Japan's Solar Trends to Watch For in 2014
There will be three new trends in the mega-solar (large-scale solar) power plant business in 2014. They are "financial scheme," "monitoring system" and "locally produced and consumed energy."
In 2014, mega-solar plants with high outputs are scheduled to start operations one after the other in Japan. As of December 2013, the largest mega-solar plant in Japan is "Kagoshima Nanatsujima Mega-Solar Power Plant" (about 70MW) in Kagoshima City, followed by "Nikki Mirai Solar" (26.5MW) in Oita City.
However, "Softbank Tottori Yonago Solar Park" (42.9MW) will start operations in Yonago City, Tottori Prefecture, in February 2014, surpassing Nikki Mirai Solar and becoming the second largest solar plant in Japan. Also, in April 2014, "Oita Solar Power" (81.5MW) will begin operation in Oita City, becoming the largest solar power plant in Japan. Moreover, mega-solar plants with output powers higher than 100MW will start power generation in 2015 in Hokkaido, Aomori Prefecture, etc.
Many of those mega-solar plants, whose outputs range from several tens of megawatts to over 100MW, will be built on former industrial sites that have been unused. Because those sites have already been developed and are located near special high voltage lines, they are suited for the construction of mega-solar plant. While ceremonies to celebrate the completions of mega-solar plants are spectacularly performed, the number of such suitable sites for new construction is decreasing.
In and after 2014, the tariff in the feed-in tariff (FIT) scheme will decrease, and the development of lower-output mega-solar plants, whose construction costs per kilowatt are relatively high, will become the mainstream. As a result, there will be an increasing pressure to further cut the prices of solar power generation systems. As the IRR (internal rate of return) of solar projects lowers, more foreign-made solar panels and peripheral equipment will be employed, and the business risks of mega-solar projects will increase.
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Thus far, the constructions of mega-solar plants have been financed by financial institutions through project finance in addition to cash-rich major companies. Not only megabanks but major local banks started to deal with project finance. But as the business risks of mega-solar projects increase, construction costs are expected to be financed more by general investors and citizens through financial schemes such as funds and the securitization of the part funded through project finance.
At the same time, in terms of technology, there will be an increasing need for meticulous "monitoring systems" to detect the risks of mega-solar plants, whose business risks are increasing, and deal with them. And their prices will be expected to decrease. Systems that monitor each string (direct-current circuit) of solar panels are increasingly being introduced. And there has already been a mega-solar plant equipped with a system that monitors each panel in Japan (See related article).
Another trend in the mega-solar business is the integration of "locally produced and consumed energy," which many local governments claim, and mega-solar plants. For example, the government of Nakanojo, Gunma Prefecture, established a local PPS (power producer and supplier), planning to sell electricity generated at a mega-solar plant run by the government. And Ohisama Energy Fund (Iida City, Nagano Prefecture) started to build mega-solar plants (See related article 2). Such activities might take place in other regions.
However, to sell electricity generated by a mega-solar plant, whose output fluctuates, it is necessary to comply with the 30-minute balancing rule. Therefore, to help a local PPS achieve the balancing of supply and demand including a mega-solar plant, new services and inter-corporate efforts are appearing.
On the other hand, in foreign countries including the US, a considerable number of mega-solar plants are being introduced in the aim of using generated electricity in house to reduce electricity cost on the premise that they will be used for 35 to 40 years. In view of the reformation of domestic power systems and the post FIT era, new business models will begin to be developed.