Shulman Advisory

Bids to Supply Solar Power under FIT/FIP Drop Below JPY8 for First Time

On November 24, Japan’s Organization for Cross-Regional Coordination of Transmission Operators (OCCTO) announced the results of the 18th round of bids to supply solar power under the FIT/FIP system. The lowest bid price was JPY7.94/kWh, which is the first time it has dropped below JPY8/kWh.

Solar projects whose generation capacity is between 250kW and 500kW were eligible to bid for the feed-in-tariff (FIT) and those above 500kW were eligible to bid for the feed-in-premium (FIP).

The results point to several promising signs that Japan’s solar energy market has become more competitive and that the cost of solar is on the decline. In November 2017, when the bidding system began, there were only nine bidders, and the lowest bid price was JPY17.20/kWh. Not only was this year’s lowest bid price less than half that of November 2017, but it was considerably lower than the JPY9.35/kWh that OCCTO set this year as the bid ceiling.

Of the 69 bids to supply solar power, 33 were successful. The combined generation capacity of the successful bids totaled 105MW.

Since the government introduced the FIT system in 2011, electric utilities must purchase electricity from renewable energy generators at a fixed price. That fixed price for solar power facilities above a certain size is determined based on the bidding results.

In addition, a FIP was introduced in April 2022. Under this system, a precalculated “premium” price is added to the market price of renewable electricity, to incentivize investment in renewables. In the first bid after FIP was introduced, only renewable energy companies with generation capacities over 1MW could submit bids. In this latest round, OCCTO expanded the eligibility pool to those with over 500kW in generation capacity, allowing more companies to benefit from the premium.

The 18th solar auction marked a milestone, reaching a historic low bid of 7 yen. OCCTO disclosed results on November 24th under the Renewable Energy Special Measures Act. Details for the 19th tender’s capacity recruitment were also unveiled. The upcoming round requires business plans by January 9 – 16 and bids by February 19 – March 1.

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Publication date: December 10, 2023

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