JAPAN Law and Practice Contributed by: Yusuke Murakami, Nobuhiko Suzuki, Yuma Ito and Masataka Hayano, Mori Hamada & Matsumoto
6. Recent Legal Developments 6.1 Significant Court Decisions or Legal Developments Given that many renewable power plants (especially solar power plants) were rapidly developed all over Japan by numerous developers, we have seen more and more cases where developers have failed to com- ply with relevant regulations or have caused a material adverse impact on the local environment. To ensure better engagement with local stakeholders, developers are now required to take effective meas- ures to give advance notice to local residents about their plan to develop renewable power plants. In par- ticular, as of 1 April 2024, developers of renewable power plants sized over a certain threshold subject to the government subsidy (the FIT or FIP programme) have been required to hold a briefing session to explain the comprehensive parametres of the projects to local residents living within a certain distance of the project site. This requirement also applies to the tim- ing of acquisition/M&A transactions on such projects and even to any change of control affecting develop- ers setting up or operating the projects. It will therefore have a material impact on M&A practice in the sector. 6.2 Key Developments in Renewable Energy and Cutting Emissions Japan’s energy market is undergoing a pivotal trans- formation. Following the government’s pledge in 2020 to achieve carbon neutrality by 2050 and cut greenhouse gas (GHG) emissions by 46% by 2030, the Seventh Strategic Energy Plan (February 2025) emphasises maximising the use of renewable energy and nuclear power. Together, these sources are tar- geted to provide up to 70% of Japan’s electricity by FY 2040. The government also adopted the GX2040 Vision, which integrates a package of economic poli- cies to achieve the best balance of decarbonisation, energy security and economic growth. Reform of Renewable Energy Framework Since 2012, the FIT scheme stimulated solar power development but imposed heavy costs on the pub- lic (about JPY4.8 trillion annually by 2025). To alle- viate this public burden, Japan introduced the FIP scheme in 2022 under the new FIT/FIP Act. Unlike
FIT’s guaranteed prices, FIP incentivises developers to sell electricity at market rates (or negotiated CPPA prices), with a subsidy covering the gap between a “strike price” and market averages. While designed to reduce the public burden, the shift creates uncer- tainties for developers, particularly in large-scale solar and wind projects. The Act also introduced automatic cancellation rules for non-operational projects (which have failed to achieve the commercial operation by a certain longstop date) in order to free up grid capacity. Offshore Wind Development Offshore wind is critical to Japan’s renewable mix. Large-scale projects are advancing, such as those in Akita, Hokkaido and Kyushu, with targets of 10 GW by 2030 and 30–45 GW by 2040. Legal frameworks – the Port Act and the Marine Renewable Energy Act – enable long-term marine-area use and competitive bidding. A proposed amendment would extend per- mitting to Japan’s Exclusive Economic Zone (EEZ). Government support also includes infrastructure investment, streamlining of environmental impact assessment, and funding for floating wind technolo- gies. Rising costs due to inflation and currency shifts (a weak yen) remain challenges, although investor interest remains fairly strong. Corporate PPAs Corporate power purchase agreements (CPPAs) are rapidly expanding, driven by regulatory reforms, envi- ronmental commitments (eg, RE100), and rising elec- tricity prices. The government supports a wider use of CPPAs through various subsidies and clearer legal frameworks. GX Policy: Decarbonisation Tools The Green Transformation (GX) Promotion Act (2024) advances carbon pricing, with emissions trading to launch in 2026 and fossil fuel levies by 2028. A volun- tary GX League already pilots trading. GX transition bonds fund major investments in hydrogen and ammo- nia projects, which are prioritised under the revised Hydrogen Basic Strategy, with support through CfDs and subsidy grants for supply-chain infrastructure. Japan also enacted the CCS Business Act (2024), creating a framework for carbon capture and storage, aiming for 120-240 million tonnes of annual storage by 2050. Finally, the newly introduced Long-Term Decar-
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