Japan's Ministry of Economy, Trade and Industry (METI) has angered investors and operators of solar power projects in the country with its proposal to cut subsidies for projects whose permits were granted under feed-in-tariffs (FiTs) between 2012 and 2014, if they do not submit applications by March 2019 to connect to the grid, reports Reuters.
It added that public comments for the proposal were due by Wednesday November 21, 2018.
Minimum price guarantees that the government assured under the 2012 launched FiT regime are between JPY 32 to JPY 40 ($0.28 to 0.36) per kWh. If companies miss the deadline, they will have to settle with FiTs of JPY 21 ($0.19) per kWh, as per the report.
METI is acting out of concern for projects approved but not yet connected to the grid, as 23% of total capacity approved in fiscal year 2012, 49% approved in 2013 and 59% approved in 2014 is yet to start operations. According to Reuters, it also wants to reduce the burden of FIT subsidies that ultimately passes on to end consumers. These subsidy cuts could adversely impact 23.5 GW of solar power capacity which adds up to 44% of the total approved capacity since 2012.
Companies are obviously unhappy with this state of affairs and may consider lawsuits against the government for breach of earlier contract, Reuters reported conveying the sentiment of various stakeholders it spoke to.
The Japan Photovoltaic Energy Association (JPEA) has also raised concerns about METI's proposals, saying such a step will question the stability and reliability of the FIT system. It has created panic in the industry, according to JPEA, which said that some business operators have 'abruptly cancelled construction work'. The proposals do not factor in the time taken to get environmental clearances and other approvals in place for the projects, it said.
In a survey conducted by JPEA, between November 2 and November 14, 2018, involving 29 companies and 113 PV projects representing JPY 200 billion ($1.77 billion) worth of investments, it figured that if METI's proposal is implemented in its present form, about 80% of them will not be able to operate.
The association suggests extending the deadline for submission of grid interconnection construction start to March 2020. According to JPEA, the current proposal targets late January 2019.
However, an October 2018 report by Nikkei Asian Review said the government wants to make way for new players in the industry by pushing out companies with no concrete plans to construct and start generating solar power. "Under the new rules, any solar power producer that requests a connection to power transmission lines in April 2019 or beyond will be able to sell electricity only at rates from two years prior," the article reads.
Japan has a total installed power capacity of around 250 GW, and solar contributes 44 GW of the total, according to Reuters.
Fitch Solutions Macro Research said, the Japanese solar sector will undergo a slow down as the country transitions from FiT to an auction process. It also stated the government has announced FiT cuts for smaller-scale PV projects for households and companies by mid 2020s, that will set the course for a slowdown in the sector (see 31 GW PV Forecast For Japan From 2018-27).
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