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Gap Widening Between Study-Stage Renewable Projects, Connected Grid Capacity in Japan, IEEFA Says

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Despite an expanding line-up of renewable energy projects, the conversion from application to physical grid remains weak in Japan, according to an analysis by the Institute for Energy Economics and Financial Analysis published Friday.

Only about 87 gigawatts have been connected to the grid from about 317 GW of wind, solar, and storage capacity under study as of December last year, the study said, citing the country's grid application data.

With a connected capacity about 2.3 times the volume at the study stage, solar energy has exhibited the highest realization in Japan. However, transmission-dependent technologies such as offshore wind and battery storage have displayed significantly weaker conversion rates.

Onshore wind, offshore wind, and battery storage have conversion rates of around 14%, below 1%, and 0.35%, respectively, IEEFA said.

According to IEEFA, the challenges around Japan's renewable energy bottleneck stem more from institutional design, rather than ambition or resource constraints

"The widening gap between study-stage projects and connected capacity suggests that Japan's renewable energy bottleneck is fundamentally institutional in nature," IEEFA analysts said.

IEEFA added that without reforms that enhance cost transparency, project prioritization, and transmission coordination, "capacity is likely to continue accumulating in the queue without translating into large-scale transformation of the power system."

The country's grid connection bottleneck results from three structural issues in its interconnection framework: cost allocation, queue design, and geographic transmission constraints, IEEFA said.

Japan's framework uses the "causer pays" system under which the cost risks associated with upgrades are transferred to the developers, increasing their financial risk.

At the same time, weak controls in the project queue allow speculative projects to compete with ready-to-build projects for limited grid capacity, while geographic transmission constraints are causing bottlenecks between power-producing regions and major demand centers, it said.

"If left unchanged, this structure could continue to slow renewable energy deployment, not because projects are lacking, but because the interconnection framework constrains the conversion of applications into operational capacity," IEEFA analysts added.

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