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Prospects for Japanese PV Market in 2018 (1)

Trends of market scale, policy, technology, finance

2018/02/01 19:14
Kenji Kaneko, editor in chief, Mega Solar Business
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Market scale will remain at about 10GW for the coming three to four years

The year 2017 was a notable year for the solar power generation market in Japan. The revised reed-in tariff (FIT) scheme was enforced in 2017 and the certification was changed from "equipment certification" to "project plan certification." Following the revision, stagnant projects with no possibility of operation were swept away, and we expect that it will become easier to predict the market scale in 2018.

However, the paperwork for shifting to the new certification system has been delayed and the total capacity of projects that obtained the business plan certification, among the certified solar power capacity, which was approximately 84.5GW (as of the end of March 2017), has yet to be announced. So, 2018, when the capacity to be shifted to the new system will be decided, should become a notable year.

The Ministry of Economy, Trade and Industry (METI) announced that the "projects expected to expire" following the shift to the new system will be about 27GW for all renewable energies in April 2017. The figure is based on the projects that had not concluded a connection contract as of the end of March 2017, which was confirmed by hearings with power companies. If it is assumed that all the projects that are "expected to expire" are solar power projects, the total capacity of solar power projects shifted to the new system will be 57.5GW, deducting 27 from 84.5.

However, projects subject to bidding for grid connection and projects that obtained certification after the end of June 2016 are excluded from the predicted figure, because a grace period of nine months is set for these projects and other renewable energies such as biomass energy could be included in the projects believed to be expiring. It is possible that the capacity of solar power projects that are eventually shifted to the new certification system will be higher than 57.5GW.

Inability to pay the contribution in aid of construction, which is required for signing a connection contract with a power company, is the typical cause of the loss of certification following the shift to the new system.

However, "many of the projects that obtained the certificate in the early period of the FIT scheme, when the tariff was high, and remained stagnant were shifted to the new system by obtaining a short-term emergency loan to sign the connection contract," according to sources, and some people say that the decrease due to the aforementioned inability to pay may be lower than estimated.

If this is the case, it is possible that the capacity of solar power projects shifted to the new system exceeds 60GW and projects with more than a total capacity of 30GW, which is obtained by deducting 33.5GW, the total capacity of projects that are already in operation (as of the end of March 2017), will be realized in the solar power equipment market in the coming three years or so.

Many of the projects that have been shifted to the new system are exempted from the "3-year limit before start of operation," a rule set for the revised FIT Scheme, but some of the companies change solar panels in exchange for application of the 3-year-limit rule, and it is likely that a considerable number of the projects are aiming for completion within three years.

Based on the above, the scale of the domestic solar power equipment market will remain at about 10GW per year for the period from 2018 to around 2021. The scale is equivalent to or larger than the market scale for the past several years. According to the prediction of the renewable energy market by Fuji Keizai Co Ltd, the solar power market is expected to maintain a high level for the coming three years (Fig. 1).

Fig. 1: The domestic market of FIT-related power generation systems predicted by Fuji Keizai Co Ltd (source: Fuji Keizai Management)