuing them?

Safety review under the Electricity Business Act: As a general rule, the period for carrying out a safety review under the Electricity Business Act is around one month. The procedure for carrying out the safety review is broadly as follows.

When a business operator intends to install or modify a power facility, it must submit a construction plan notification, and is not permitted to perform any work on the facility during the 30-day period after the notification.

The minister of economy, trade and industry is responsible for carrying out the safety review and may, within 30 days of notification, order modifications or reject the application if the construction plan does not conform to the standards set out in the Electricity Business Act.

Approval under the FIT/FIP Act: When a power plant operator wishes to obtain approval under the FIT/FIP Act, it must submit its renewable energy power generation business plan to METI. Among other things, the plan should include details of:

  • the power producer;
  • the location and layout of the facilities; and
  • the size.

The review period for obtaining business plan approval under the FIT/FIP Act is generally three to four months.

A longer period is required to obtain approval for a business plan, because a business operator must conclude a connection agreement with an electric power network company prior to receiving approval for the business plan. The operator will also need to obtain title to use the land on which the power plant is to be installed or at least the right to use the land from the landowner.

The minister of economy, trade and industry is also responsible for reviewing the approval under the FIT/FIP Act.

3.5 What are the key features of such authorisations, including any process for renewal and the rights and obligations of the holder?

Once a safety approval under the Electricity Business Act or a business plan approval under the FIT/FIP Act has been obtained, the approval will not be revoked unless it is found that the conditions of the approval have been violated. (While the approval may not be revoked, support under the FIT/FIP Act is for a period of 20 years.)

3.6 Can these authorisations be transferred? If so, how and subject to what consents? Do any restrictions apply to the transfer?

Safety and security regulations under the Electricity Business Act are imposed on the person that installs the power plant. If the power plant is transferred to another company, the obligations under the safety regulations will transfer along with the approval, and from then on will be imposed on the transferee of the power plant. Operators must also conduct periodic inspections and other activities in accordance with applicable law and regulations.

The business plan approval under the FIT/FIP Act can be transferred to another person, provided that METI is notified in advance (METI has a right of approval but essentially the transfer of approval is usually permitted).

3.7 What obligations apply in relation to decommissioning? How is this funded?

There are no special regulations under Japanese law regarding the disposal of renewable energy power plants. As such, general waste disposal regulations will apply to decommissioning pursuant to the Waste Management and Public Cleansing Act and other applicable laws.

With regard specifically to solar power plants receiving government support under the FIT/FIP Act, operators must maintain a certain amount of financial reserves for equipment disposal.

3.8 What are the main barriers to the development of utility-scale renewables projects in your jurisdiction?

When constructing large-scale renewable energy power plants in Japan, it is important to keep in mind that the construction may face strong opposition from nearby residents. For example, operators may face lawsuits from local residents demanding an end to construction, or it may be difficult to secure land use rights. This may result in changes to the construction plan or cancellation of the project.

As mentioned in question 3.1, Japan does not have many available flat open spaces; and it can be extremely challenging to find suitable sites for constructing large-scale renewable energy power plants.

There is a risk that the electricity power network will not have the capacity to accept the power generated by newly installed renewable energy power plants, and a lot of time and cost may be required to upgrade the electricity power network facilities in future.

3.9 Environmental issues

  1. What environmental regulations or requirements must renewables generators in your jurisdiction observe on an ongoing basis (from pre-development to decommissioning)?
  2. What are the potential consequences of breach of these requirements – both for the renewables generator and for its directors, managers and employees?
  3. Which national and regional regulatory bodies are responsible for the enforcement of environmental obligations, and what is their general approach in regulating the renewables industry?

(a) What environmental regulations or requirements must renewables generators in your jurisdiction observe on an ongoing basis (from pre-development to decommissioning)?

Prior to the construction of a large-scale renewable energy power plant, an environmental impact assessment (EIA) may need to be conducted in accordance with the Environmental Impact Assessment Act.

Projects, depending on their size, may be classified as Class 1 (larger-scale) or Class 2 projects. If a project is classified as a Class 1 project, an EIA is always required. If the project is classified as a Class 2 project, the minister of economy, trade and industry will carry out a review to determine whether an EIA is required.

Class 1 projects include:

  • solar power plants with an output of 40,000 kW or more;
  • wind power plants with an output of 50,000 kW or more;
  • geothermal power plants with an output of 10,000 kW or more;
  • hydroelectric power plants with an output of 30,000 kW; and
  • thermal power plants (including biomass fuel-based projects) with an output of 150,000 kW or more.

Class 2 projects include:

  • solar power plants with an output of at least 30,000 kW but less than 40,000 kW;
  • wind power plants with an output of at least 37,500 kW but less than 50,000 kW;
  • geothermal power plants with an output of at least 7,500 kW but less than 10,000 kW;
  • hydroelectric power plants with an output of at least 22,500 kW but less than 30,000 kW; and
  • thermal power plants (including biomass fuel combustion) with an output of at least 112,500 kW but less than 150,000 kW.

In order to determine whether a Class 2 projects requires an EIA, the minister will consider whether it meets the conditions set out in the METI ordinance. For example, an EIA will be required where:

  • a school or residential area is located near the power plant; or
  • there is a natural area located nearby which requires protection.

The assessment can take around six months from the time the producer notifies METI of the outline of the project.

The EIA process generally takes three to four years, and construction work cannot begin until the assessment process is completed.

Even where projects are not required to undergo an EIA pursuant to the Environmental Impact Assessment Act, prefectural ordinances may require the implementation of an independent EIA.

In addition, there are various regulations (on both a national and potentially local level) regulating matters such as excess noise, vibrations and water pollution, which must be observed by operators.

(b) What are the potential consequences of breach of these requirements – both for the renewables generator and for its directors, managers and employees?

If a business operator attempts to construct a renewable energy project requiring an EIA without first obtaining an EIA, the project will be unable to obtain the necessary development permits.

Fines can be imposed for non-compliance with regulations regarding noise, vibration, water pollution and so on. Directors or employees of the company who violate these regulations can also face punishment.

(c) Which national and regional regulatory bodies are responsible for the enforcement of environmental obligations, and what is their general approach in regulating the renewables industry?

The Ministry of the Environment is broadly responsible for the enforcement of environmental obligations within Japan.

The main approach of the Ministry of the Environment to implementing environmental laws is via regulation. In practice, this means, for example, that:

  • businesses which have the potential to have a harmful impact on the environment must obtain permission to operate in advance; and
  • fines are imposed on business operators that discharge more than a certain prescribed limit of hazardous substances into the environment.

3.10 Health and safety issues

  1. What key health and safety requirements apply to renewables projects in your jurisdiction and are there best practices in relation to health and safety that should be adopted?
  2. What are the potential consequences of breach of these requirements – both for the renewables generator and for its directors, managers and employees?

(a) What key health and safety requirements apply to renewables projects in your jurisdiction and are there best practices in relation to health and safety that should be adopted?

There are no specific health and safety requirements that apply to renewables projects. If workers are employed on a renewable energy project, generally applicable labour-related laws and regulations, such as the Labor Standards Act and the Industrial Safety and Health Act, will apply:

  • The Labor Standards Act establishes regulations regarding minimum conditions for employment.
  • The Industrial Safety and Health Act was enacted to ensure the safety and health of workers in the workplace and to create a comfortable work environment. The Industrial Safety and Health Act establishes means and methods for:
    • formulating industrial accident prevention plans;
    • establishing safety and health management systems; and
    • establishing a system of responsibility within a company to prevent workplace accidents.

(b) What are the potential consequences of breach of these requirements – both for the renewables generator and for its directors, managers and employees?

If a company's directors or employees violate the Labor Standards Act or the Industrial Safety and Health Act, depending on the severity of the offence committed, they may face imprisonment (for up to several years) or fines (of up to JPY 3 million).

The company may also be fined the same amount as the directors and/or employees in such cases.

4 Distributed generation projects

4.1 What are the key differences in relation to small-scale distributed generation projects compared to utility-scale projects in your jurisdiction with regard to the regime discussed in question 3?

The safety regulations applicable to small-scale distributed generation projects under the Electricity Business Act are not as strict as those applicable to utility-scale projects. Similarly, small-scale distributed generation projects do not require the operator to carry out an environmental impact assessment.

Most other aspects of both types of project are broadly the same.

4.2 What are the main networks that apply to small-scale distributed generation projects in your jurisdiction?

The main electricity power networks that apply to small-scale distributed generation projects in Japan are not particularly different from those applying to large-scale projects. Projects of all sizes use the electricity power networks that are managed by the general electricity transmission and distribution utilities (the term used in the Electricity Business Act for the companies/utilities managing the electricity power network).

5 Taxes and incentives

5.1 What national, regional and/or local incentives are available as subsidies or support to facilitate the deployment of renewables projects in your jurisdiction?

The primary mechanism that has promoted renewable energy generation at a national level is governmental support under the Feed-in-Tariff/Feed-in Premium Act ('FIT/FIP Act') (see question 1.1).

Under the existing FIT Scheme, where a business plan for a renewable energy power plant has been approved pursuant to the FIT Act, energy produced by that plant is guaranteed to be purchased by a general electricity transmission and distribution utility company at a fixed price for a 20-year period.

However, the recent introduction of the FIP System has led to a change in the support mechanism from providing a FIT to providing a certain premium above the wholesale market price.

Some local governments may offer subsidies or incentives for the installation of small-scale renewable energy generation, but these vary by prefecture and municipality.

5.2 Are any tax reliefs available for investment in renewables projects?

If certain requirements are met for the introduction of renewable energy generation projects, corporation tax and property tax incentives are available.

At a national level, if a power generation operator invests in buildings, machinery and other equipment in accordance with its regional economy advancement project plan (and such plan is prepared in accordance with appropriate legislation), the power generation business is eligible for special depreciation or tax credits related to corporation tax generated.

At a local level, renewable energy generation facilities that meet certain requirements are eligible for a reduction in property tax for the three-year period starting from the year in which the property tax is levied.

The conditions for each generating facility are as follows:

  • Solar: Facilities developed with national subsidies and without approval under the FIT/FIP Act.
  • Onshore wind: Facilities that are approved under the FIT/FIP Act.
  • Biomass: Facilities that are approved under the FIT/FIP Act and whose power output is less than 20 megawatts.

5.3 Have there been any interventions affecting renewables projects in terms of their ability to be constructed or operated, or their ability to earn revenue, in your jurisdiction?

None in particular.

5.4 What other incentives are available to promote the development of the renewables industry in your jurisdiction?

In order to promote the development and installation of renewable energy generation within Japan, loan finance with favourable terms to the borrower may be available from banks that are supportive of projects within the renewable energy sector.

6 Financing structures

6.1 Is debt financing typically used and are there any particular structures that are common for renewables projects in your jurisdiction?

Various types of debt finance can be used for renewable energy projects. For large-scale renewable energy projects, project finance may be utilised. For projects that are smaller in scale, normal bank debt (ie, not project finance) may be utilised.

The most commonly used structure for project finance (including large-scale renewable projects) in Japan is the TK/GK scheme. The TK/GK scheme is an investment structure which utilises a limited liability company – a Godo Kaisha (GK) – together with a silent partnership as shareholder of the GK, a Tokumei Kumiai (TK) investor (see question 6.2).

6.2 What are the advantages and disadvantages of these different types of structures?

The main advantage of the TK/GK scheme is that the TK is not subject to corporate income tax and can therefore pay out more in dividends to investors. On the other hand, the cost of structuring and establishing a TK/GK scheme is high, so projects will need to be of a sufficient size to benefit from the scheme.

6.3 What other considerations and concerns should parties bear in mind when deciding on a financing structure for a renewables project?

In the case of the FIT Scheme, the cash flow throughout the term of the project is stable, making it easier to secure project financing. However, as described in question 1.1, going forwards the FIT Scheme can only realistically be utilised for small renewable projects with very low power output. For larger projects, the Feed-in Premium (FIP) System needs to be used.

It may be more challenging for renewable projects to secure project finance under the FIP System, primarily because cash flows will not be stable throughout the term of the project.

6.4 What main financing institutions are active in your jurisdiction?

In Japan, there are three large banking groups known as the 'megabanks' – Sumitomo Mitsui Banking Corporation, Mitsubishi UFJ and Mizuho Bank – that are active in all types of financing, including project finance and the financing of renewable energy projects.

In addition, various other financial institutions are active in financing renewable projects, including:

  • government-affiliated financial institutions such as:
    • Japan Bank for International Cooperation;
    • Nippon Export and Investment Insurance; and
    • the Development Bank of Japan;
  • regional banks; and
  • trust banks.

Foreign banks are also active in providing financing within Japan.

6.5 Which financing markets are usually turned to for sources of debt in your jurisdiction, (eg, local, London, New York)?

In Japan, financing is usually provided locally, primarily by domestic banks.

7 Transmission, distribution and export

7.1 What are the applicable processes for connecting renewables projects with transmission, distribution and export networks in your jurisdiction? Do these processes differ between different types of renewable technologies and between renewables and non-renewable projects?

In Japan, general electricity transmission and distribution utilities are licensed by the government to manage the electricity power network. The country's electricity power network is split into distinct areas, which are managed by a total of 10 utilities. When the operator of a renewable energy power plant wishes to connect the plant to the power network, it must first:

  • obtain confirmation from the general electricity transmission and distribution utility that the connection is technically feasible;
  • perform any necessary facility enhancement work; and
  • execute a contract with the general electricity transmission and distribution utility to connect to the power network.

While the contents of the contracts are broadly the same, there is no standard form used by all of the utilities.

Where a new facility will be installed and connected to the network, the renewable energy generator will be required to pay the general electricity transmission and distribution utility a portion of the costs for construction and equipment upgrades of additional transmission facilities. This process is generally the same for different types of renewable technologies and between renewable and non-renewable projects.

7.2 What requirements and restrictions apply to the export of renewable energy onto the network?

As Japan is an island country and is not connected to any other nation's power network, it does not export any renewable energy.

7.3 What other considerations and concerns should be borne in mind in relation to the transmission, distribution and export of renewable energy in your jurisdiction, including participation in ancillary services, wholesale electricity trading markets, network charging arrangements specific to renewables and the ability to construct part of the connection infrastructure? Are there long queues and delays for connection?

The rapid increase in renewable energy generation capacity in Japan has created certain problems and challenges, in that newly constructed power plants:

  • have little available capacity in the network for the power that is generated to be connected to;
  • require additional equipment to connect (ie, for the electricity power network to accept the additional power generated); and
  • take a long time to connect compared to previous plants.

Currently, general power transmission and distribution services operators collect wheeling charges from the demand side – that is, from retailers and customers only. In other words, electricity retailers pay wheeling charges and such charges are ultimately passed on to consumers, in that charges are reflected in the electricity bills paid by consumers.

In order to solve this problem, a generation-side billing system – which will charge power generation facilities to obtain the funds needed to maintain and expand the transmission and distribution facilities in the power system – is scheduled to be introduced by the government in 2024. Generation-side charges will be lower for power plants that are located closer to demand locations, such as large cities, and will be higher for those power plants that are further away from such demand. This system is expected to improve the efficiency of the electricity power network by encouraging renewable energy power plants to be built closer to the location of demand.

7.4 Are there any initiatives, reforms or consultations relating to the connection of renewables projects?

A method called 'firm-type interconnection' has been adopted in Japan. Under this method, grid capacity is secured by power plants following the order in which power generators apply for interconnection contracts. However, this method has made it difficult for power generators which are late to apply for a connection agreement to connect to the grid. Therefore, commencing from January 2021, a method called 'non-firm connection' has been gradually adopted nationwide. A 'non-firm connection' is a method that makes it possible to connect a new power source to the grid, subject to controlling its output, when the power grid is congested by other power sources in operation.

8 Storage

8.1 What processes and rules apply to parties wishing to construct and operate a storage (eg, battery, hydrogen, hydro) project in your jurisdiction?

Both storage batteries and pumped storage power plants are currently used for electricity storage in Japan.

Storage batteries that are not attached to power plants are subject to the same safety regulations as solar power generation facilities under the Electricity Business Act.

Pumped storage power generation is subject to the same safety regulations under the Electricity Business Act as apply for hydroelectric power plants.

Please also see question 3.4, which sets out the procedures relating to safety regulations under the Electricity Business Act.

In terms of hydrogen, the government revised its Basic Hydrogen Strategy in June 2023 (this was the first time it had been revised in five years). The new strategy indicates that the government intends to develop reasonable safety regulations for the use of hydrogen. At the time of writing, these regulations have not yet been published.

8.2 Are there any barriers to the development of storage projects in your jurisdiction?

Storage batteries are subject to additional regulation pursuant to the Fire Service Act because of the dangers associated with the ignition of battery storage plants.

8.3 What other considerations and concerns should be borne in mind in relation to the development of storage projects in your jurisdiction?

Energy storage projects are currently being promoted by the government and various subsidies may be available from both the government and regional utilities.

9 Competition

9.1 Are there any dominant players, including dominant purchasers, in the renewables industry in your jurisdiction?

Under the Feed-in-Tariff Scheme, in principle, the general transmission and distribution utilities are obliged to purchase all electricity generated at the purchase price set by the government. However, there are no dominant players or purchasers that could be said to be impeding fair competition.

9.2 Are there any pro-competition measures that are targeted specifically at renewables generators?

None in particular.

10 Disputes

10.1 In your jurisdiction, do disputes typically go to arbitration or litigation, and does this vary for different types of disputes? What sorts of matters tend to come up in disputes?

In Japan, disputes of any kind are still usually referred to litigation, to be resolved by the district courts. The reasons for this include that:

  • it has not been practice in Japan for disputes to be resolved through arbitration; and
  • the costs incurred in litigation are generally regarded as lower than those incurred in arbitration.

In the field of renewable energy power plant development, many lawsuits have arisen concerning:

  • defaults in construction contracts; and
  • disputes between developers and outsourcing companies in relation to tasks that were outsourced during development (eg, obtaining title to land, permits and approvals).

10.2 Have there been any important disputes in the public domain that relate to or may potentially impact on the renewables industry or the deployment of renewables projects?

Conflicts have often arisen in recent years where residents living near proposed renewable energy power plant sites have opposed the development of such power plants. As a result, local governments have in some cases enacted ordinances that impose certain restrictions on the development of renewable energy power plants in their area. In addition, the national government has revised the Feed-in-Tariff/Feed-in Premium Act ('FIT/FIP Act') (see question 1.1) to require that residents near renewable energy power plants be provided with a briefing as a requirement for business plan approval. This amendment was passed by the Diet in May 2023.

11 Trends and predictions

11.1 How would you describe the current renewables landscape and prevailing trends in your jurisdiction?

In Japan, the market for certain renewable energy sources such as solar power and onshore wind is maturing and becoming more commoditised. Nevertheless, the development of renewable energy is expected to continue in order to achieve the country's goal of carbon neutrality.

In addition, we have observed the following potential trends:

  • Expectations for offshore wind: Japan is believed to have significant additional space for offshore wind power development and many offshore wind farm development projects are expected to progress in the near future.
  • Increased M&A activity relating to renewable energy power plants: Companies in various industries are seeing increased need for electricity generated by renewable energy power plants. As such, M&A transactions related to renewable energy power plants, particularly solar power plants, are expected to increase.
  • Increased photovoltaic installations on underutilised land and rooftops: In order to install as much renewable energy generation equipment as possible, we are increasingly seeing the installation of photovoltaic panels on idle and unused land owned by companies, as well as on the roofs of buildings and factories.
  • Increased investment in battery storage projects: Projects to produce storage batteries and install/develop storage batteries are gaining momentum in order to make effective use of electricity captured at solar and wind power plants. Some subsidies have been made available by the government and regional utilities in order to support the growth of battery storage production and installation.

11.2 What influence are net zero commitments having on the development of the renewables industry in your jurisdiction?

As explained in question 1.1, the government has declared that it will target a 46% reduction in carbon emissions by 2030; and Japanese companies are also focusing on matching and achieving these decarbonisation efforts.

As a result, companies are increasingly purchasing electricity generated by renewable energy plants. In addition, 'corporate power purchase agreements' – where companies purchase electricity generated by renewable energy plants directly from power producers, rather than from electricity retailers – are also increasing in popularity.

11.3 What new developments are anticipated in the next 12 months, including any proposed legislative reforms?

As mentioned in question 10.2, an amendment to the Feed-in-Tariff/Feed-in Premium Act ('FIT/FIP Act') (see question 1.1) was passed by the Diet in May 2023.

The amendment requires, as a condition for the approval of projects eligible for support under the FIT/FIP Act, that residents in the vicinity of a proposed renewable energy power plant be briefed about the power plant construction plan by way of a community meeting.

In addition, as mentioned in question 7.3, a generation-side billing system is scheduled to be introduced by the government in 2024.

12 Tips and traps

12.1 What are your top tips for renewables generators in your jurisdiction and what potential sticking points would you highlight?

The Ministry of Economy, Trade and Industry and the Agency for Natural Resources and Energy have provided a large amount of useful information that can act as helpful guidance for renewable energy power producers.

Regulations for the development of renewable energy power projects in Japan are changing at a rapid pace, so it is necessary to monitor and keep an eye on legislative and regulatory developments.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.