Japan Slashes FIT For Small-Scale Solar

Non-residential small-scale commercial solar power plants ranging from 10 kW to 500 kW will see its solar feed-in-tariff (FIT) cut by 22% to JPY 14 ($0.13) per kWh in April, down from the previous JPY 18 ($0.17) per kWh. This is the largest decrease since the start of the country’s FIT policy in 2012, according to global market intelligence and consulting firm Enerdata.

These changes will be implemented at the recommendations of a special committee formed by the nation’s Ministry of Economy, Trade and Industry (METI). The government wants to ‘actualize cost and facility utilization rates’ which is driving this change.

Enerdata said the government has also reviewed long term cost targets for solar projects and aims to achieve an average power generation cost of JPY 7 ($0.065) per kWh for projects that will start operating in 2025, which is equivalent to setting a FIT of JPY 8.5 ($0.079) per kWh in 2022, basis current FIT calculation criteria.

Japanese government’s FIT policy has had many developers announcing projects and securing the rates, but a large number of them are yet to see the light of the day. The domestic average realization rate for approved projects is 20% for utility-scale solar systems owing to the ‘insecurity about the future of the FIT system’, according to Enerdata.

In February 2018, the firm said the FIT rate for non-residential solar power plants as of 10 kW capacity will be lowered by 14% from JPY 21 ($0.19) per kWh to JPY 18 ($0.17) per kWh for systems that are certified in and after April 2018 for a 20-year period.

Back then, Enerdata reported, “Feed-in tariffs for residential PV systems (below 10 kW) were set in 2017 for the 2017-2019 period and will remain unchanged, at JPY 26 ($0.24) per kWh for 2018 and JPY 24 ($0.22) per kWh in 2019 in regions where output control equipment is not required to be installed; they are set at JPY 28 ($0.26) per kWh for 2018 and JPY 26 ($0.24) per kWh for 2019 in regions where the installation of output control equipment is required.”

Like several other mature solar markets in the world, Japan is now shifting to an auction-based power procurement mechanism and has conducted 2 rounds already in 2017 and 2018, awarding 140 MW and 197 MW, respectively. However, the prices achieved were not competitive (see High Lowest Tariff In Japan’s First PV Auction).

In November 2018, Reuters reported that proposed subsidy cuts for solar power projects in Japan under its FiT regime could threaten 23.5 GW PV in the country (see Reuters: 23.5 GW PV At Risk In Japan). The government then announced a FIT level of JPY 21 ($0.19) per kWh for projects of over 2 MW, approved between 2012 and 2014, with effect from September 2019.