Japan’s solar grid connection impasse starts to bite

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Recent challenges to large-scale solar in Japan, including disputes over grid connection, appear to be having a tangible effect, with negative impacts reported this week by two major PV companies in their latest financial results.

Japanese thin-film manufacturer Solar Frontier and Norwegian developer, Scatec Solar, both said this week that the decision last year by five of Japan’s utility companies to stop considering large PV projects for connection approval had had damaging consequences.

Scatec Solar revealed in Q4 financial results yesterday that it had been forced to stop progress on a number of projects in Japan due to the utilities’ actions

In the report, Scatec said that policy uncertainty and the halt of applications for connection to the grid had prompted it to discontinue its Japanese development activities, thought to include a substantial pipeline of projects.

“The introduction of the utility moratorium on renewable energy in Japan has halted progress on projects in Scatec Solar pipeline in the country,” Scatec said.

“It is highly uncertain when and how the Japanese government will move forward with utility scale solar. This has led to a decision for Scatec Solar to discontinue further project development activities in Japan.”

Meanwhile, Solar Frontier, the vertically integrated Japanese CIGS specialist said in its own financial results out this week that there were enough delays to its customers’ projects in Japan that its module shipment volumes for the fourth quarter of 2014 were lower than in the previous year. However, domestic demand “remained robust”, the company said, and as has been the case for some time constituted around 90% of Solar Frontier’s total module sales.

Domestic concerns

The two companies’ observations echo the findings of an as-yet unpublished survey of Japan’s solar industry, conducted by the Japan Renewable Energy Foundation (JREF) advocacy group and revealed in the latest issue of PV Tech Power magazine published today.

Around 130 solar companies responded to the questionnaire, which the foundation hopes to publish before the end of the first quarter of this year.

In PV Tech Power's special report on the state of solar in Japan, JREF senior researcher Keiji Kimura reveals that around 60% of respondents said they were directly affected in a negative way by both the grid connection issue and measures introduced to resolve them, which include revisions to the rules governing Japan’s feed-in tariff.

In a saga that began in October with the suspension of new grid applications by southern Japanese power company Kyushu Electric, followed quickly by four others among Japan’s 10 utility companies, the solar industry and in particular large-scale PV, found itself in a difficult impasse. In Japan, each utility company has a regional monopoly that includes responsibility for the transmission and distribution infrastructure. The government, through its Ministry of Economy, Trade and Industry (METI) convened a “working group” to calculate available grid capacity. The utilities resumed their consideration of applications in late January after the working group ruled that over 50GW of capacity remains available in the five regions in question.

The grid connection issue has not been the only reason for this bottleneck of projects to form – dating from further back there have been various other issues, not least of all rising electricity prices and the burden placed on ordinary consumers to pay for the FiT as well as the generosity of the FiT itself, which has led to some accusations of profiteering.

It is mainly for these reasons that the government undertook a wide-ranging review of the FiT at the end of last year. Keiji Kimura said that according to respondents to JREF’s survey of developers and other stakeholders, the most serious of the aforementioned negative effects has been that companies have found it increasingly difficult to make business plans for the medium term future.

Read more about Japan's latest challenges and the domestic solar industry's outlook for the future in Volume 2 of PV Tech Power, available to read online now.

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