Cuts in Japan’s Solar FIT Looking Likely

Japan’s government began discussions today over revisions to its solar feed-in tariff (FIT), as the industry rushes to complete projects ahead of an expected reduction on 1 April.Japan introduced new FITs for renewable energy projects on 1 July last year, triggering a surge in investment, particularly in PV power plants.

But a five-member panel under the Ministry of Economy, Trade and Industry (METI) is expected to propose a reduction to the tariff based on falling system prices.The current FIT for solar – 42 yen ($0.52) per kWh for 20 years – was based on average system prices of 466,000 yen per kW ($5,207), says ShutaMano, senior policy researcher at the Japan Renewable Energy Foundation.

But these costs have now dropped by around 10% to 427,000 yen per kW.Mano expects the METI panel to propose new tariffs of up to 10% lower than this year’s rate.The new FIT is expected to be revealed in February or March, before the new budget year starts on 1 April.

Tariffs for wind and geothermal power will not change, as few projects have yet been able to benefit from the 2012 subsidy because of the long planning process involved.Japan installed 1.44GW of new solar power capacity from April to the end of November 2012. It is likely to install as much or more in the months to end of March 2013.

“Japan may install up to 5GW this year,” says Mano. However, JREF says access to the electricity grid has become the biggest challenge for solar projects.JREF is also urging METI to introduce revisions to its renewable energy subsidies earlier to allow developers to make betterplans for future projects.