This is an extract from a recent report “Key Barriers in Japan’s Renewable Energy Development” published by IEEFA. This extract provides an overview of national trends in power capacity, generation, and technology composition, especially since the introduction of the FIT in 2012 and the transition to the Feed-in Premium (FIP) scheme in 2022. While total capacity has increased, new installations and generation growth have slowed significantly in recent years.

From FIT to FIP

Japan implemented the Renewables Portfolio Standard (RPS) law in 2003, which mandated that utilities should procure a certain share of electricity from renewable sources. However, due to limited targets and weak incentives, renewable deployment remained modest. A residential solar surplus buyback scheme followed in 2009 but was insufficient for large-scale expansion. After the 2011 Fukushima nuclear accident, the government recognized the urgent need to shift away from nuclear and scale up renewables, leading to the introduction of the FIT in 2012. The FIT scheme required utilities to purchase renewable electricity at fixed prices, incentivizing the development of new projects and spurring rapid expansion, particularly in solar photovoltaic (PV) installations. However, increasing consumer prices, market distortions, and rapidly falling renewable technology costs prompted a policy shift.

In 2022, the FIP system was introduced to promote market integration of large-scale renewables. The FIT scheme remained available for specific, smaller-scale technologies. Unlike the FIT, which guarantees a predetermined purchase price for renewable energy, the FIP provided a variable premium in addition to wholesale electricity market prices, encouraging producers to participate in wholesale markets and develop more flexible business models, including storage and aggregation. The FIT led to the share of renewables in Japan’s energy mix increasing quickly after 2012, while total generation in the country fell. In 2023, Japan’s electricity generation was 14.3% lower than in 2010, due to demographic trends and energy efficiency measures. In contrast, renewable energy — which included solar, wind, hydropower, biomass, and geothermal — rose to a 22.9% share in power generation in 2023, from 9.5% in 2010. Excluding hydropower, it grew sixfold from 2.2% of the total generation mix to 15.3%.

Similarly, renewable energy capacity grew 166% compared to 2010. Total renewable capacity certified by FIT, including pre-FIT installations, reached 119.49 GW in fiscal year (FY) 2023. 80%, or 78.65 GW, of this amount is currently operational while the remainder is being developed.

However, new installations under FIT and FIP have declined, and in 2023, renewable power generation grew by just 5.9% — the lowest annual growth rate since 2010 (Figure 3). Several factors have contributed to this slowdown. Under the FIT scheme, prices have decreased, and eligible technologies are limited, while unpredictable costs have jeopardized stable project development under the FIP system. Additionally, curtailment risk has increased significantly because of insufficient grid capacity. Consequently, revenue forecasts for new projects have become less certain.

The new FIP scheme poses particular challenges for small and medium-sized enterprises (SMEs), which lack the financial resilience to withstand the fluctuating revenues from a tariff tied to the wholesale market price. Without access to grid-balancing infrastructure such as battery storage, these operators risk incurring losses even while generating electricity — reversing the logic underpinning FIT-driven investment. The financial strain is evident. In FY2024, Japan saw a record 52 renewable energy project developers exit the market — including eight bankruptcies with liabilities over JPY10 million, double the number recorded in the previous year.

The 7th Strategic Energy Plan

Every three to four years, the Japanese government updates its Strategic Energy Plan (SEP), a key policy document that guides the long-term development of the country’s energy sector. The latest plan, the 7th SEP, was finalized in February 2025. It aims for a power generation mix in 2040 that consists of 40%–50% renewable energy (including hydropower), 30%–40% thermal power (without specifying exact shares of coal, LNG, and oil), and 20% nuclear. Table 1 provides a breakdown of planned renewable technologies.

These targets do not meet Japan’s international commitments. At the G7 summit in 2023, Japan formally pledged to achieve a “fully or predominantly decarbonized power sector by 2035”. However, the SEP still envisions up to a 40% share of fossil fuels by 2040. During the 28th Conference of the Parties (COP), Japan committed to tripling its renewable energy capacity, alongside 132 other countries. While the SEP contains some capacity targets for new renewables technologies — including 20GW of next-generation solar and 30 GW to 40GW of offshore wind by 2040 — it does not specify overall renewable energy targets. Additionally, the 7th SEP contains a contingency in case of slow renewables deployment. In this scenario, renewables could fall below the 40% share targeted by 2040, while the fossil fuel share could remain higher. The inclusion of this contingency reflects the sentiment that renewables may be insufficient for energy reliability and price reductions.

Solar Power

Solar power remains the primary driver of Japan’s renewable expansion. In 2023, solar PV generated nearly 30 times more electricity than in 2010, accounting for 9.8% of the total electricity output. Yet, growth has slowed. Annual capacity additions under the FIT and FIP schemes fell from a peak of 9.4GW in FY2014 to 3.1GW in FY2023, a 33% drop from the previous year. To meet the 2030 target of 14%–16% solar generation, an average growth of between 4.2%–6.1% and an additional 25 GW–38 GW of capacity will be needed, based on calculations by the Institute for Energy Economics and Financial Analysis (IEEFA). To achieve carbon neutrality by 2050, Japan would need about 400 GW of solar capacity — more than five times the current level.

Wind Power

Wind power generation rose from 4,016 GWh in FY2010 to 10,492 GWh in FY2023, increasing its share from 0.3% to 1.1%. In FY2023, output grew 12.9% boosted by two new wind projects. However, this pace remains inadequate. Meeting the 2030 target of 5% (about 51,000 GWh) requires an average annual growth of at least 25.3% — more than double the 2023 rate. Even if all 19 GW of FIT-certified wind capacity becomes operational by 2030, output would reach only 31,643 GWh. The actual installed capacity currently in operation is 6.3GW, including the capacity predating the FIT and FIP schemes. Japan has substantial offshore wind resources, with the potential to become a primary power source. However, the country had only 0.3GW operating as of December 2024.

In the Vision for Offshore Wind Power Industry report released in 2020, the Japanese government set clear goals to foster a domestic supply chain, promote regional revitalization, and expand deployment with 5.7 GW in operation by 2030, around 10 GW by 2030, and 30 GW–45 GW by 2040.  This plan has yet to materialize and progress remains slow, a gap implicitly acknowledged in the latest report’s emphasis on Exclusive Economic Zone floating offshore wind deployment. Japan introduced an auction system under the Offshore Renewable Energy Act in 2018 to promote cost efficiency and fair competition. The first round, using the FIT scheme, was completed in December 2021. The government then adopted the FIP scheme from the second round to support offshore wind commercialization and enhance market integration. As of June 2025, three auction rounds have been conducted, awarding 5.1GW of projects. Of this, 4.6GW were chosen through auctions, while 0.5GW was selected through other processes. These projects are expected to come online between 2026 and 2030.

Access the report here