Between July 2013 and July 2015, the Japanese feed-in tariff (FIT) program
has supported the installation of over 22 GW worth of renewable energy
nationwide, according to the latest data released by the Ministry of
Economy, Industry and Trade (METI). That means, in only three years, the
nation doubled its renewable energy capacity.
Those renewable energy
projects have cumulatively generated 66,854 GWh of renewable
electricity, roughly equivalent to the annual electricity consumption of
the state of Minnesota, ranked 19th in the U.S. for clean power
generation.
The FIT program heavily skewed toward solar
Although the program supports five renewable technologies: solar photovoltaic (PV), wind, hydro (below 30 MW), geothermal and biomass, PV accounts for 96 percent of the 22 GW of installed capacity in the last 37 months.
The FIT program aided Japan in its ascent towards becoming one of the world’s biggest PV markets
in 2013 and 2014. According to METI’s data, Japan installed 8.51 GW of
PV under the FIT program. In the first seven months of this year, Japan
has already installed a little over 6 GW. If Japan manages to install 1
GW of PV every month from August to December of this year, Japan will
hit, as many PV industry analysts have predicted, 10 GW and solidify its
position at the top of the list again this year.
With the abundant amount of projects the nation has taken on this
year, does Japan have enough projects for the next year? The cumulative
installed capacity of 22 GW is nothing compared to what has been
reserved. As of July 2015, the country has 82 GW worth of FIT approved
PV projects in queue. Systems sized over 2 MW account for the largest
share of 37 percent, followed by systems between 10 kW and 50 kW in size
(31 percent) and 1 MW to 2MW (16 percent). It can lead to a prediction
of much of the growth coming from large-scale, non-residential PV
projects.
This July, METI released the nation’s energy plan for 2030. In the
energy plan, Japan’s electricity generation mix in 2030 comprises 22
percent to 24 percent of renewable. That amount can be translated to
between 92 GW and 94 GW cumulative installed capacity of renewable. Out
of that capacity, PV is assigned for a beyond-generous share of 64 GW.
The reserved capacity exceeds the planned capacity for 2030. With the
installed capacity, PV alone can easily meeet the 2030 renewable goal.
The Program is costing too much without adequate grid capacity
But when, if ever, will these projects actually be completed? And can
Japan continue to support the massive volume of renewable projects it’s
taken on? The FIT program is funded by electric ratepayers via monthly
surcharges. For the last 37 months, it incurred the cumulative payment
of 2.3 trillion yen (US$18,700 million). That amount is equivalent to
three times as much as Minnesota’s annual electricity sales. METI
projects that, this year, it will cost a total of 1.84 trillion yen or
474 yen (US$3.85) monthly per average residential customer, up from the
cost of 66 yen in 2012. Furthermore, the total cost is projected to soar
to about 4 trillion yen by 2030.
Reducing the FIT surcharges imposed on ratepayers is critical,
considering the nation in April is moving toward the fully deregulated
electric market, in which the government promises more choices and lower
prices for electric consumers. Although the FIT has helped the nation double its renewable
electricity content in three years, the progress, which was moving much
faster than the government anticipated, has come at a cost. An
overwhelming volume of PV projects developed and under development are
exceeding the grid capacity limit, leading some utilities to hold or
even refuse interconnection applications and curtail production output,
without compensation.
“Ever since the tariff rate [for PV systems larger than 10 kW] got
reduce to 27 yen/kWh this July, the market has been very slow,” a
manager of a major domestic solar project developer said. “Not many new
projects are coming in. With a possibility of unlimited output
curtailment, we cannot determine project viability. There are many
developers cancelling projects. Probably the future market will be
driven by reserved projects, which secured the tariff rate of either 36
or 32 yen/kWh. And those have access to the grid, which is not affected
by production curtailment.”
In September, METI created a new subcommittee to bring reforms to the
current FIT program structure. Pending tasks that the committee intends
to focus on are: modifying the application approved process and rate
structure; implementing cost-effective renewable to reduce ratepayers’
burden; alleviating grid constraints; strengthening R&D to reduce
the cost of renewable technology; and expediting permit process through
legislative/regulatory reform. METI is currently looking into the German FIT model to set pricing.
Since the program’s inception in Japan, the tariff rates for a single
year have been determined annually, which has caused boom and bust
cycles and left project investors or developers uncertain about
prospects of the future market.
Instead of setting prices administratively and annually, METI is
considering implementing a market-based price setting, which covers
multiple years to provide the necessary certainty for market
participants to create a stable market. Rate reductions can occur every
year or at a certain interval with a fixed reduction rate or with a
volume trigger. METI is also considering the possibility of an auction
mechanism for new PV projects to minimize ratepayers’ burden.
METI may introduce a new pricing mechanism from next April.
Balancing maximizing deployment of renewable and reducing ratepayers’
burden is a current task that the nation must tackle. Failure to do so
will consequently lead Japan down the same path other countries, such as
Spain and Italy, traveled when the FIT program busted within a short
period of time, without creating a sustainable market.
http://www.renewableenergyworld.com/articles/2015/11/japan-passes-fit-peak-now-what-for-87-gw-re-queue-2030-energy-mix.html
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