Larger-scale installations and residential PV-plus storage look set to become more the norm in Japan.

The Japanese solar market could splinter into fewer, larger grid-scale projects and more storage-tied residential systems as feed-in tariffs (FiTs) look to end, experts said.

Japan's Ministry of Economy, Trade and Industry (METI) is discussing the introduction of an auction process for large-scale solar projects, which is likely to begin in 2017.

At the same time, new regulations are allowing utilities to freely curtail solar to maintain grid stability. This could favour larger, more efficient and controllable plants, predicted Tyler Ogden, research associate at Lux Research.

“The change will result in more large-scale solar installations,” he said.

“As part of these new systems, it is likely integrated monitoring electronics will be incorporated to provide grid operators with more information on real-time renewable electricity production.”

Monitoring equipment might also be used to provide short-term forecasts of a PV plant’s output, giving grid operators additional flexibility in determining the proper generation mix, he said.

“The Japanese market will be shifting from small, distributed installations, that benefited from the FiT, to utility-scale projects supported through auctions, but the outlook is still positive,” said Ogden.

“Part of this shift can be seen in the rise of floating solar plants in Japan, financially feasible due to limited land availability.”

For smaller-scale projects, the prospect of curtailment will likely increase interest in energy storage as a way of maximising self-consumption.

“We see the post-FiT market as characterized by distributed power generation, self-consumption and storage,” said Hideki Gakumazawa, general manager of the corporate communications department at Solar Frontier.

The company is working to provide residential systems that can operate at grid parity next year. “We will be in a position to provide systems at JPY¥290,000 (USD$2,389/EUR€2,200) per kilowatt-peak by 2016,” Gakumazawa said.

He also noted that concerns over curtailment had “caused some uncertainty in the market.”

Nevertheless, a string of new project reports have confirmed continuing strong interest in Japanese solar.

Recent months have seen the announcement of two projects totalling 40 MW by Japan Asia Investment, a 17 MW plant by JAG Energy and the completion of a 22 MW project by Orix, 20 MW plant by Oizumi and a 9 MW installation by Daiwa Securities.   

One of the Japan Asia Investment plants is an 11 MW project being built with Renewable Japan.

It will cost ¥4 billion ($33 million) and should be completed in June 2017 in the Shizuoka prefecture, selling power to Tokyo Electric Power. Japan Asia is also planning to build a 29 MW plant in Nara prefecture, Bloomberg has reported.

No further details were given. Separately, JAG Energy, a subsidiary of Japan Asia Group, has confirmed plans for a 17 MW power station in Tochigi prefecture.

The plant will be equipped with solar panels from Kyocera and should start running in March 2017.

Also, Bloomberg said Orix had finished building a 22 MW power station on Hokkaido Island, northern Japan, on land adjacent to a motor racing circuit.

Meanwhile the Japanese game machine maker Oizumi was reported to have completed a 20 MW project on an old golf course in Tochigi prefecture, north of Tokyo. The plant cost ¥5.7 billion ($46 million).

Finally, Daiwa Securities Group is reported to have finished a 9 MW plant in Hokkaido. The project is the first of three large-scale plants backed by the group’s Daiwa PI Partners subsidiary.   

The new projects are among a number of developments that show the Japanese market continues to flourish in spite of a 13% drop in panel shipments registered by the Japan Photovoltaic Energy Association in the first quarter of 2015.

The association has not yet released further figures for 2015. But in the meantime Barclays, the British banking giant, has hinted at plans to offer ¥50 billion ($418 million) in solar bonds for up to 300 MW of solar power in Japan.

If it goes ahead with the plans then it will be following in the footsteps of US financier Goldman Sachs, which has been issuing bonds for Japanese projects since 2013.

Goldman Sachs has funded 58 MW across 16 plants to date, for a total of ¥17.3 billion ($144.7 million).

Further investments are expected under current incentive schemes, which the government believes will double the level of renewable energy across Japan by 2030.

“We still see growth,” said Harumi McClure, America general manager for Tabuchi Electric, one of the top three solar inverter makers in Japan. “There is quite a lot of capacity still to be installed.”

Tabuchi believes Japanese residential solar customers will increasingly look to deploy energy storage to decrease their reliance on grid supplies.

At the same time, it expects Japanese utilities to seek greater control over how and when residential solar is fed into the grid.

Problems emerged with excess renewable power on Japan’s energy networks last year, after a 2012 feed-in FiT of ¥42 ($0.35) per kilowatt-hour met with more than 1.2 million applications.

The avalanche led utilities to refuse new renewable energy contributions and forced METI to revise its FiTs downwards. “Utilities know that at 15% solar penetration the grid will be saturated,” said McClure.

“But they didn’t expect people to respond so quickly to the FiT. The market grew 10 times faster [than they expected].”

The FiT for solar PV installations of less than 10 kW now stands at ¥33 ($0.27) per kilowatt hour, or ¥35 ($0.29) for setups that include output controls. Larger systems have a FiT of ¥27 ($0.22) per kilowatt hour.

To adapt to the need for greater utility control, Tabuchi is commercialising an ‘intelligent battery system’ called EneTelus that allows utilities to manage distributed energy resources including solar PV arrays and smart thermostats.

This allows utilities to adjust PV output to the grid, with the excess potentially being stored in batteries for later use. In future, said McClure: “If you want to install solar you will do it with storage. It will be a package.”

At the same time, the prospect of lower tariffs for grid-scale solar is expected to force asset holders to look more closely at how they can improve the efficiency of operations and maintenance (O&M).

“The Japanese O&M market is certainly evolving as the market matures,” said Gakumazawa of Solar Frontier. A more noticeable change, however, is on the consumer side.

“System owners are much more aware of the importance of O&M to keep their assets performing at maximum level.”

Find out more about Japan’s solar market opportunities at Solar Asset Management Asia in Tokyo, June 2-3, 2016.