Daiwa House: 5%+ IRR Possible at FIT Tariff of 21-22 Yen (2)

2016/11/21 11:03
Kenji Kaneko, Nikkei BP CleanTech Institute
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Continued from Daiwa House: 5%+ IRR Possible at FIT Tariff of 21-22 Yen (1)

Strength in land development knowhow

Q: You said, "It is likely that construction of a 1MW power generation facility will be completed in one month if the land is already developed." However, projects that require plenty of time for land development have actually been increasing, such as construction of facilities by developing forests or on former sites of golf courses.

Managing Director Hama of Daiwa House Industry (Source: Nikkei BP)

Hama: It is estimated that development projects that require large-scale land development will increase in the future. But this trend is also advantageous to Daiwa House. EPC companies affiliated with construction companies generally do not have civil engineering specialists, and they often entrust external companies with land development.

Daiwa House gives the strong impression of being a house construction company, but the company started the development of housing complexes shortly after its foundation. Therefore, the company has an "urban development division," and many civil engineering specialists work in this division. Actually, members of the urban development division are also included in working on the overall design of our mega solar EPC projects.

It is sometimes said that "land development cost depends on the labor cost for on-site workers, and the cost reduction margin is limited," but this is not true. The number of panels that can be installed, or the power generation capacity, is decided by the land utilization plan. An optimum land development plan is decided by simulating land development costs of various patterns and capacity increase by each development pattern. The feasibility is significantly affected by the quality of the plan.

Q: I understand that the feasibility is improved by the overall design and construction knowhow, including in land development.

Hama: There are many companies that can "handle everything from engineering, construction and O&M inside the company," but I think only a few solar power EPC companies have civil engineering and land development specialists inside the company.

The target of "5% or more IRR" will be realized by making efforts with these multidimensional elements one by one, and the tariff is only one of these elements, as I explained earlier. Even if the tariff drops to ¥21-22/kWh in the future, we think it will not be impossible to realize "5% or higher IRR" depending on the conditions.