Unit price of non-residential solar power dropping to 20 yen/kWh or less in fiscal 2018?

The sales unit price of residential solar power in fiscal 2018 is set at 26 yen/kWh (28 yen/kWh in regions where installation of output control equipment is compulsory). Bidding will take place twice in 2018. Taking into consideration the sluggish result of the bidding (first) in fiscal 2017, discussions are currently in progress in regard to possible changes made to the bidding system targeting extra-high-voltage projects, including reduction of the volume set for the second bid from the originally planned 500MW to 250MW, permission to appropriate the deposit to the next bidding and non-disclosure of the upper limit price.

As for non-residential solar power facilities excluding extra-high-voltage projects, it was announced that the capacity factor used to calculate the sales unit price will be increased from 15.1% set for fiscal 2017 to 17.1% at the FIT Calculation Committee held in December. It seems inevitable that the sales unit price will be lowered from 21 yen/kWh for fiscal 2017 to 20 yen/kWh or less, and it is estimated that the price will drop to around 19 yen/kWh. The capacity factor was increased responding to the increase in the overload ratio of 1MW and larger projects to 1.3 times (Fig. 10).

Fig. 10: Transition in overload ratio (panel output ÷ Grid output) (source: METI)

When the sales unit price drops to this level, lowering of electrical charges by peak cut through self-consumption will become active in case the load factor of the demand load is low in facilities that are installed on consumer sites or adjacent sites. Business models that utilize subsidies provided by organizations related to the Ministry of the Environment (MOE) without using the FIT scheme will also be searched for actively.

The result of the second bidding, which is the first bidding in fiscal 2018 (applications are accepted until August 24), is attracting attention in regard to extra-high-voltage projects. It is expected that "failure to attract sufficient applications" will be avoided for the second bidding, based on the fact that the impact of the last-minute applications in fiscal 2016 will decrease and projects worth 347MW that were qualified to participate in the first bidding "left halfway through the process" due to cancellation or not paying the deposit.

Attention will be focused on the level of decline in the winning price following the change of the upper limit price to non-disclosure. It is likely that the 17 yen/kWh level will be the battle line for winning the bid based on the lowest bidding price of 17.2 yen/kWh for the first bid and the expected sales unit price of around 19 yen/kWh for non-residential solar power plants smaller than 2MW in fiscal 2018.