Japan’s BESS Moment: Strategic Opportunity or Speculative Trap?

Why international developers need more than optimism to navigate Japan’s battery storage gold rush.
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Professor Hiroshi Takahashi of Hosei University recently made a compelling case in Nikkei GX for Japan to formally integrate battery energy storage system (BESS) capacity targets into its Strategic Energy Plan. His central thesis that BESS will be a structural requirement for Japan’s energy transition, and not just a speculative bubble, is correct. But the gap between that structural reality and the current policy environment is precisely where international developers face the greatest risk.

Capital is flooding into Japan’s BESS sector faster than the regulatory framework can absorb it. As of mid-2025, connection study applications for grid-scale storage reached 143 GW—while actual connected capacity stood at approximately 250 MW. That ratio tells a story of extraordinary interest colliding with inadequate infrastructure and immature governance. For developers making investment decisions today, the question isn’t whether BESS will matter in Japan. It’s whether the project in front of you will survive long enough to matter.
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The UK Lesson Japan Hasn’t Learned

Takahashi correctly points to the UK as an instructive case, noting its 800 GW interconnection queue and the emergence of ‘zombie projects’-applications that occupy queue capacity without genuine development prospects. What his interview doesn’t fully capture is how dramatically the UK has responded.

In April 2025, Ofgem approved the National Energy System Operator’s TMO4+ reform package, fundamentally restructuring how projects access the grid. The old ‘first come, first served’ model is gone. Projects must now demonstrate they are both ready (land rights, permits, financing) and needed (aligned with national strategic plans) to receive a firm connection offer. Projects that can’t meet these criteria are either removed from the queue entirely or downgraded to an indicative ‘Gate 1’ status. NESO estimates this will re-order and strip down over 750 GW (of which 240 GW are BESS projects) of capacity from the queue.

Japan, by contrast, is still operating on first-come-first-served principles with tactical workarounds. The April 2025 ‘early connection additional measures’ (早期連系追加対策) allow BESS projects to connect without grid reinforcement if they accept charging restrictions during peak congestion periods. This is useful, because it unblocks some projects that would otherwise wait years for transmission upgrades, but it’s a workaround, not a structural fix. Projects with weak fundamentals can still occupy queue positions indefinitely. Japan has not yet established clear criteria for distinguishing viable projects from speculative placeholders.

The UK’s reform was painful. Some developers with legitimate projects were caught in the restructuring. But the alternative, a decade-long queue that benefits no one, was worse. Japan will eventually face a similar reckoning. As developers evaluate opportunities in today’s market, it may be worth considering how projects would be positioned if Japan were to introduce stricter connection criteria similar to the UK’s approach.

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The Aggregator Assumption Gap

Takahashi warns about ‘unsophisticated entrants who assume BESS automatically generates returns through aggregators.’ This deserves unpacking, because the assumption is remarkably common among new market participants -and remarkably wrong.

The logic seems straightforward: build a battery, contract with an aggregator, and collect revenue from balancing markets, capacity auctions, and arbitrage. In practice, the gap between ‘we’ll use an aggregator’ and ‘we have a viable market participation strategy’ is vast.

First, aggregator licensing in Japan involves genuine complexity. Operating as a 特定卸供給事業者 (specified wholesale supply operator) or participating in balancing and capacity markets through EPRX and OCCTO requires navigating regulatory requirements that take time and expertise to satisfy. Not every aggregator can necessarily offer every revenue stream, and the aggregator market itself is still maturing.

Second, the economics depend heavily on various factors outside the developer’s control: how the capacity market evolves, whether the balancing market (需給調整市場) continues to offer attractive revenue opportunities, and how curtailment patterns develop as renewable penetration increases. A project underwritten on today’s price signals may face a very different market by the time it reaches commercial operation.

Third, and critically, siting matters enormously. A battery in the wrong location, even with excellent equipment and a sophisticated aggregator relationship, may find its revenue potential constrained by grid topology, local congestion patterns, or competition from other storage in the same zone. The assumption that ‘any grid-connected battery will find value’ does not survive contact with Japan’s fragmented and regionally constrained transmission network.

None of this means aggregator-based strategies are unworkable. It means they require rigorous analysis of market access, competitive positioning, and regulatory evolution – not hopeful assumptions.––

What a ‘Zombie Project’ Looks Like in Japan

The UK’s zombie projects were largely developers sitting on queue positions without land rights or permits. Japan’s version looks somewhat different and in some ways more insidious.

We’re seeing a growing market in brokered land packages that come with interconnection rights already in hand. On the surface, this seems attractive: the site has cleared the connection study process, has an assigned interconnection point, and may even have preliminary community engagement completed. The developer just needs to build.

In practice, many of these packages are deeply problematic. Some are in locations where grid constraints will limit practical operation far more than the formal connection agreement suggests. Still others involve land with unresolved issues: unclear title chains, agricultural conversion complications, or community opposition that wasn’t fully disclosed.

The megasolar era taught Japan this pattern. Interconnection rights were traded as assets, changing hands multiple times before anyone actually built anything, if they built at all. The question for BESS is whether or not the market learns from this history, or repeats it under a different technology label.

For international developers, the risk isn’t just that you overpay for a site. It’s that you enter a project that was never designed to succeed – only to be sold.

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Regional Realities

Takahashi notes that grid connection applications are surging in certain regions. The connection study data confirms this: Tohoku, Chugoku, and Kyushu have seen dramatic increases. This geographic concentration isn’t random—these are regions with significant renewable penetration where BESS value propositions appear strongest.

But the same factors that make these regions attractive for BESS also make them challenging. High renewable penetration can mean higher curtailment risk, potentially limiting discharge opportunities during the most valuable hours. Weak interconnection to other service territories means less flexibility when local supply exceeds demand, and fewer options for managing localized grid constraints that could affect operational availability.

The Tokyo and Chubu service areas present different dynamics: stronger demand, less curtailment risk, but tighter grid constraints and higher land costs. The Kansai region sits somewhere in between.

There’s no universally ‘right’ region for BESS development. The right question is whether the specific project economics (accounting for realistic connection timelines, local congestion patterns, and competitive dynamics) support the investment thesis. That analysis must happen at the site level, not the regional level.
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What International Developers Should Ask

None of the above means Japan’s BESS sector is uninvestable. It means that disciplined diligence is non-negotiable. For any project under consideration, developers should be able to answer:

Connection pathway: What is the realistic timeline to energization? Is the project relying on grid reinforcement that may never happen, or on early-connection measures with charging restrictions? What are those restrictions, and how do they affect revenue potential?
Site history: How many times has this site or interconnection right changed hands? Why is the current seller selling? What due diligence did previous owners conduct?
Market participation strategy: Which specific revenue streams is the project targeting? What aggregator relationships are in place or planned? What are the licensing and operational requirements for each revenue stream?
Competitive positioning: What other BESS capacity is planned in the same interconnection zone? How will the project differentiate if local markets become saturated?
Policy exposure: How does the project perform if market rules change? If interconnection governance tightens? If curtailment patterns shift?
Community and permitting: Has the site secured all necessary local approvals? Is there documented community engagement, or is opposition likely to emerge?

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The Bottom Line

Professor Takahashi is right that Japan needs to treat BESS as strategic infrastructure, not a speculative asset class. The 7th Strategic Energy Plan, recently revised in early FY2025, acknowledges this direction, but translating policy vision into regulatory frameworks and market mechanisms will take time.

For developers making decisions today, the structural case for BESS in Japan is clear. The path from that structural case to a bankable, operational project is not. The developers who will succeed are those who treat Japan’s complexity as a feature, not a bug—understanding that the same barriers that frustrate underprepared entrants can protect well-positioned projects from commodity competition.

The gold rush is real. So are the claims that don’t pan out.

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Shulman Advisory provides market intelligence, regulatory monitoring, and strategic advisory services for international energy companies navigating Japan’s electricity sector. Our team tracks policy developments, interconnection reform, and market design changes as they happen—translating complexity into actionable guidance for developers, investors, and corporate offtakers.

For more information, contact us at info@shulman-advisory.com