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Climate Change

Japan development bank launches $500m fund to grow wind sector

Novel framework lowers hurdles for newcomers to build more farms

Green Power Investment began operating a wind farm in the northern Japanese city of Tsugaru in April 2020. Wind power is seen playing a key role in Japan's goal of becoming carbon-neutral by 2050.

TOKYO -- The government-backed Development Bank of Japan has launched a roughly 53 billion yen ($509 million) fund to help drive the expansion of Japan's wind power industry.

The DBJ chipped in 13 billion yen to the fund, launched in partnership with Tokyo-based renewable energy provider Green Power Investment. Ten other institutional investors, including insurers and regional banks, are participating as well. Funds focused exclusively on wind power operators are rare in Japan.

The government views wind energy as key to achieving its goal of net-zero greenhouse gas emissions by 2050. Major utilities and trading conglomerates have already entered the sector. But the government wants to lower the hurdles for cash-strapped newcomers by purchasing facilities they bring online so that they can quickly reinvest the money in new projects.

The DBJ's fund has purchased three wind farms and two solar energy projects operated by GPI, which have a combined capacity of 220 megawatts. GPI will continue to manage them for at least 20 years, while using proceeds from the sale to construct new wind farms.

GPI plans an offshore wind farm in Hokkaido and an onshore wind farm further south in Iwate Prefecture. It aims to expand total output to 5,000 MW -- the equivalent of five nuclear reactors.

Such ambitions do not come cheap. Building one wind farm can cost tens of billions of yen, and recouping that investment takes a long time.

By selling renewable energy assets to the fund, GPI could instead quickly secure funding for new projects and accelerate its expansion without going further into debt. The DBJ will support GPI's development by establishing a new fund each time the partner completes a new power station.

This type of funding framework is becoming more popular in Europe, a global leader in wind power use. The DBJ will consider forming similar partnerships with other renewable energy operators in order to help them build new infrastructure across Japan.

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