The Japanese government is expected to approve revisions to the feed-in tariff (FIT) law this spring that will impose new operation and maintenance (O&M) requirements on owners of solar plants from April 2017, but the potential impact on the market remains a matter of speculation.
“At this point, there doesn't seem to be anything of detail readily available from the Ministry of Economy Trade and Industry (METI) — only that they will require operators to increase inspections and implement more robust security measures,” says Tony Nicholson, a Tokyo-based associate at law firm White & Case.
The regulatory amendments will become clear after the Diet [the Nation’s parliament] approves the Ministry of Economy, Trade and Industry’s (METI) proposals, likely by early June 2016.
One of the most widely anticipated changes is that the government may require developers to regularly submit electricity generation data, to prove that their PV plants are operating properly.
The government says it is introducing the new O&M requirements to ensure the stability of electricity generation.
“The FIT is not only an investment opportunity; IPPs have a responsibility to keep plants stable over the long term,” explains Masuo Kuremura, Deputy Director of New and Renewable Energy Division Agency at METI. “We believe this change to the FIT law will drive new investments in renewable energy.”
“Currently, when a developer builds a plant, they can get a tax break for the first year. And after that, they don’t really have to worry about the performance,” says Takehiro Kawahara, an analyst at Bloomberg New Energy Finance (BNEF).
“METI is really concerned about this because if a plant is not operating properly, the solar plants do not contribute to an increase in solar generation, in terms of the generation mix.”
A recent spate of accidents has raised concerns in communities throughout the Japanese archipelago over the maintenance of larger utility-scale projects. In some cases, typhoon winds have knocked over panels at project sites, according to Kawahara.
Despite the lack of clarity on the looming regulatory changes, David Vallejo — executive director of PV systems integrator Solarig Japan — believes the Japanese authorities will provide plenty of advance notice of the new expectations for project O&M standards, in order to ease the impact on developers.
Among the anticipated changes, Vallejo expects that METI will be stricter in ensuring that developers commit to long-term agreements with O&M service providers.
He also expects that the ministry may require companies to keep qualified electrical engineers on staff, even though there is a shortage of such professionals throughout Japan.
“My preliminary feeling is that [these changes] will be good for the market,” Vallejo says. “And there will be less space for companies that don’t have experience.”
Kawahara agrees that in sum, METI’s new O&M rules will be positive for solar in Japan.
“It’s good news for O&M service providers,” he says. “In terms of the safety of the solar plants, the sustainability of the industry and public perceptions of solar, I think that generally speaking there will be positive impacts.”
“In the short term, implementation of O&M will help owners gain additional cash flows,” says Kuremura. “Over the long term, owners will be able to maintain higher returns.”