Japan's Largest Mega Solar Project Launched in Oita

Funded by project finance

2013/10/04 18:37
Kenji Kaneko, Nikkei BP CleanTech Institute

Oita seaside industrial zone was once called a "model city of new industry," based primarily on the heavy chemical industry. The industrial zone is now being transformed into Japan's largest mega solar (large-scale photovoltaic power plant) park. The output from the industrial zone is expected to exceed 120MW by spring 2014, and Oita City is likely to become famous as a "model city of new energy."

The opening ceremony for the first mega solar project in the zone took place May 14, 2013. The project's name is "NISSAN Green Energy Farm in Oita." With roughly 110,000 photovoltaic panels installed across Nissan Motor Co Ltd's industrial site, which is about 35ha in size, a maximum power of 26.5MW will be generated (fig. 1). As of October 2013, this is the largest mega solar power plant operating in Japan. JGC Mirai Solar (Nishi Ward, Yokohama City), a special purpose company (SPC) fully financed and established by JGC Corporation, rents the site from Nissan and runs the power generation business.

Project Finance for Japan's 1st Mega Solar Project

After about a 30-minute drive from the city of Oita on the Rinkai Sangyo Road, no large buildings can be seen to the left after passing the chimneys of the thermal power plant. This area is reclaimed land, developed in the 1970s, but it has lain idle as some companies owning the land stopped construction projects due to changes in the economic environment. Nissan's property was one of such abandoned areas. Thus, it came to be used for a mega solar project by being leased to JGC. The solar panels inclined at a 10-degree angle are about 1m high and cannot be seen behind the vegetation alongside the road. However, once visitors go up to the observation deck inside the power plant, they can see the panels covering the land in front of them. The distant panels become like a blue horizon blending in with the blue sea.

JGC has abundant experience in engineering, procurement and construction (EPC); however, it was entering into the field of mega solar projects for the first time. So, the company tied up with experienced enterprises in each business process area such as fund-raising, EPC and maintenance concerning mega solar projects to get to the point of celebrating the opening ceremony.

Given the total project cost of about ¥8 billion, JGC decided to raise funds by the "project finance" method. Unlike corporate finance based on the enterprise's credit rating, project finance provides funds to the project itself. At that time, there was no other case where funds were raised by project finance in the Japanese mega solar market. Based on this, Mizuho Bank, which had already been engaged in project finance for mega solar projects overseas, organized a syndicate with Oita Bank, the Howa Bank and the Bank of Fukuoka and became the syndicate's managing bank. In regard to EPC, Yonden Engineering (Takamatsu City), one of the most experienced firms in photovoltaic power generation system design and installation in Japan, and JGC Plant Solutions (Konan Ward, Yokohama City) reached an agreement to form a consortium.

(Continue to the next page)

As the buying price in power generation projects is fixed for 20 years based on the feed-in tariff (FIT), revenue from electricity sales can be easily estimated; however, risk factors increase due to the long- term nature of the project. According to Koji Shiroishi, senior vice president of the project finance team, Mizuho Bank, when it comes to project finance, it becomes important to understand the hidden risks involved and make adjustments accordingly so each risk can be dealt with by the party most familiar with it. President Masashi Mizoguchi of JGC Mirai Solar said, "We combined several insurance products against disaster and other risks, making a thorough survey of insurance companies both inside and outside Japan."

Finding, Preparing for Hidden Risks

Although EPC contractors select facilities and equipment to be incorporated, banks frequently evaluate their quality and maintenance systems in terms of risk. In this project in Oita, the EPC contractor also selected the materials to be used after consulting with Mizuho Bank's person in charge. As a result, the EPC contractor used solar panels manufactured by Sharp Corp and Solar Frontier K.K. Two different manufacturers' solar cell panels were employed with the aim of reducing risk while assessing the difference in their output properties to accumulate reference data for JGC's future overseas advance in mega solar business. As for the power conditioning subsystem (PCS), the product manufactured by Toshiba Mitsubishi-Electric Industrial Systems (TMEIC) was chosen (fig. 2). The solar panels were set on Nisso Pronity's mounts (fig. 3), which were fixed onto the ground with Nippon Steel & Sumikin Engineering's screw pickets (fig. 4). The mounts are made with Nippon Steel & Sumitomo Metal's high corrosion resistant steel.

Low-priced solar panels imported from abroad have recently been adopted at some plants. However, from the beginning, President Mizoguchi intended to use Japanese panels in light of FIT's intent to have all the power users bear the photovoltaic power generation costs. Mizuho Bank was also moving in the same direction from a risk-averse perspective.

"It is unknown whether the imported panels could maintain their performance for 20 years under the unique Japanese climate conditions such as high humidity," Mizuho Bank's Shiroishi said. "Since many of the low-priced imported panels are inferior to Japanese products in terms of specifications, we consider Japanese products as our basic choice for domestic mega solar projects."

In addition, 38 TMEIC 500 kW PCSes were introduced in view of the product's history, price, maintenance and use for the next 20 years. "We greatly appreciated the manufacturer's 20-year maintenance program, among other benefits, in which maintenance service is provided regularly in accordance with the menu," President Mizoguchi said.

(Continue to the next page)

Greater-than-expected Power Generation in 1st 4 Months

The mega solar project has operated smoothly since it started about four months ago. The amount of power generation is estimated based on the weather data from the past 20 years, and a management plan is formulated at relatively low estimates. But the amount of power generation, thus far, has surpassed the expected figures, President Mizoguchi said. He attributed this to the amount of sunshine, which was more than expected, and the entire power generation system's power loss, which turned out to be less than projected.

Meanwhile, there are challenges to be tackled in accordance with future development. They are the issues concerning weeds and water drainage. Low-height weeds have already grown partly because no herbicide has been sprayed so residents living in the vicinity can feel safe. There is a plan to remove weeds on a regular basis, once the weeds grow high enough to shade the panels. However, how often weeding should be carried out is still unclear. In addition, large puddles formed in some places after rain, and a solution of some sort might be needed depending on circumstances.

What measures would be the best to secure the project's business performance while adapting to Japan's weather and climate? A diverse array of ideas is likely to come from the Oita project, which is creating Japan's leading mega solar park.