Post-FiT era is pressing concern for Japan’s PV industry

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Preparing to do business after the feed-in tariff (FiT) scheme ends in 2020, whether or not the government maintain the country’s “no nuclear” energy policy, will be crucial to survival for solar in Japan, according to one expert.

Dr Hiroshi Matsukawa of Tokyo-based analysis firm RTS PV told PV Tech in a telephone interview that while uncertainty exists at the top level over energy policy in Japan, the build-out of solar capacity will continue in the short term, at least until the end of the FiT.  

“Introduction of generation capacity will continue apace as the backlog of projects approved at ¥40 (US$0.38) and ¥38 (US$0.37) kWh starts to clear. This could well be the year in which we see the most activity in a lively solar industry in Japan so far, but while this period of heavy activity is ongoing, we should be thinking about what comes next and what the next phase should be for solar in Japan,” Matuskawa said.

“At the very least, the FiT is scheduled to end in 2020 and rates paid will be progressively lower each year until then, we can already see that, so how to survive and keep doing business, that will become increasingly important, in my view.”

In April the government of prime minister Shinzo Abe released an updated version of Japan’s Basic Energy Plan, a policy document broadly outlining national energy strategy. The policy drew criticism for officially stating an expected return to nuclear power generation and the proliferation of so-called ‘clean coal’ burning to maintain baseload electricity.

Neither measure has yet to be implemented, but the plan came as a shock to many as Japan had turned off all of its nuclear reactors in the wake of the Great East Japan Earthquake and subsequent Fukushima nuclear accident. However Matuskawa said that despite the new version of the plan, the FiT is almost certain to remain in place until it is scheduled to be removed in 2020 after a period of ‘managed degression’.

“This year could be spent in preparation for the days to come when the FiT has dropped away almost completely, and preparing for how the solar industry will keep going in that future,” Matsukawa said.

Japan’s FiT scheme was kick-started in July 2012 at the generous rate of ¥40 (US$0.38) per kWh, leading to a flood of approved large-scale solar projects. The rate fell at the beginning of the 2013 financial year at the end of March 2013 and again at the beginning of the current financial year just over a month ago. Despite the drop, projects continue to go into the ground. This is in part due to a backlog of projects approved in the first and second year that are still being developed and constructed.

In one year, Japan’s PV generation capacity leaped by around 6.55GW, from 1.6GW at the end of February 2013, to 8.15GW by the same time this year, according to figures released this week by the country’s Ministry of Economy, Trade and Industry (METI). International industry research firms including Solarbuzz and EnergyTrend have claimed that the market for PV installs worldwide will be driven by the Asia-Pacific region, with Solarbuzz predicting that Japan will be one of five countries to make up 95% of the world's demand for PV. Solarbuzz also said recently that the UK and Japan were the two countries that drove end-market demand furthest in 2013.

Matsukawa went on to say that since the energy plan’s pro-nuclear statement had yet to be made into solid action, the government’s main concern over solar energy was the possible impact on electricity prices. He said that even in the worst case scenario of a u-turn on energy policy, the government was still committed to increasing renewable energy generation capacity but that it would take steps to avoid a ‘price bubble’ forming by continuing to lower the FiT rate each year until the scheme finished.  

“Even at its worst the government does have a policy committed to increasing renewable energy, but in the immediate future they do want to avoid a bubble forming around prices paid,” Matuskawa said.

“There's no commitment on nuclear yet, while renewable energy use is intended to be increased while the economic burden remains bearable.”

Groups including the Japan Renewable Energy Foundation (JREF) also criticised the energy plan for not establishing year-by-year targets that mapped out how Japan would reach its long-term national target of generating 30% of its electricity from renewable sources by 2030. Matsukawa said that since the latest plan avoided mention of fresh targets, the industry would expect to continue working to the long-term goals previously set.

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