Outlook for Solar PV Market 2019 - Market Scale, Policy, Finance (1)
Large-scale projects face crucial time, post-FIT business will take off
METI expressed determination in 2018
The "strong determination" of Japan's Ministry of Economy, Trade and Industry (METI) was put into practice in 2018, and the year was a turning point for the operation of the feed-in tariff (FIT) scheme by the domestic solar power generation industry.
METI set the upper limit price for bids in the first half of fiscal 2018 at 15.50 yen/kWh. As a result, none of the applicants won the bids. Based on the new policy for "projects that have yet to be put into practice for a long period," METI reduced the purchase price of power from projects that were certified within three years after the start of the FIT scheme and have yet to start construction.
These policies betrayed the implicit "trusting relationship" that existed between METI and solar power plant developers.
The price of "15.50 yen/kWh," which was set behind closed doors for bids in the first half of the year, was a "sharp decline" compared with the past reduction in purchase price calculation setting, which remained at 3 to 4 yen at a time from the start of the FIT scheme. Developers of large projects with an output of 2MW or more, which were the targets of the bids, were required to reduce the price by more than 5.5 yen/kWh, which was a sharp decline from 21 yen/kWh set for fiscal 2017, to 15.5 yen/kWh or less.
The purchase price will be reduced if necessary procedures are not completed by the designated deadline, in respect to projects that remain idle for a long period. The purchase prices decided by the ordinance will be changed retrospectively, which was beyond expectations based on the principle of non-retroactivity of laws. METI dared to use "prohibited techniques" with potential lawsuit risks and a feeling of distrust with the FIT scheme.
In the background of the "determination" of METI is the impatience of the ministry in charge of the energy policy, which is strongly criticized in industrial circles for the high electrical charge due to the FIT surcharge and contributes to the fact that solar power generation costs in Japan are still higher compared with other countries throughout the world.
On the other hand, the amount of solar power introduced in the energy mix (ideal power supply configuration in 2030) set by the government, which is 64GW (7% in composition ratio), is expected to be achieved following the accumulation of certified solar power projects. The "determination" indicated by METI in 2018 is a kind of message from the ministry that "solar power projects that are too high in cost from a global viewpoint will not be certified anymore."
The determination resulted in the policies to expand the targets of the bidding system, tightening of the framework for inviting bidders and setting of the upper limit price.
In forecasting the trend of the solar power market in and after 2019, "changes in mindset" of persons in charge of the solar power generation policies need to be remembered.