[PV EXPO 2018] METI Maintains Solar Is Central to the Development of Japan’s Renewable Energy Policies

Japan is facing several major challenges in the development of its domestic solar PV industry. First and foremost, the costs of system installation and generation are still too high. Second, the domestic market is approaching saturation. Third, the reduction of the FIT rate has caused domestic demand to contract significantly. In fact, the FIT scheme will not apply to most PV systems that will be connected to the grid in the future. Despite these challenges, Japan’s Ministry of Economy, Trade and Industry (METI) maintains that solar PV is the backbone of the country’s renewable energy sector and is optimistic that the country will reach the target of 64GW of grid-connected PV capacity by 2030 (cumulative total).

Takuya Yamazaki, director of New and Renewable Energy Division under METI’s Agency for Natural Resources and Energy, gave a keynote at PV EXPO 2018 on 1 March to further explain the government’s renewable policies. Yamazaki’s keynote, “RES Policy in Japan – Focusing on Solar PV,” aimed to clarify the government’s efforts on reforming the solar market and addressing the aforementioned challenges.

METI: Japan has enough time to hit 64GW by 2030

The keynote, which was attended by about 1,000 people, presented a breakdown analysis and growth forecast of Japan’s renewable energy portfolio. With respect to the country’s energy mix, Yamazaki pointed out that the share of grid-connected renewable energies already surpassed that of coal-fired generation in 2015. Moreover, the cumulative total of grid-connected PV capacity exceeded the cumulative totals of other renewables in 2016. Going forward, Yamazaki said the growth of the domestic solar market will be driven by the lowering of both the installation cost and the LCOE.

Based on the official projection to 2030, nuclear power will be the base load energy source and account for 20-22% of the country’s electricity supply. Renewable generation on the other hand will represent 22-24% by that time. Currently, the share of renewables in the country’s electricity supply is around 15%, of which only 1.78% are non-hydro renewable energies.

Compared with the 2016 data, non-hydro renewable energies have to grow substantially to achieve the projected scenario for 2030. PV generation has to expand by 61% between 2016 and 2030 to fulfill the renewable portfolio target and the cumulative 64GW target. Generation capacities of wind, biomass, and geothermal energy in the country also have to achieve growth of 34%, 43%, and 33% during the same period.

Hence, renewables including solar all have a lot of room for growth in Japan. The Japanese government also intends to raise the self-sufficiency ratio of its renewable energy supply to at least 26% as part of its development initiatives. On the whole, the ultimate policy goal is creating a “low-carbon society” in Japan. Significantly expanding the renewable generation capacity is thus one of the numerous ways to achieve this objective.

Overcoming challenges related to high costs and reduction of FIT

Yamazaki also emphasized that the Japanese government recognizes the high cost of renewable generation in the domestic electricity market. METI has tried to address this issue by introducing an auction process. The first PV auction held by METI took place at the end of 2017, and its results were not as successful as expected. Nevertheless, the ministry is reviewing the auction process. Future tender rounds are anticipated to help bring the cost of domestic PV electricity down to the international average.

Regarding subsidy, Japan’s 2018 FIT scheme will officially come into effect this April. The FIT rate for systems used in utility-scale projects that are not part of any auctions will drop down to JPY 18/kWh, which is even lower than the special rates set for some local grids. As for residential PV systems, their FIT rate will go down to JPY 24/kWh by 2019. This rate is also lower than the current price of JPY 25/kWh charged to some households for their electricity consumption. Those residential PV systems integrated with power conditioning systems will have a slightly higher rate of JPY 26/kWh. The latest FIT rates indicate that Japan is on track to attain grid parity in near future.

A topic that has been widely discussed at PV EXPO 2018 is the gradual phase-out of FIT subsidy for residential PV systems from 2019 onward. The removal of FIT for residential PV systems will adversely affect the utilization of PV electricity in Japan and is now regarded as an urgent issue. METI in response has announced that it is reviewing the rules on the utilization of newly installed PV systems. The two immediate problems that METI wants to fix is to remove barriers that delay grid interconnection and to increase the average grid utilization rate of PV generation, which can be as low as 10%. METI believes that making changes to the distribution of electricity reserves, together with smarter grid management, can make renewables such as solar and wind into major sources of consumable electricity in the future. This in turn is expected to help bring about a massive expansion of grid interconnection for renewable projects.

The METI keynote additionally outlined the four areas of focus in the development of the renewable sector: (1) renewable energies for emerging applications such as EV/PHV and data centers; (2) ZEH/ZEB construction; (3) mechanisms for local grids to support each other with the renewable projects in their respective sections; and (4) diversification of renewable energy sources. The last area of focus is especially important for METI and local utility companies this year. With the FIT phase-out starting in 2019, the ministry and utility companies have to work hard to develop different types of renewable projects that are best suited for the places that they located in.

Also, the Japanese government is currently establishing a regulatory framework for the disposal of wastes related solar products as well as wastes related the manufacturing processes of solar products. Soon, there will be specific, mandatory guidelines that relevant agencies and businesses will have to follow with respect to recycling and disposing of various materials within disused solar panels. PV system owners are also expected to share the cost burden for the solar waste disposal.

Source: pv.energytrend