Setting Prices for FIT Solar Projects in Japan

Dec 16 2013 Published by under Japanese energy law

The Japanese publication “Tech-On” is doing a series of articles about megasolar projects. Installment seven is an interview with Head of Renewable Energy Department Murakami at the Japanese Ministry of Economy, Trade and Industry . Thanks to this tweet by Hiromichi Matsubara for the link.

One thing we learn from this interview is that there have been already megasolar projects totaling over 20 GW approved by the Ministry. This is far exceeding expectations.

The problem on the other hand is that the Japanese system sets the FIT price for a project at the time of the Ministry approval. Only about 20 percent of those 20 GW approved have already started actually producing electricity. And there are many projects out there that have gotten approval at the high rate of 42 yen per kWh and are only now starting to actually build their solar parks at already lowered costs.

This is different from the German system, where everyone gets the feed-in tariff in place at the time they actually start delivering. I think that approach is superior. Murakami says they are now in the process of checking all projects that are unfinished. Those that are making insufficient progress will see their approvals revoked.

This way of handling things means that projects approved at the higher feed-in tariff last year now are on the same market for solar panels and installation work as projects approved more recently at a lower tariff, which obviously distorts the competition between these two groups of solar project companies.

One could avoid these problems by just paying the rate at the completion of the project, as in the German model.

The Japanese way of handling things also leads to confusion. 20 GW of solar approved since the start of the feed-in tariff in July last year sounds very good, until you hear that only 20 percent of that is actually already built.

I was also rather surprised to learn that one utility quoted a time frame of two years for building a power line over a distance of a couple of meters. Murakami also pointed out that many of the companies building megasolar projects are lacking in basic knowledge about how grid connections work. Studying these questions some more may help avoid answers like the one quoted above.

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