by RTS Corporation

This article by RTS Corporation outlines some of the major recent changes in Japan's Feed-in Tariff Program. To learn more about the FIT-scheme, also consult our new complimentary whitepaper, which you can download by filling out the form at the bottom of the article.

The Chairman of the Purchase Price Calculation Committee published a proposal regarding the feed-in tariffs (FITs) from FY 2017. For the first time, future proposal FITs have been set for projects below 10 kW. Furthermore, plans have been announced to annually reduce the FIT rates, aiming to reach the level of household electricity rates (24 Yen/kWh (20.5 cents/kWh)) by FY 2019. For residential application, the basic FITs will be 28 Yen/kWh (23.9 cents/kWh) for FY 2017, 26 Yen/kWh (22.2 cents/kWh) (target) for FY 2018 and 24 Yen/kWh (20.5 cents/kWh) (target) for FY 2019. As for double power generation (with fuel cells, etc.): since there will be no excess profit any more when the FIT reaches the electricity rate for household, the category of double power generation will be removed when single power generation reaches 24 Yen/kWh (20.5 cents/kWh). For the category range of 10 kW - 2 MW, the FIT will be 21 Yen/kWh (17.9 cents/kWh), down by 3 Yen/kWh (2.56 cents/kWh) from FY 2016. For projects which are required to start operations within three years after deemed approval (new approval) in April 2017 a measure has been put in place which entails that when this deadline is not met, the number of months of delay will be reduced from the FIT purchase period.

In FY 2017, ≥ 2 MW extra high voltage projects will be the target of a tender scheme, thus applications for approval cannot be made until the start of the offering of the tender. It is scheduled that approximately two rounds of tenders will be implemented annually and that the first round will start offering in September 2017, whilst the second round will start offering in July 2018, and the third round will start offering in November 2018. The total capacity of the first three rounds will comprise around 1 to 1.5 GW. The first round is expected to offer a maximum of around 500 MW of capacity. The ceiling bidding price is limited to the FIT for 10 kW - 2 MW capacity range (21 Yen/kW (17.9 cents/kWh) for FY 2017) and the bidding price can be submitted with the unit of 0.01 Yen (0.009 cents) at minimum. After bidding, no change is accepted until the winners are selected, however, only after winning the bid, application for approval of the change and minor changes such as the change of the change of the operator will be allowed similarly to the previous FIT rule.

The guideline of output curtailment was also published. The fairness of the management of the tender scheme is indicated while various rules exist. Basically, the fairness of the procedures is emphasized while the fairness of the results is not necessarily required. Thorough disclosure of information and forecasts is also required.

It is also proposed to create a new market named “non-fossil value exchange market” where the environmental value of electricity generated under the FIT program - which is not considered in the wholesale power exchange - can be actualized and traded. It is expected that the achievement of the targets under the Act on the Promotion of the Use of Non-fossil Energy Sources and Effective Use of Fossil Energy Source Materials by Energy Suppliers and the Act on the Promotion of the Measures to Cope with Global Warming which oblige electric retailers to achieve (44 % share of non-fossil power sources by 2030, equivalent of 0.37 kg-CO2/kWh) will be encouraged and the reduction of FIT surcharge will be realized.

Figure 1.jpg

Figure 1 outlines the methods to separate the non-fossil value from electricity to create credit (non-fossil credit) and exchange it separately from electricity. While nuclear power, etc. are also included in non-fossil credit, it is possible to appeal the added value of “100 % pure renewable” to consumers by setting the menu of “designating renewables”. As for the electricity generated under the FIT program in and after FY 2017, it is considered to be included as a target of exchange.

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