Japan Cuts Feed-in Tariff for Solar Electricity

2014/03/11 19:31
Kenji Kaneko, Nikkei BP CleanTech Institute

Japan's Ministry of Economy, Trade and Industry (METI) had a committee meeting to calculate procurement cost, etc of solar power generation March 7, 2014.

In the meeting, a new tariff for the period beginning from April 2014 was announced as a chairperson's proposal. According to the proposal, the tariff for 10kW or higher-capacity solar power generation facilities will be lowered from ¥36 per 1kWh of the current fiscal year to ¥32 (approx US$0.3, excluding tax) per 1kWh, or ¥34.56 including tax.

Within March 2014, Toshimitsu Motegi, the minister of economy, trade and industry, is expected to officially approve the new tariff.

In regard to the tariff for fiscal 2014, some people claimed that the costs of components such as solar panels are no longer lowering because of the weak yen, etc. In fact, according to the results of a research conducted by METI, the cost of a 1MW or higher-capacity system was ¥305,000 per 1kW in the period from October to December 2013, an increase from ¥280,000 per 1kW in the period from October to December 2012.

However, according to the latest data obtained through the "collection of reports," the cost of a 1MW or higher-capacity system decreased from ¥316,000 to 275,000 in the comparison of the two periods. And the committee adopted this figure.

Also, based on the results of verification projects that had been carried out before the implementation of the feed-in tariff (FIT) policy, METI has been considering that the utilization rate of solar power generation facilities is 12%. This time, however, based on the data of facilities that started operation after the implementation of the FIT policy, METI found that the utilization rate increased to 13.6% on average and employed a utilization rate of 13% for determining the tariff for fiscal 2014.

(Continue to the next page)

In addition to the lower prices of systems and the improvement in utilization rate, METI announced that annual operating and maintenance costs decreased by ¥1,000 per 1kW. Combining such figures, METI concluded that the current profitability of solar power generation projects, or an IRR (internal rate of return) of 6%, can be ensured even if the tariff is lowered to ¥32. The chairperson's proposal is also based on such observations.

The lowered tariff is a negative factor for mega-solar (large-scale solar) power plant businesses. But the majority of concerned parties said that they expected the tariff of ¥32 per 1kWh excluding tax. One of them kiddingly said, "Considering the past tariffs, METI seems to like even numbers. So, it will be ¥34 or 32 excluding tax. Since ¥34 is unlikely, it will be ¥32."

As for foundations and mounting systems, whose costs can reportedly be further cut, new products are being developed in consideration of the tariff of ¥32. Moreover, there is a growing trend of checking foreign-made solar cells and panels, whose qualities and durabilities have been doubted, with original methods. In other words, most mega-solar businesses are operating on the premise of the tariff of ¥32.