Japan’s new FiT rules draw criticism from Japan Renewable Energy Foundation

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The Japan Renewable Energy Foundation (JREF) has criticised a freshly issued set of rules in Japan that will allow utility companies to limit renewable energy output and lower feed-in tariff (FiT) payments in some cases.

The Agency for Natural Resources and Energy, a division of the Ministry of Economy, Trade and Industry (METI) has just issued the revised rules for renewables, which have come about as a result of a number of utility companies, which are also responsible for the grid, suspending the receipt of applications for new projects. Beginning with Kyushu Electric Company in September, four other utility companies followed suit.

The agency set up a ‘working group’ to deal with the well-publicised problems and to calculate how much more renewable energy capacity could be added to networks, which was fed into the wider-ranging FiT review.

Under the new rules, developers are to be given limited time-frames to start building and to connect projects or risk losing their right to grid access. Previously, there had been fears that projects were guaranteed a high FiT before construction even began, allowing developers to wait until costs fell further in order to maximise their profits. There have been no direct accusations made publicly that this has been the case but it has been widely reported that this has happened in some unnamed instances.

Additionally, METI has ruled that utilities are permitted to limit the output of renewable energy projects that they purchase, for up to 30 days a year, based on the variability of wind and solar generation.

JREF acknowledged that it is positive that flexibility of supply and demand is being taken into account but said the plans contain several flaws. The advocacy body claims that suppressing output without compensating project owners will cause uncertainty and could make it difficult for projects to continue to be financed.

JREF also says the working group calculating the available capacity for grid connection of new power generation has underestimated how much renewable energy could be comfortably accommodated into existing networks. Firstly, despite the shutdown of all of Japan’s nuclear power plants since the Fukushima crisis of 2011, many of the calculations used by the working group are done on the assumption that many of the plants will come back online and therefore do not represent the true picture, which JREF has criticised previously. JREF gave the example of utilities on the islands of Hokkaido and Kyushu, where nuclear accounts for up to 60% of the baseload figures provided for in the calculations.

Additionally, the data used to calculate solar and wind output, JREF says, is outdated and inaccurate, while the grid connection working group has also not taken into account the possibility of electricity being transmitted from one regional grid to another adequately – Japan has a set of 10 regional grid networks, each administered by one of the utilities. The electricity market is set for reform in 2016, through which it is anticipated there will be an “unbundling” of electricity tariffs for consumers.

The foundation gave a set of its own recommendations for policy revisions. They include a call for better transparency of the methodology and calculations by which available grid connection is determined and for the introduction of a compensation mechanism for times when output is suppressed. The group also says the government should introduce a mechanism for publishing and verifying data, to prevent arbitrary shutdown of power generation facilities.

Although the latest government plan has been criticised, it has nonetheless been touted by METI as an attempt to maximise the introduction of renewable energy resources. JREF pointed out recently to PV Tech that METI could look to a scheme similar to the UK’s contracts for difference (CfDs), where all government support for energy project funding comes from one centralised pot. Press officers for the UK’s Department of Energy and Climate Change (DECC) confirmed that talks had taken place with a Japanese delegation over the scheme. Meanwhile, a recent report by management consultancy Accenture predicted that solar in Japan will reach grid parity in the next few years.

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