A flat year for solar installations in Japan can be considered positive for the country moving to new solar business models, he writes. Izumi Kaizukaresearch director for the Japanese solar consulting company RTS Corp.
Japan’s solar market is estimated to have reached 6.5 GW in 2022, supported by the Ministry of Environment’s (MOE) Feed-in Tariff (FIT) and Feed-in Fee (FIP) programs, which ended in early 2022. capacity is comparable to the amount of solar energy production capacity commissioned in 2021.
Power purchase agreements (PPAs) – the sale of clean energy to business consumers and electricity suppliers – are a new approach for renewable energy developers, and the Japanese market is very much in transition.
The Japan Photovoltaic Energy Association estimated that the country supplied 3,536 MW of solar modules from January to September 2022, of which 3,520 MW were supplied to Japanese customers. Since the figures do not include imports from China, it is assumed that installation levels were similar to 2021, and imports are expected to dominate the total number of solar panels added to the country.
Japanese companies are increasing panel recycling and battery reuse, especially for electric vehicle (EV) batteries. Toyota and power company Jera are developing stationary storage with used electric vehicle batteries, and Tesla Motors is entering Japan’s grid-level energy storage market.
In the mix
Solar energy is expected to supply 14-16 percent of Japan’s energy mix in FY2030, with a target of 117.6 GW (AC) of solar generation capacity. Japan unveiled its 6th Strategic Energy Plan and Global Warming Countermeasures Plan in 2022, with Prime Minister Fumio Kishida chairing the GX (Green Transformation) Implementation Council. The focus of energy policy is on renewable energy sources and nuclear power, and the share of the former in the electricity mix will be 36–38 percent in 2030.
Municipalities set their own renewable energy targets, distribute clean energy targets, install panels in public buildings and offer subsidies. The Tokyo Metropolitan Government (TMG) is set to mandate solar power for new buildings starting in fiscal year 2025, and Kawasaki in Kanagawa Prefecture plans to follow suit.
Ministry of Economy, Trade and Industry (METI); MoE; and another public body, the New Energy and Industrial Technology Development Organization, are installing solar demonstration projects. METI is also presenting solar plus storage for grid balancing.
In 2021, around 50 companies, including utilities and virtual power plant operators, will demonstrate the integration of clean electricity as part of three projects. Both ministries are working on zero-energy buildings, and SM’s solar energy reuse and recycling program includes a demo project to collect residential solar panels in Saitama Prefecture, which has the second largest installed system capacity in Japan.
Although most PV systems installed in Japan have previously been supported by the FIT program, new business models and services have been introduced to the market. The third-party ownership model is used by utilities that install residential panels and energy storage systems with no upfront costs. The promotion of zero-energy living is also progressing.
Solar panels are installed on the roofs of factories and logistics facilities in accordance with the PPA business model for corporate customers and public entities. Solar powered carports in shops are also gaining a foothold in the country.
Companies motivated by environmental, social and governance issues have accelerated the deployment of PPA-backed renewable energy generation facilities, mainly among members of the international RE100 clean energy initiative.
As in other major markets, traditional energy companies are making large investments in clean energy. Electricity prices have risen since Russia invaded Ukraine, with the non-profit industry organization Japan Electric Power Information Center reporting that the average surcharge electricity price has risen from ¥15.80 ($0.12)/kWh to ¥24.19/kWh in January 2021 in October 2022. Solar is a popular solution for companies seeking to avoid incremental price increases and volatility, whether consumed on-site or acquired through a PPA.
As the number of PPA-backed solar power plants increases, new business models are also emerging between clean energy developers – including design, procurement and construction service providers – who previously banked user fees, and utility companies and power trading companies. When the order for FIT-supported renewable energy production facilities decreases, developers are looking for new ways of operating.
METI plans to launch a new FIT and FIP program to support the introduction of rooftop solar energy in the new fiscal year. The new prices, which are already in effect, cost more per kilowatt-hour than projects installed in the ground.
In brief: The main trends in the solar industry in Japan 2022
|Practice||As a basic policy of GX, it was decided to expand the introduction of solar electricity in public spaces, apartments, factories, warehouses, airports, railways, etc., and the introduction of renewable energy under the leadership of local communities.|
|METI initiated new programs such as FIP, formulated plans for solar deployment in harmony with local communities, responded to grid constraints, and enhanced the deployment environment by changing deployment regulations.|
|KM selected 46 municipalities as leading areas for reducing carbon dioxide emissions to start the municipalities’ intensive introduction of solar electricity.|
|The Ministry of Land, Infrastructure and Transport enacted a revised Building Energy Efficiency Act, which mandates energy saving standards and promotes solar installations on roads, railways and airports.|
|municipalities||Many municipalities started to expand the introduction of renewable energy, such as setting installation goals and areas that promote the introduction of renewable energy, bringing solar electricity to municipal facilities and financing installation subsidies.|
|TMG orders solar electricity installations in new houses from the fiscal year 2025.|
|Market||Domestic solar capacity is estimated at 6.5 GW, which is the same as the previous year, and the cumulative installed capacity was 84.9 GW.|
|The average winning bid for PV projects fell to JPY 9.70/kWh in the FIT bid and JPY 9.73/kWh in the FIP bid, falling below JPY 10 for the first time.|
|Area||Business models that utilize the PPA systems of both off- and on-site companies began to develop.|
|Business models have been developed to enhance the production of solar electricity through cooperation between solar electricity and the traditional energy industry, trading houses and financial institutions, etc.|
About the author: Izumi Kaizuka is the head of RTS Corp’s research department in Tokyo. The PV consulting company has almost 40 years of history and is a member of the PV Market Alliance. Kaizuka leads several research projects for the Ministry of Economy, Trade and Industry, the New Energy and Industrial Technology Development Organization (NEDO) and other government organizations. He has been the representative of Japan in IEA PVPS Task 1 (Group for PV strategic analysis and communication) since 2003. He is also one of the authors of the IEA-PVPS Trends report describing the situation of the solar power market.