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Feed-in-Tariff (FIT) in Japan

How Japans FIT opened up renewable energy markets after Fukushimas nuclear crisis? This report provides the details of the FIT policy that was implemented in July 2012, early results, and insights for future opportunities.

Japan Cleantech Market Report

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

December 2012

Disclaimer
Japan-North America Cleantech Advisory Group (the Company) produces and publishes contents on the report based on information and data the Company believes reliable and accurate at the time of writing, but the Company does not take any responsibility with regard to accuracy, reasonability, and completeness. Any party that views or collects information from the report does so at his or her own risk and must judge whether the information is applicable to his or her own circumstances. Nothing in this report is intended to be investment advise. The Company will not be liable for any direct, indirect, special, incidental, consequential, or exemplary losses or damages resulting from the use of the report and of information on the report.

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

Table of Contents
1. The FIT Policy
The details of the Policy contract prices and period for each type of renewable energy and other requirements

2. The Result

How the FIT opened up new opportunities of renewable energy? Here are the early results.

3. Discussions and Conclusions

Does FIT provide opportunities for overseas renewable technology providers?

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

Section 1

The FIT Policy

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

Background
In 2003, the renewable portfolio standard (RPS) that requires electric utilities to purchase fixed amount of electricity generated from renewable energy sources was implemented. In FY2003, 4,000 gigawatt hours of electricity was generated from renewable energy sources. It grew to over 10,000 gigawatt hours in FY2010. In 2009, the feed-in-tariff for residential solar PV was implemented. The capacity of solar PV generation increased from 2.14 gigawatts (approx. 500,000 houses) in 2008 to 4.91 gigawatts (one million houses) in 2011. Yet electricity from renewable power sources only accounted for approximately 1.2% as of 2010 (not including large hydro). The new feed-in-tariff was implemented in July 2012 to further boost renewable energy. The new FIT includes five types of renewables solar PV (residential and nonresidential), wind, hydro, geothermal, and biomass

Information is based on Agency for Natural Resources and Energy, Ministry of Economy, Trade and Industry website: http://www.enecho.meti.go.jp/saiene/kaitori/dl/120522setsumei.pdf (in Japanese)

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

Common rules
All the contract prices and periods will be reviewed annually by the government committee. Once a contract is closed, the price and period are locked for the period of the contract. Contract price is in effect at a point of time whichever comes later:
A complete application that includes specification and information on installation location and interconnection is received by an electric utility company, or The facility is approved by the Minister of Economy, Trade, and Industry

Contract period starts when electric power delivery is initiated. Commissioning period is not included. Prices include tax. The prices and period do not apply to existing facilities at the time of the policy implementation (July 1, 2012). These will be determined on a case-by-case basis. Fiscal year (FY) in Japan starts in April. FY2012 for the FIT policy is July 2012 to March 2013. 1=80 (US or CAD) in this document

Source: http://www.enecho.meti.go.jp/saiene/kaitori/kakaku.html (in Japanese)

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

Common requirements
A power generation facility/equipment must be approved by the Government, and an application must be submitted to the electric utility company of the applicable jurisdiction. A maintenance system that maintains expected performance must be secured for the contract period. A measurement system of electricity generated in accordance with applicable regulations must be equipped. Documentation required. Equipment of facility must be clearly identified by documentation. (e.g. manufacturers, product number etc.) Cost information (e.g. facility, land, interconnection, operation, and maintenance) must be submitted annually. For existing facilities, if electricity supply generated by renewable energy source is increased, the incremental electricity must be measured.

Source: http://www.enecho.meti.go.jp/saiene/kaitori/kakaku.html (in Japanese)

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

Contract Price and Period: Solar Photovoltaic (PV)


>10kW
Price Period 42 (52.5) 20 years

<10kW
42 (52.5) 10 years

<10kW (double generation*)


34 (42.5) 10 years

* What is double generation?


Double generation refers to generating power by solar PV AND other power generators for residential homes. Generators are primarily two types: - Gas engine CHP (product name: Ecowill) - Fuel cell CHP (product name: Enefarm) Power generated by these generators is consumed first; therefore, more power from solar PV is sold than when there is no other generator. No FIT on power generated by CHP
2012 Japan-North America Cleantech Advisory Group

Enefarm micro-CHP
Hot water Fuel cell generation unit tank unit

Japan FIT Report

Solar Photovoltaic (PV)


Requirements
Conversion efficiency must be equal or higher than the following: Single crystalline silicon and polycrystalline silicon: 13.5% Thin film silicon: 7.0% Compounds: 8.0%

For <10kW system, JIS standards (JISC8990, JISC8991, JISC8992-1, JISC8992-2) or JET certification must be complied. Circuits must be designed so generated power is consumed first and surplus is supplied to an electric utility company. For double generation, the generator must have a mechanism to prevent the power from flowing to the grid.

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

Contract Price and Period: Wind


>20kW
Price Period 23.1 (28.9) 20 years

<20kW
57.75 (72.1) 20 years

Requirements (part)
For <20kW systems, JIS certification (JISC 1400-2), equivalent certification by JSWTA or a foreign certification body must be complied.

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

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Contract Price and Period: Hydro


1-30MW
Price Period 25.2 (31.5) 20 years

200-1,000kW
30.45 (38.1) 20 years

<200kW
30.45 (38.1) 20 years

Requirements (part)
The output of generators must be less than 30 megawatts. No pumped storage hydro is allowed.

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

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Contract Price and Period: Geothermal


>20kW
Price Period 27.3 (34.1) 15 years

<20kW
42 (52.5) 15 years

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

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Contract Price and Period: Biomass


Biogas/ Unutilized gasification wood
Price Period 40.95 (51.2) 20 years 33.6 (42) 20 years

General wood
25.2 (31.5) 20 years

Non-wood waste
20 years

Recycled wood
20 years

17.85 (22.3) 13.65 (17.1)

Requirements (part)
Systems to measure the ratio of biomass must be in place and monthly measurement must be conducted. Biomass fuel must not have significant influence to existing industries. Documents that prove the origin of biomass fuel are required. (Not applicable to biogas/gasification and recycled wood) For wooden biomass generation, a proof of complying the guideline is required. Refer to Forestry Agency website.

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

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Section 2

The Result

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

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Installed Capacity after the FIT was implemented


700 600 500 400 300 200 100 14 0 PV residential PV nonresidential Wind Hydro 1,000kW Hydro <1,000kW Biomass 0 1 6 0 586 Installed capacity (Megawatts)

Installed capacity from July to October 2012

97% is solar PV No geothermal installed


238

Geothermal

Based on METI website http://www.enecho.meti.go.jp/saiene/kaitori/dl/setsubi/201210setsubi.pdf

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

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Total Installed Capacity before/after FIT


10000 9000 Installed Capacity (megawatts) 8000 7000 6000 5000 4000 3000 2000 1000 0 PV residential PV nonresidential Wind

0.2%

FY2012 Nov-Mar (projected) FY2012 Apr-Oct Installed by FY2011

38%

Change in FY2012 from FY2011/before

15% 63% 5%
Hydro 1,000kW Hydro <1,000kW

4% 0%
Biomass Geothermal

Based on METI website http://www.enecho.meti.go.jp/saiene/kaitori/dl/setsubi/201210setsubi.pdf

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

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Trends Solar PV

Cost of solar PV coming down


The PV system with the lowest cost is 290,000 ($3,625) per kilowatt, which translates to 19 (27.8) per kilowatt hour as of November 2012.

Mega solar
A total of 340 mega solar systems (capacity equal or greater than 1,000 kW per system) have been installed as of October 31.

New business model


Municipalities and private companies lease facility roofs for solar PV business owners. Some municipalities organize a matching system for roof owners and businesses.

More imported PV cells and modules


Imported cells and modules were 202,689kW and take up 32.3% of the total in Q2 2012. This is more than 300% of Q2 2011 on a kilowatt basis.

Source: http://www.enecho.meti.go.jp/saiene/kaitori/dl/setsubi/201210setsubi.pdf (in Japanese) http://business.nikkeibp.co.jp/article/report/20111226/225632/?P=2 (in Japanese) http://www.kankyo-business.jp (in Japanese)

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

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Trend other renewables


Penetration is not as fast as that of solar PV, but other renewables are also on the move.
Government-funded offshore wind projects Government plans SPC (specific purpose companies) to expand transmission infrastructure for wind projects Codes and standards for binary power generation was deregulated in 2011. This helps binary power generation (e.g. Organic Rankine Cycle, ORC) using low to mid temperature (100200C) geothermal heat source; Japan has the third largest geothermal resources, yet only 10% is currently being used.

First biomass generation plant approved for FIT (5,000kW)

Source: http://www.kankyobusiness.jp/news/003566.php?utm_source=mail&utm_medium=mail121024_d&utm_camp aign=mail (in Japanese), http://business.nikkeibp.co.jp/article/report/20121109/239261/?P=1 (in Japanese), http://www.meti.go.jp/english/policy/energy_environment/renewable/pdf/summary201207. pdf

Source: Sumitomo Heavy Industries, Ltd. http://www.shi.co.jp/info/2012/6kgpsq0000001f70.html

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

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Section 3

Discussion and Conclusion

Japan FIT Report

2012 Japan-North America Cleantech Advisory Group

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Discussions and Conclusions


So far, the major part of growth in the capacity of renewables after the implementation of FIT has come from solar PV. This is mainly because of ease of installation and short lead time. However, this early result does not indicate that opportunities are scarce for wind, hydro, geothermal, and biomass. Innovation is taking place not only in the core technologies (e.g. floating wind turbines), but also non-core technologies (e.g. construction method of solar PV) as well as business models. Recent successful entry in the renewable market in Japan from North America includes Canadian Solars solar PV modules and Ormats geothermal power generation (2006). Still need to understand and overcome remaining challenges for each type of renewable power. For example, securing biomass resources constantly is not easy in many regions. Extensive stakeholder consultation and coordination is required for geothermal power generation development.
2012 Japan-North America Cleantech Advisory Group 20

Japan FIT Report

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