Solar Revenue From Prefecture-financed Plant Expected to Benefit Locals

Aiming to return 900 million yen in revenue to local community

2013/10/29 11:47
Kenji Kaneko, Nikkei BP CleanTech Institute

Shobara Solar Power Plant in Shobara City, Hiroshima Prefecture, is Japan’s first large-scale solar power plant to use a limited liability partnership (LLP). The project is financed by Hiroshima Prefectural Government and the Chugoku Electric Power Group. With ¥900 million (approx US$9.22 million) expected in revenue over the next 20 years, the plant will remain unconsolidated, and its revenue will be used for energy-saving and other activities. In consideration of the climate in the region, the plant selected solar panel and PV inverter models focusing on their quality and durability.

Shobara City in the northwest of Hiroshima Prefecture has several towns scattered along the rivers surrounded by the Chugoku Mountains. Drive for about 10 minutes by car from the municipal office, leave the main road up the hill leading to an industrial site, and you will see the solar panels neatly arrayed. The completion ceremony of the 1,960kW (1.96MW) Shobara Solar Power Plant took place Oct 10, 2013. Hiroshima Prefecture originally developed the site for industrial use, but it has been vacant. The entire view of the blue solar power plant can be seen from the top of the trail behind the site, with the green woody ridge line in the background.

Japan’s 1st LLP-based solar power plant

"We are expecting the local community to make the most of this plant as a new base for environmental studies where children can consider the future environment and energy," said Hidehiko Yuzaki, governor of Hiroshima Prefecture, offering his felicitations at the opening ceremony. Besides the governor, the mayor of Shobara City and city council members were invited. In fact, Governor Yuzaki participated in the completion ceremony as a member of the "host," not a guest.

This is because Hiroshima Prefectural Government invested in Shobara Solar Power Plant and became a power producer itself. The plant is primarily run by the "Hiroshima Limited Liability Partnership (LLP) for Promotion of Renewable Energy," an LLC financed by Hiroshima Prefecture, etc. This is Japan’s first large-scale solar power plant that is operated by an LLP financed by a local government.

The LLP is planning to develop solar power plants with a total of 6.6MW at three locations in Hiroshima Prefecture, including the site in Shobara City. Considering these as first-term constructions, the prefectural government aims for a larger 10MW solar power project as the second-term construction in the future.

"If we advanced the solar power plant project for leasing prefectural property to private companies, the proceeds from electricity sales would belong to the private companies and prefectural citizens would be faced with rising electric bills," said Seiji Okada, chief of Renewable Energy Promotion, Environmental Policy Division, Prefectural Environment Department, Hiroshima Prefectural Government. "We decided on an LLP, seeking a way for Hiroshima Prefecture to run the business and return the proceeds to the people of Hiroshima Prefecture."

(Continue to the next page)

LLPs were formulated primarily by the Ministry of Economy, Trade and Industry (METI) in 2005 with the aim of stimulating joint ventures by enterprises and special human resources. LLPs can be characterized, for example, by the sponsor’s responsibility, which is limited to the amount of contribution, and the proportion of revenue and correct distribution, which is not bound by the amount of contribution.

Many large-scale solar power plants are run by special purpose companies (SPC). But both revenue at the SPC and dividends to the sponsors are taxed at such stock corporations as SPCs. In an LLP, on the other hand, revenue at the LLP is not taxed, but the sponsors are.

"The LLP method has a number of merits, allowing us to save the taxation on the revenue from electricity sales and return more to the prefectural citizens," Okada said.

Hiroshima Prefecture and the Chugoku Electric Power Group provided ¥540 million and 280 million, respectively, for the 6.6MW first-term solar power plants of the Hiroshima LLP for Promotion of Renewable Energy. Most of the Chugoku Electric Power Group’s investment was provided by Energia Solution & Service (ESS, Hiroshima City). The LLP is also planning to receive a loan of about ¥1.3 billion under project finance, by establishing a syndicated loan from Hiroshima Bank and The Momiji Bank. This is reportedly the first project finance to an LLP.

(Continue to the next page)

Total of 900 million yen returns to local community expected for next 20 years

Returns will be distributed as follows: 76.8% to Hiroshima Prefecture and the remaining 23.2% to ESS. The dividend to Hiroshima Prefecture is larger than its capital contribution in the LLP. Hiroshima Prefecture is planning to return the expected revenue of about ¥900 million from the 6.6MW solar power plants to the local community over the next 20 years. The returns would be separated from the general accounting of the prefecture and independently spent for energy-saving and other activities of prefectural citizens.

"As more solar power plants are built under the feed-in tariff (FIT) scheme, the power rate would rise due to the government-imposed charge," Okada said. "Our goal is to keep the electric bill from rising by facilitating our energy-saving efforts using returns from the solar power plants."

Nevertheless, the solar power plants have to continue to generate stable revenues for 20 years to realize the goal of returning revenues to the local community. The fact is, however, at the current time, there are no experts or engineers for large-scale solar power plants in the prefecture, which has taken the initiative in the power generation business. The poorer the related knowledge is, the larger the business risk grows.

In a bid to lower such risk, Hiroshima Prefecture requested the ESS of the Chugoku Electric Power Group to participate in financing the LLP. The ESS is Shobara Solar Power Plant’s EPC (engineering, procurement and construction) contractor that acts as a solar power generation system and electric facilities expert and a member of the electric power plant operator at the same time.

(Continue to the next page)

Proprietary "Earth Plate" development

Shobara Solar Power Plant is located in Shobara City in the Chugoku Mountains, where the temperature often goes below 0°C in winter and the gap is large between cold and warm periods. The area also has a lot of snow, with even 1m of snow recorded in the past. In light of such weather conditions, along with the expected returns to the local community, the plant gave more consideration to long-term operational stability compared with other general solar power plants located in flat areas run by private enterprises.

Its single-crystal silicon solar panels are manufactured by Mitsubishi Electric and feature enhanced weather resistance. Mitsubishi Electric listed the output volume by panel, inspecting every panel before shipment, and removed the panels that could not demonstrate the rated output.

The panels were tilted at 20° on the mounting system so snow would slip off. The lower side of the panel and the ground are spaced 85cm apart so the snow slips from the panel and does not pile up higher than the panel. The mounting systems are positioned about 2m from each other for the purposes of keeping the panels from shading other panels and boosting working efficiency by leaving space for vehicles to pass.

The adopted PV inverters are a product of Toshiba Mitsubishi-Electric Industrial Systems (TMEIC). Its maximum efficiency reaches 97.7%. The efficiency of PV inverters becomes low in some models when the amount of irradiation is small due to clouds and other factors. But TMEIC’s PV inverters maintain high efficiency even when there is not much sun.

Meanwhile, cost-cutting efforts can also be seen everywhere throughout the plant. Each array (a group connected via the same wiring) consisting of 16 solar panels is laid on a mounting system with only four posts. The posts are held rigidly with screw pickets screwed 2m into the ground.

Panels are usually connected with each other by earth cables to release electricity. But Shobara Solar Power Plant succeeded in lowering costs and problems soldering earth cables by developing a proprietary hardware dubbed "Earth Plate" and inserting this between the mounting system and the panels at their joints to ensure power distribution to the mounting system.