Project boom

More and more companies are entering the PV power generation business in Japan, ranging from major corporations, through small- and medium-sized enterprises, to local industrial entities. At the end of August, about 40 days after the ministerial ordinance on the feed-in tariff (FIT) program had been announced, which went into effect on July 31, the Ministry of Economy, Trade and Industry (METI) announced the renewable energy generation facilities that had been approved by the end of July: 33,695 renewable energy systems with a total output capacity of 566.8 MW, of which 33,686 facilities with a capacity of 444.6 MW were PV systems. The other facilities consisted of six wind power systems, and three hydraulic power systems. PV systems accounted for 99.97% in terms of the number of facilities, or 78.43% in terms of power generation capacity.
Among the approved PV systems (see Figure 1, p. 24) there were 32,659 systems with a capacity of less than 10 kW, mostly for residential applications, with a total installed capacity of 143.9 MW; 946 PV systems with a capacity between 10 kW and 1 MW, mainly installed on rooftops of public and industrial facilities, with a total installed capacity of 57.6 MW; and 81 so-called “megasolar” systems, ground-mounted PV projects with the capacity of 1 MW or above, mainly for large-scale PV power plants, with a total installed capacity of 243.1 MW.
The new FIT program has created new industrial opportunities in Japan and provided a strong impetus to revitalize local economic activities by involving local governments. Locations near industrial complexes that were developed by local governments, and idle land owned by private companies can now be utilized for the construction of large-scale PV power plants. Solicitation of developers by prefectures and municipalities is reported almost every week. For example, Abashiri City of the Hokkaido Prefecture, the most northern prefecture in Japan, started accepting applications from developers for the construction of a large-scale PV power plant, which will be constructed on 149,000 m2 of public land.
Not only local governments have unused rural land on hand, several cities also have plans to invite developers. Osaka City of the Osaka Prefecture is planning to utilize its waste repository for PV power projects. The city started accepting applications for the construction of the Yumeshima District No. 1 large-scale PV power plant on a waste repository in waterfront areas as part of the “Osaka Hikari no Mori” project. Approximately 20 participating companies will share the construction cost and receive income from the electricity sold to the utility depending on the proportion of the shared cost. This model has the advantage of reducing the cost burden, such as the cost for securing sites or for maintenance and management.
Smaller municipalities are also taking the opportunity to revitalize their economy by developing PV projects. Ashikita Town of the Kumamoto Prefecture on Kyusyu Island will construct large-scale PV power plants in two lots of idle land. A PV power plant of approximately 15 MW will be constructed by a consortium of Obayashi and Matsushitagumi on an area of approximately 24.8 ha in Yajiro ranch. And a solar power plant of approximately 8 MW will be constructed by a consortium of Coretech and SunEdison Japan on an area of approximately 9.5 ha within a landfill of approximately 17 ha. The investments for these projects will amount to about 4.4 billion Japanese yen (JPY) and JPY 3 billion, respectively. Both power plants are scheduled to start operation in 2013.
Companies from various industrial sectors are entering the business of selling PV-generated electricity, including IT and communications companies, trading companies, warehouse companies, railroad companies, general construction contractors, convenience stores, trading houses and large-scale retailers of home electric appliances. Furthermore, some electric utilities established subsidiaries to start PV power generation businesses.
One of the developers that recently entered the business is SB Energy, a subsidiary of SoftBank. SB Energy had announced plans for solar farms at 10 locations and is now considering doubling the number of projects. The company already started the operation of two solar power facilities on July 1, the day the new FIT program started: A 2.1 MW PV power plant in the Fushimi Ward, Kyoto City, began commercial operation on July 1, then SB Energy added another 2.1 MW to the plant on September 1, making the total capacity 4.2 MW.

New aspect: profitability

It may be assumed that this PV boom is based on the expectation that the FITs will enable a sufficient return on investment. Up to now, large-scale PV had been developed as part of corporate social responsibility activities to reduce carbon emissions, without taking into account profitability. It is expected that the composition of Japan’s PV market will shift from residential applications (more than 80% of the installed capacity were residential applications in 2011) to various core markets representing a variety of applications. During the three year promotional period stipulated in the Renewable Energy Law in which FITs are guaranteed to be set at “cost plus appropriate profit,” 3 to 4 GW of annual installation can be expected. However, some obstacles have been identified regarding the implementation of PV projects. For example, project developers need to consider various zoning laws under the jurisdiction of the different ministries and agencies.
The current FIT of JPY 40/kWh plus 5% consumption tax [JPY 2/kWh] (US$0.52/kWh plus US$0.03/kWh) for PV applications with a capacity of 10 kW or more is effective until the end of March 2013, the end of fiscal year 2012. A new tariff will be decided on by a committee under the METI based on the cost of PV projects. It is expected that METI will reduce the tariff in April 2013, given the cost reduction, market growth and the competitive environment among PV module suppliers. It is assumed that we will hear of more project pipelines in the last half of this fiscal year.