A special committee under Japan's Ministry of Economy, Trade and Industry (METI), which was formed to discuss feed-in-tariff (FiT) pricing, has set a new FiT for non-residential small-scale commercial solar power plants with capacities ranging between 10 kW and 500 kW. It will stand at JPN14/kWh (roughly US$13c/kWh), 22% down from the previous JPN18/kWh (US$17c/kWh), the largest decrease since the start of the Japanese FiT policy.
The METI has also reviewed long-term cost targets for solar projects and aims at achieving an average power generation cost of JPY7/kWh (US$6.5c/kWh) for for projects set to start operation in 2025 based on the current FIT calculation criteria. This is equivalent to setting a FiT of JPY8.5/kWh (US$7.9c/kWh) in 2022.
The main driver behind this new policy is the need to actualize cost and facility utilization rates. The domestic solar PV industry is facing many challenges and the costs of system installation and generation are still very high compared with other countries. The domestic average realisation rate for approved projects only stands at 20% for utility-scale solar systems because of the insecurity about the future of the FIT system. To address this issue, the government is slowly switching to an auction-based system and held its first solar auctions in 2017 and 2018. However, the results were disappointing as as the lowest bid was above its targeted cap price. 140 MW and 197 MW were allocated in the two auctions, respectively.