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Survey: IRR of Solar Project Is 4.75% on Average

2017/02/17 17:45
Kenji Kaneko, Nikkei BP CleanTech Institute
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CBRE Inc (Chiyoda-ku, Tokyo), a major business-use real estate service provider, announced Feb 15, 2017, that it has started a survey on the IRR (internal rate of return) of solar power generation.

According to the results of the survey, the IRR of solar power generation project was 4.75% on average.

CBRE provides the results of a survey on the yield of real-estate investment as "Japan Real Estate Investment" every quarter. Thus far, the company has been aggregating data for each field (office building, apartment, commercial facility, hotel and warehouse). But it added "solar power generation" to the January 2017 issue (for the fourth quarter of 2016).

According to the results of the latest survey, which is the company's first survey on solar power generation, the lowest, highest and average project IRRs were 4.25%, 5.25% and 4.75%, respectively. The survey was conducted on the assumption that the FIT tariff is ¥32/kWh or higher and the total output of solar panels is 1-2MW. And it is targeted at existing facilities.

Questionnaires were sent to 194 people (178 companies), of which 142 people replied (139 companies). The response rate was 73.2% (78.1% in terms of the number of companies).

"Investment in existing facilities is increasing in the aim of ensuring a profit and expanding operation scale as the purchasing price is lowering," according to CBRE. "The yield will start to lower as the number of trades of existing facilities increases."

When CBRE asked real-estate investors about the situation of investment in solar power generation projects for the latest survey, 23% of them said, either "We have already invested in solar power generation" or "We are considering investing in solar power generation."

CBRE has been providing assessment/consultation services for solar power generation since 2013. It expects to increase the transparency of the investment market for solar power generation and activate the market by conducting a survey on expected yield and publishing the results every quarter.