February 2023
No.A&S_022

Battery Storage Subsidies in Japan
Introduction
In the Sixth Strategic Energy Plan, 1 published by the Japanese Government in October 2021, targets are
set to (a) achieve carbon neutrality by 2050; (b) increase the share of renewables as part of Japan’s total
electricity generation to 36-38% by 2030 (including 19-21% from solar and wind) compared to an 18%
share in 2019; and (c) reduce greenhouse gas emissions by 46% in 2030.
Solar and wind power generation are heavily dependent on weather conditions and other factors.
Therefore, in order to stabilise the fluctuating supply of electricity from such sources, the Government
recognises that it is essential for Japan to develop large-scale battery energy storage systems (BESS),
which allows the storage of energy for utilisation at appropriate times.
In the last month, details of at least two subsidy schemes which relate to battery storage have beenannounced by the Government. This includes the 2023 BESS subsidy scheme (which seeks to increase
subsidy support for BESS installation projects following on from a similar scheme in 2022), together witha subsidy scheme with a more specific focus on large scale battery production and supply.
The subsidy schemes are open for applications fromcompanies and special purpose companies (SPCs)
registered in Japan.
As this includes Japanesesubsidiaries of foreign registered companies, it will be ofinterest to foreign investors in Japan.
We have
therefore prepared this newsletter to set out details ofthese subsidy schemes, together with a brief analysis of
the 2022 BESS subsidy scheme which might be helpful
for prospective applicants. In addition, details of athird battery subsidy scheme, which is currently Tokyospecific, is considered.

The 2023 BESS Subsidy Scheme
Introduction and Key Dates
The 2023 round of subsidies for battery storage (announced on 31 January 2023) 2 will utilise around JPY
17 billion of the JPY 25 billion allocated by the Government as part of its 2022 supplementary budget1

See for example the following summaries:
https://www.enecho.meti.go.jp/en/category/others/basic_plan/pdf/6th_outline.pdf
https://www.meti.go.jp/english/press/2021/1022_002.html

2

Subsidy for the Project to Support the Introduction of Distributed Energy Resources that Contribute to the Expansion of Renewable
Energy Introduction (再生可能エネルギー導入拡大に資する分散型エネルギーリソース導入支援事業)

1©Atsumi & Sakai 2023

February 2023
No.A&S_022(2023 Scheme). The 2023 Scheme is being implemented by the Sustainable open Innovation Initiative(SII) 3, together with Dai Nippon Printing Co., Ltd.
The 2023 Scheme aims to subsidise projects which install new BESS facilities (or alternatively the
installation of water electrolyzers 4 ) that meet certain requirements, including providing adjustment
capacity via various electricity markets (essentially markets where energy is traded in Japan – including
the supply and demand adjustment market, wholesale electricity market, capacity market and via
individual trading).
The first Application Period for the 2023 Scheme recently opened on 6 February 2023, and the key dates
to note for the remainder of the scheme are as follows 5:
1. Application Period: From Monday 6 February 2023 until [X] (date yet to be determined)
2. First Application Round Deadline: Monday 27 February 2023 (applications must arrive by 12:00)
3. Second Application Round Deadline: [X] (date yet to be determined)
4. Third Application Round Deadline: [X] (date yet to be determined)
Potential applicants should note that where the total grants reach the JPY 17 billion limit in the first roundof applications, there would not necessarily be a second or third application round. Therefore, it might
be advisable for applications to be made in the earliest application round possible.
Requirements
1. BESS Requirements
a. The proposed BESS facility should be directly connected to the power grid; andb. The system should contribute to the effective use and expansion of renewable energy together withimproving the power balance in Japan (e.g., charging when surplus power is expected to begenerated and discharging when power is in short supply).
2. Operator Requirements
Requirements for operators include the following:a. Operators should be entities that conduct business activities in Japan (note that “General
Electricity Transmission and Distribution Operators” (ippan-sohaiden-jigyosha) such as TEPCOPower Grid are not eligible to apply for the subsidies) – foreign companies with Japanesesubsidiaries are eligible to apply for the subsidies;b. The operator should be the owner and user of the equipment for the project 6; andc. Operators need to have the necessary management structure in Japan to ensure the project’s
success 7.
3. Facility Requirements
All of the following should be met:

It is anticipated that the remaining JPY 8 billion of supplementary budget allocation will be used to support (i) the installation of energy
storage systems for households together with commercial industrial use that can be used to address electricity supply and demandcrises; and (ii) promotion of the Internet of Things (IOT) to expand demand response to electricity supply and demand constraints, etc.
3

4
5

SII is a private entity selected by the Government to manage and implement the Subsidy project.
Note: This article does not focus on subsidies available for water electrolyzers. Please reach out if you have a particular interest in thesesubsidies.
https://sii.or.jp/chikudenchi04r/public.html
The Application Guidelines can be found below (Japanese only)

6

https://sii.or.jp/chikudenchi04r/uploads/R4r_k_ess_kouboyouryou.pdf
Where the owner and operator of the equipment will be separate entities, a joint application needs to be made. If the owner does notintend to use the equipment itself, it is recommended to consult in advance with SII.

7 With respect to an SPC, a written assurance confirmation regarding performance of the project must be submitted by the principal investor.

While the guidelines are not entirely clear as to how non-SPC companies satisfy this requirement, considering the fact that the assurance
letter is sufficient for an SPC, an equivalent letter would seemingly satisfy the requirements for other companies.
2©Atsumi & Sakai 2023

February 2023
No.A&S_022

a. The system should be a new installation;b. The output capacity of the system must be 1,000 kW or more;c. The facility needs to meet certain requirements applicable to each type of storage battery (including
requirements such as security/safeguards, education and training, etc.);
d. Appropriateness of proposed development and supply will be assessed and confirmed; ande. The facility must comply with all applicable laws and regulations.
Subsidy Rate and Maximum Amount
Category
Design, equipment and construction costs of BESS which falls
under the following:

Subsidy
Rate
up to 1/2

Maximum Amount(per Application*)
JPY 2.5 billion

up to 1/3

JPY 1.0 billion

up to 1/2

JPY 2.5 billion(a) BESS manufactured using new technology (such as bipolar
batteries); or(b) Energy storage systems assembled via the secondary use ofstorage battery modules used to drive electric vehicles
Design, equipment andconstruction costs of
BESS other than theabove*

Output capacity of 1,000 kW or more
but less than 10,000 kW
Output capacity of 10,000 kW or
more

A separate application can be made for each lead-in line from the power grid.

Only the minimum necessary costs for design, equipment supply and/or construction will be subsidised.
Application and Evaluation Process
1. Application Process
a. Registration and application is made through jGrants. 8 Registration should be completed byapplicants in advance using gBizID's website 9 and these details are then used to log into jGrants.
The application form can be downloaded from the SII website, and once filled in, should be
uploaded onto jGrants.
b. Two duplicate copies of the application documents need to be prepared; one to be submitted to SII
and the other to be retained by the applicant. SII may request that the applicant submit additional
information following SII’s review of the application.
c. Proxy applications are not permitted.
2. Evaluation Process
a. SII will conduct interviews with applicants in relation to the details of the project described in theirapplication. Following this interview, and after consultation with a review committee comprisedof external experts, SII will determine whether the applicant is entitled to receive a subsidy.
b. Details of subsidy awards will be published and applicants notified.
Payment of the Subsidy
Following completion of the project, a successful applicant is required to submit a performance report toSII for review. Once SII has reviewed and confirmed that the project has been carried out in line with theoriginal application, SII will notify the successful applicant of the fixed amount of subsidy that it will
receive. However, if the operator needs the subsidy prior to completion of the project, it should submit arequest to SII explaining why prior payment is required.
89https://www.jgrants-portal.go.jp/
https://gbiz-id.go.jp/top/index.html
Below sets out the detailed procedure for obtaining gBizID (Japanese only):https://sii.or.jp/chikudenchi04r/uploads/R4r_k_ess_gBizID.pdf
3©Atsumi & Sakai 2023

February 2023
No.A&S_022

Once this process is complete, the applicant submits an invoice and the subsidy is received.

Overview and analysis of the 2022 BESS Subsidy Scheme
For the 2022 BESS subsidy scheme (2022 Scheme), the Government earmarked a lower amount of JPY
13 billion as part of its 2021 supplementary budget10 to support standalone BESS construction, with theapplication process held between February and March 2022. Applicants were able to apply for subsidies
to install BESS, or alternatively for the installation of water electrolyzers.
The application process for the 2022 Scheme closed on 31 March 2022, as the total budget allocated to thescheme had already been reached for applications then received. Parties interested in bidding in the 2023
BESS Subsidy Scheme should continue to bear this in mind when determining which Application Period
they apply for.
A total of 13 projects 11 were awarded subsidies under the 2022 Scheme (with some operators receiving
subsidies for more than one project). Of these, 12 projects were granted subsidies for installing BESS,
while one operator received a subsidy for installing water electrolyzers.

Subsidy for a Stable Supply of Batteries
In mid-January 2023, the Government
announced a new additional subsidy scheme toensure a stable supply of storage batteries, basedon the “Act on the Promotion of National Security
through Integrated Economic Measures”. 12 Thissubsidy is promoted by METI but it is understoodthat the subsidies will be provided by the New
Energy and Industrial Technology Development
Organization (NEDO). 13 This scheme focuses
more on battery production and supply, rather
than (in the case of the 2023 Scheme) the
installation of BESS.
The following is a brief summary of the scheme:
1. Targeted Products: The aim of the subsidy is to develop production of (a) storage batteries (advanced
lithium-ion batteries used as either vehicle-mounted storage batteries or stationary storage batteries);and (b) battery materials (advanced lithium-ion battery component materials, produced ascomponent materials for the manufacture of storage batteries as specified in (a)). In the case of both(a) and (b), the developed products must be of a more advanced standard than products currently
under development (e.g., offers better performance and cost competitiveness compared to products
currently in production).
2. Targeted Initiatives: It aims to improve manufacturing infrastructure for targeted products, including(a) the installation of production facilities and production equipment; and (b) further technologicaldevelopments which relate to (a), which are conducted to establish technological leadership andsecurity, decarbonize the manufacturing process, and/or utilise digital technology.
3. Requirements:
a. Storage batteries: Production capacity should be 3 GWh/year or more for vehicle-mounted storage
batteries and 300 MWh/year or more for stationary storage batteries; and10"Subsidy for the Project to Support the Introduction of Grid Storage Batteries, etc. to Accelerate the Introduction of Renewable Energy(再生可能エネルギー導入加速化に向けた系統用蓄電池等導入支援事業費補助金)"
https://sii.or.jp/chikudenchi03r/public.html

11https://sii.or.jp/chikudenchi03r/uploads/ess_koufukettei.pdf

12

The Act was approved on 11 May 2022.
https://www.meti.go.jp/policy/economy/economic_security/battery/index.html

134©Atsumi & Sakai 2023

February 2023
No.A&S_022

b. Battery materials: Storage batteries (other than recycled materials) should have a production
capacity of at least the equivalent of 3 GWh/year of storage batteries. For recycled materials, theoperator needs to process at least 1,000 tons/year of waste battery (pack) equivalent.
In 2022, a more general subsidy scheme was provided by the Government, which sought to support capital
investment and R&D for technology production. However, the Government has clearly perceived apotential risk of losing manufacturing capacity and technical knowledge for storage batteries to overseas
competitors. As such, the Government sees the need to provide further support to maintain and improve
Japan’s domestic manufacturing capacity and technology. This battery production and supply subsidy
focuses on supporting this domestic industry. With a 300 MW minimum limit, the subsidy may be ofinterest to a more limited group of battery producers compared to the 2023 BESS Subsidy Scheme. Thatsaid, it does further demonstrate the Government’s intention and willingness to protect the domestic
battery storage industry.

Tokyo’s own battery subsidy scheme
As well as the nationwide subsidies described above, the wider Tokyo Metropolitan area also seeks toprovide certain subsidies for grid storage batteries. 14 This particular subsidy scheme will support energy
storage systems of 1,000 kW or more and will be open to applications from 1 March 2023 to 10 April 2023.
For this scheme, applicants must be companies with a head office or branch office in Tokyo and the system
must be installed within the service area of The Tokyo Electric Power Company (TEPCO). At present,
TEPCO covers the Kanto area (being Tokyo, Kanagawa, Saitama, Chiba, Tochigi, Gunma, Ibaraki,
Yamanashi and certain Eastern parts of Shizuoka).
The subsidy rate is 4/5 of the project cost (i.e., eligible expenses), with an upper limit of JPY 2.5 billion foreach eligible application (although the published guidelines do not make clear whether this is JPY 2.5
billion per application). However, if the number of applications exceeds the total budget of JPY 4.8
billion, the subsidy amount would be prorated among all applicants that meet the requirements. 15
The subsidy can be used together with the subsidies provided by the Government (as discussed above).
Where both subsidy schemes are applied for by an applicant in relation to the same project, the amountthat will be subsidised is calculated as follows:
4/5 of the “eligible expenses” minus the subsidy provided by the Government
At the moment, this is a unique scheme for Tokyo and equivalent projects have not been announced forother cities or prefectures in Japan.

Further Developments – designation of 10MW Plants
As well as the various subsidies described above, there are further attempts by the Government to expand
the use of grid-scale batteries.
Of note, the Electricity Business Act was amended in May 2022, stipulating that from April 2023 grid-scalebatteries (defined as those with capacity of 10MW and above) would be classified as “electricity
generating”. As a result, if a grid-scale battery operator requests, in principle it should be possible for thebattery to be connected directly to the electricity grid.

14

Project to Promote the Introduction of Large-Scale Storage Batteries for the Grid (系統用大規模蓄電池導入促進事業)

https://www.tokyo-co2down.jp/subsidy/grid-connect
15 https://www.tokyo-co2down.jp/wp-content/uploads/2023/01/grid_connect_gaiyo_2301.pdf
5©Atsumi & Sakai 2023

February 2023
No.A&S_022

Conclusion
The Government’s focus in 2022 and 2023 on providing these different subsidies for battery production
and BESS installation demonstrates a genuine commitment to the support of companies that will provide
innovative solutions to stabilising energy supply.
It remains to be seen how the 2023 subsidies will be allocated, and whether further subsidies will be
provided in 2023 or beyond, but even these subsidies will help continue to accelerate the development ofbattery storage and related technologies in Japan.
---------------------------------------------------------------------------------------------------------------------------THIS NEWSLETTER IS PROVIDED FOR INFORMATION PURPOSES ONLY; IT DOES NOTCONSTITUTE AND SHOULD NOT BE RELIED UPON AS LEGAL ADVICE.
----------------------------------------------------------------------------------------------------------------------------

Authors/Contacts
Daniel Jarrett
Partner
Registered Foreign Lawyer (The Laws ofEngland & Wales*)E: daniel.jarrett@aplaw.jp
Kimiharu Masaki
Partner
E: kimiharu.masaki@aplaw.jp
Yuka Nakanishi
Associate
E: yuka.nakanishi@aplaw.jp

Miho Niunoya
Partner
E: miho.niunoya@aplaw.jp

Tomoko WatanabePartner
E: tomoko.watanabe@aplaw.jp* Atsumi & Sakai is not regulated by the Solicitors Regulation Authority for
England and Wales.

Please see here for our Energy practice.
Inquiries:
Atsumi & Sakai Projects & Energy Practice Team
Email: cpg_project_energy@aplaw.jp
If you would like to sign up for A&S Newsletters, please fill out the sign-up form.
Back issues of our newsletters are available here.

--------------------------------------------

Atsumi & Sakai is a multi-award-winning, independent Tokyo law firm with a dynamic and innovative approach to legal
practice; it has been responsible for a number of ground-breaking financial deal structures and was the first Japanese law
firm to create a foreign law joint venture and to admit foreign lawyers as full partners. Expanding from its highly regarded
finance practice, the Firm now acts for a wide range of international and domestic companies, banks, financial institutions
and other businesses, offering a comprehensive range of legal expertise.
Atsumi & Sakai has an outward-looking approach to its international practice, and has several foreign lawyers with extensive
experience from leading international law firms, providing its clients with the benefit of both Japanese law expertise andreal international experience.
We are the only independent Japanese law firm with affiliated offices located in New York, London and Frankfurt, which,
together with our Tokyo office and Fukuoka affiliated office, enables us to provide real-time advice on Japanese law to ourclients globally.

6©Atsumi & Sakai 2023

February 2023
No.A&S_022

Atsumi & Sakai
www.aplawjapan.com/en/
Tokyo Office: Fukoku Seimei Bldg., 2-2-2 Uchisaiwaicho, Chiyoda-ku, Tokyo 100-0011, Japan
Fukuoka Affiliate Office: Tenjin Bldg. 10F, 2-12-1 Tenjin, Chuo-ku, Fukuoka-shi, Fukuoka 810-0001 JapanNew York Affiliate Office: 1120 Avenue of the Americas, 4th Floor, New York, New York 10036
London Office: 4th Floor, 50 Mark Lane, London EC3R 7QR, United Kingdom
Frankfurt Affiliate Office: OpernTurm (13F) Bockenheimer Landstraße 2-4, 60306 Frankfurt am Main, Germany

NOTICES
1. ABOUT ATSUMI & SAKAI
Atsumi & Sakai is a partnership consisting of Atsumi & Sakai Legal Professional Corporation, a Japanese professional corporation, a foreign law joint venture underthe Act on Special Measures Concerning the Handling of Legal Services by Foreign Lawyers with certain Registered Foreign Lawyers of our firm, a Japanese Civil Codepartnership among Japanese lawyers, represented by Yutaka Sakai, a lawyer admitted in Japan, and a foreign law joint venture with Janssen Foreign Law Office,represented by Markus Janssen, a foreign lawyer registered in Japan to advise on the laws of the Federal Republic of Germany. In addition to lawyers admitted inJapan, our firm includes foreign lawyers registered in Japan to advise on the laws of the US States of New York and California, India, England and Wales, and the Stateof Queensland, Australia. Foreign lawyers registered in Japan to advise on state laws also are qualified to provide advice in Japan on the federal laws of their respective
jurisdictions.
Atsumi & Sakai has established an office in London operating as Atsumi & Sakai Europe Limited (a company incorporated in England and Wales (No: 09389892); sole
director Naoki Kanehisa, a lawyer admitted in Japan), and has established an affiliate office in New York operating as Atsumi & Sakai New York LLP (a limited liability
partnership established in New York; managing partner Bonnie L. Dixon, a lawyer admitted in New York and a Registered Foreign Lawyer in Japan). We also havea partnership with A&S Fukuoka LPC in Japan (partner: Yasuhiro Usui, a lawyer admitted in Japan) and an affiliate office in Frankfurt operating as Atsumi & Sakai
Europa GmbH - Rechtsanwälte und Steuerberater, a corporation registered in Germany providing legal and tax advisory services (local managing directors: Frank
Becker, a lawyer, and Miyuki Hanaoka a tax advisor, both admitted in the Federal Republic of Germany).
2. LEGAL ADVICEJapanese legal advice provided by Atsumi & Sakai and our global offices is provided by lawyers admitted in Japan. Advice provided in Tokyo in respect of any foreign
law on which one of our foreign lawyers is registered in Japan to advise, may be provided by such a Registered Foreign Lawyer. None of Atsumi & Sakai Legal
Professional Corporation, Atsumi & Sakai Europe Limited or Mr. Naoki Kanehisa is regulated by the Solicitors Regulation Authority for England and Wales, and none
will undertake any reserved legal activity as defined in the United Kingdom Legal Services Act 2007. Advice provided in Germany on the laws of Germany will be
provided by a lawyer admitted in Germany, and advice provided in New York on the laws of New York will be provided by a lawyer admitted in New York.

7©Atsumi & Sakai 2023