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New Act to Promote Offshore Wind Power Generation in General Sea Areas
Trending News Dec 2018

New Act to Promote Offshore Wind Power Generation in General Sea Areas

Dec 2018
Update 2018/12/12
Practice Areas Energy and Natural Resources

AuthorsTakashi Akahane (Partner) Kunihiro Yokoi (Special Counsel)

1. Background

On November 30, 2018, the “Act on Promotion of Utilization of Sea Areas for the Development of Marine Renewable Energy Generation Facilities” (the “Act”) was passed by the Diet. The Act creates mechanisms for the designation of general sea areas for the promotion of offshore renewable energy generation and creates a certification system for utilization plans for long-term occupancy of these sea areas. This new system for utilizing general sea areas under the Act has attracted attention as it allows for the long-term and stable operation of offshore wind power generation businesses in general sea areas within Japanese waters.

Because Japan is an island nation, marine renewable energy businesses such as offshore wind power generation are regarded as important. Until now, however, there have been no unified rules for long-term occupancy of sea areas––being Japanese territorial and inland sea waters––other than areas designated under the Port and Harbor Act and the Coast Act (the “General Sea Areas”). Nor has there been a framework for coordinating between sea area users in certain industries such as maritime transport and fisheries.

The Act was passed to remedy the above deficiencies. It contains a mechanism for coordination between sea area users, as well as a certification system for the long-term occupancy of sea areas. These mechanisms are particularly important from the standpoint of future investment in, and operations of, offshore wind power businesses.

The following is a brief overview of the key points of the Act which we consider to be particularly important.

2. Key Points of the Act

(1) Designation of Promotion Areas

The Minister of Economy, Trade, and Industry (“METI”) and the Minister of Land, Infrastructure, Transport, and Tourism (“MLIT”, and together with METI, "The Ministers") will be able to jointly designate utilization promotion areas (Sokushin Kuiki) ("Promotion Areas"), made up of General Sea Areas, for the development of marine renewable energy generation business (Article 8, Paragraph 1 of the Act). When designating Promotion Areas, The Ministers must consult with the Minister of Agriculture, Forestry, and Fisheries (“MAFF”); the Minister of the Environment (“MOE”); and/or any other relevant authorities. The Ministers must also hear the opinions of relevant prefectural governors and (if established) a specifically organized council (Kyogikai) made up of a combination of any of the parties named in this paragraph (excluding MOE and other relevant authorities) and other interested parties. (Article 8, Paragraph 5 and Article 9 of the said Act).

(2) Introduction of a License System for Occupancy of Promotion Areas

After the Act enters into force, the permission of the MLIT will be required when any party wishes to occupy Promotion Areas; install or reconstruct facilities or structures; or engage in any other actions covered by the Act (or a Cabinet Order) in the Promotion Area (Article 10, Paragraph 1 of the Act). The maximum valid term of an occupancy license is 30 years, and the same maximum term applies to each renewal of the license (Article 10, Paragraph 4 of the said Act).

(3) Public Tenders and the Certification of Occupancy Plans

When the Ministers designate a Promotion Area, they shall establish guidelines for public tenders for the occupancy of sea areas within the Promotion Area (Koubo Senyo Shishin) (the “Guidelines for Public Tender of Occupancy”). These guidelines must be made in accordance with relevant basic policies (Kihon Houshin) and will allow the Ministers to select, by public tender, entities to carry out marine renewable energy generation business in a sea area within the Promotion Area (Article 13, Paragraph1 of the said Act). The Ministers will select a business operator (Sentei Jigyousha) based on the occupancy plan (Koubo Senyo Keikaku) submitted by that business operator (the "Business Operator"; Article 15 of the Act). The Ministers will then certify the occupancy plan submitted by the Business Operator (Nintei Koubo Senyo Keikaku) (the “Certified Occupancy Plan”; Article 17 of the Act). The valid term of the certification will be specified in the Guidelines for Public Tender of Occupancy in advance, and cannot exceed 30 years (Article 13, Paragraph 3 of the Act).

Under the Act, use of the sea areas within the Promotion Area and the actual offshore wind energy generation businesses therein are to be developed by the Business Operator. This development must be based on the Certified Occupancy Plans. However, the MLIT must grant the Business Operator's application for the occupancy of sea areas within the Promotion Area as long as the application is in accordance with the Certified Occupancy Plan (Article 19, Paragraph 2 of the Act). If a Certified Occupancy Plan has been granted to the Business Operator, no other person can apply for permission to occupy the same area during the occupancy period under that certification (Article 19, Paragraph 3 of the Act).

The status of the Business Operator may be transferred, with the approval of the Ministers, to either a general successor of the Business Operator, or a person who has acquired from the Business Operator ownership or any other titles necessary for the installation and maintenance of equipment for the marine renewable energy generation facilities subject to the Certified Occupancy Plan (Article 20 of the Act).

3. Process for Public Tender and Development of the Business

A prospective operator who seeks to develop an offshore wind power generation project under this new system will need to follow these procedures:

  1. (i)The Government will, by Cabinet decision, issue basic policies for promoting the utilization of sea areas for the development of marine renewable energy generation facilities in the Promotion Area.
  2. (ii)The Ministers will designate Promotion Areas and issue Guidelines for Public Tender of Occupancy, after consulting with MAFF; MOE; other relevant authorities; hearing the opinions of (if established) a specially organized council; and announce the public tender.
  3. (iii)A business operator who wishes to occupy the Promotion Area will submit its occupancy plan to the Ministers during the public tender period.
  4. (iv)The Ministers will select as a Business Operator the person who submits the most appropriate plan. This selection will be based on factors such as the details of the proposed power generation business and electricity price supplied by the power generation facilities. The Ministers will then certify that occupancy plan as the Certified Occupancy Plan.
  5. (v)The Business Operator will, based on the Certified Occupancy Plan, apply for METI’s certification of its business plan for power generation (and, Feed-in Tariff (”FIT”)applicable to the business plan) under the FIT Act ( “Renewable Energy Act”). It will do this by the deadline set out in the Guidelines for Public Tender of Occupancy.
  6. (vi)The Business Operator will apply for a license to occupy the sea areas within the Promotion Area based on the Certified Occupancy Plan. That license will be granted by MLIT (for a maximum period of 30 years).

4. (Scheduled) Date of Entry into Force

The date of entry into force of the Act is “the date specified by Cabinet Order within a period not exceeding four months from the date of promulgation” (Article 1 of the Supplementary Provisions of the said Act). Therefore, it is expected to be entered into force by early April 2019.

The Government has stated the goal (and expected effect) of the Act is to increase the total installed capacity for wind energy generation from approximately 3.5 GW (as of fiscal year 2017) to approximately 10 GW by fiscal year 2030. The Government has also stated that its aim is to designate five Promotion Areas under the Act by fiscal year 2030.

5. Support by AMT

Our Energy Practices Group has provided a variety of advice and legal support for a number of domestic and overseas wind power generation projects. Prior to the new Act, we have also provided advice on domestic offshore wind power generation projects based on occupancy plans under the Port and Harbor Act (after that act’s revision in 2016). Based on our knowledge and experience, we will continue to support the development of renewable energy businesses, including offshore wind power generation.

Practice Areas
Energy and Natural Resources