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Solar Industry 'Quakes' at Recommended 10 Percent Cut in Japan's FIT

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March 13, 2013

Solar Industry 'Quakes' at Recommended 10 Percent Cut in Japan's FIT

By Cheryl Kaften
TMCnet Contributor


Japan has been wending its way toward the adoption of renewable energy “in FITs and starts” since an 8.9 magnitude earthquake and a resulting tsunami hit the nation in March 2011causing widespread deaths and damage, including meltdowns at three reactors in the Fukushima Daiichi Nuclear Power Plant complex.

Last July, the nation approved restarting two nuclear reactors despite mass public opposition at the same time it unveiled pricing for its landmark renewable energy feed-in tariff (FIT), which was believed to be the highest worldwide. It was also expected to trigger a boom in Japanese renewable energy business.

Now, according to The Japan Times, a committee of experts has recommended to the Ministry of Economy, Trade and Industry (METI) that the price paid for solar power under the FIT should be cut by as much as 10 percent. The payment for wind energy would remain unchanged.

Specifically, the committee recommended that the feed-in tariff guaranteeing above-market prices for solar energy should be cut to ¥37.8 (US$0.40) per kWh for 20 years for applications after April 1. The current rate is ¥42 (US$0.44).

The cost of solar systems has dropped so drastically that the experts say incentives can be reduced without discouraging development plans. Indeed, the average system cost for nonresidential solar has fallen 14 percent to ¥280,000 (US$2,912) per kilowatt since October 2012, compared with the amount used by the committee to set the solar tariff for the year ending March 31, according to the ministry.

The recommendation would require government endorsement before becoming policy. Even at the reduced rates, Japan’s support for solar is about three times the incentives offered in Germany and China, two countries that are among the biggest markets for the technology. Japan is likely to be one of the top three markets this year, according to data compiled by Bloomberg (News - Alert).

“The solar market is expanding, and we don’t think the proposed tariff would change the trend much,” Hisao Kayaoka, secretary general of the Japan Photovolatic Energy Association, said in a statement. “The proposed tariff will allow for continued growth in the market.

The association’s member companies include Sharp Corp., Mitsubishi (News - Alert) Electric Corp., Suntech Power Holdings Co., Kyocera Corp., and Solar Frontier K.K, all manufacturers of solar panels. The utility Kansai Electric Power Co. also is a member.

New rates for projects bigger than 10 kW “remain attractive enough” since they will provide a six percent rate of return for developers, said Yugo Nakamura, an industry analyst at Bloomberg New Energy Finance in Tokyo. “We would, though, see slower applications in the second quarter 2013,” he added.

Edited by Jamie Epstein

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