Common Reasons for Abandoning Development

Grid-scale battery connection review applications reached approximately 95GW in FY2024. However, cases where development is abandoned after receiving the connection review response are far from rare. Typical reasons include:

Construction cost contributions exceeded expectations. The construction cost contribution indicated in the connection review response exceeded 1 billion or 2 billion yen, making the project economics unworkable. Costs can come in at several times the estimate, particularly when new tower construction is required.

Unable to secure financing. Grid-scale battery projects require total investment of tens of billions to over 100 billion yen. Structuring project finance requires sophisticated negotiations with financial institutions, and many companies lack this experience internally.

LDA competition is too intense. The battery competition ratio in the 2nd LDA was approximately 5:1 — submit five projects and win only one. Without winning, there is no 20-year fixed revenue, and the entire business plan collapses.

Change in corporate strategy. A management decision to exit the battery business or concentrate resources on other ventures. Some companies conclude that the solar business offers more predictable returns.

Regardless of the reason, connection review responses have expiration dates. If the construction application is not filed within a certain period from the response date, the response lapses. Simply leaving it idle means the value of your rights is heading toward zero.

Comparing the 3 Options

Option 1

Develop the Project Yourself

Utilize the connection review response to proceed with EPC selection, subsidy applications, LDA bidding, and project finance structuring to build and operate the battery facility in-house. This option offers the highest returns but requires resources on an entirely different scale.

Advantage: Capture 100% of long-term revenue from the project (20-year fixed income under LDA)
Challenge: Requires financing of 5-15 billion yen in total investment, specialized personnel, and a 2-4 year development timeline
Option 2

Sell the Development Rights

Transfer the development rights (business rights) tied to the connection review response to a company operating in the battery storage business. Land transactions are handled through a separate direct contract, with consideration received for the rights portion.

While the returns are less than self-development over the long term, in most cases the consideration received significantly exceeds the development costs invested (connection review fees, land survey costs, etc.). Projects with low construction cost contributions are particularly valuable to buyers, and command higher sale prices.

Advantage: Quick monetization. No business risk exposure. Recover more than invested development costs
Note: Name change procedures take several months. Buyer creditworthiness verification required
Option 3

Withdraw the Connection Review Application

File a withdrawal notice with the transmission and distribution operator. The costs invested in the connection review (several hundred thousand to several million yen) and the time spent cannot be recovered.

Advantage: Simplest procedure. Zero ongoing management costs
Disadvantage: All invested costs become a total loss. Market value of the rights drops to zero

The Practicalities of Option 2: Selling Development Rights

If you choose to sell the development rights, the process generally follows these steps:

Finding a buyer. Companies operating in the battery storage space include listed major energy companies, general trading houses, infrastructure funds, and developers. While it is possible to find a buyer independently, whether you connect with a buyer who can properly evaluate the technical value of your project will significantly affect the sale price.

Rights valuation and price negotiation. The confirmed construction cost contribution amount, distance from the grid connection point, grid configuration, land regulations, and other factors are comprehensively evaluated to determine the sale price. Whether a technically knowledgeable party is involved in the evaluation process makes a substantial difference in the consideration the seller receives.

Sale agreement and name change. A sale agreement for the rights portion is executed, and a name change application is filed with the transmission and distribution operator. The review period for name changes varies by utility but is typically 3-6 months. Land transactions are generally contracted directly between seller and buyer.

The rights transfer process differs for each project. Individual judgment is required based on the content of the connection review response, the operational rules of the transmission and distribution operator, and the land ownership structure.

Why "Doing Nothing" Is the Worst Choice

Connection review responses have expiration dates, and once expired, the rights lapse. Additionally, available grid capacity may be opened to other operators, meaning the relative value of the rights decreases the longer you wait.

Furthermore, with connection review applications surging to 95GW in FY2024, transmission operators are expected to tighten their review processes going forward, making it increasingly difficult to obtain new connection review responses. In other words, responses already in hand are likely to become even more scarce and valuable over time.

Whether you decide to develop or sell, making the decision sooner is better. At the very least, letting the response expire through inaction is the worst possible choice.

Related Columns

Is Your Land Valuable as a Battery Storage Site? — 5 Assessment Criteria Battery Development Rights Transfer — Procedures and Key Considerations What is the Long-Duration Auction (LDA)? — How 20-Year Fixed Revenue Works

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