consumption is generally low in these areas, so large amounts of solar power
generation equipment have been introduced to areas with low power demand
(Table 21.3).
The mismatch between the amount of certified renewable energy power generation facilities and demand for electric power is related to the endowment of natural
resources in Japan.
21.1.3 Designing a Fixed Price System for Renewable Energy
21.1.3.1 Learning Effect of PV System Technology
The nationwide bias in the introduction and certification of renewable energy toward
solar power is closely related to the learning effect of introducing solar power
generation facilities and the method of determining the purchase price in Japan.
When the FIT system was introduced, the Procurement Price Calculation Committee
set the purchase price for each type of renewable energy by adding an internal rate of
return (IIR) of roughly the same level to the cost base. If the investment effect is the
same, differences in the amount of certified renewable energy of different types
should be small, but the standard cost is that at the time of price setting. However, the
purchase price did not reflect that the cost of PV systems continues to reduce at a
significantly faster rate than that of other renewable energy power generation
facilities, due to the learning effect.
The average cost of a solar power generation system of between 10 and 50 kW
has decreased by 31% (procurement price, etc.) in 2 years (from July–September
2012 to September–December 2014; Price Procurement Committee 2015). Initially,
the purchase price of renewable energy was determined by the price at the time at
which the power generation company submitted its application. This led some
companies to wait for declines in power generation system prices before submitting
their applications. A typical example of this was seen in March 2014, when there was
a last-minute rush of renewable energy introduction before a new purchase price was
applied. Since 2014, the system has been gradually revised, the certification of some
inappropriate projects has been revoked, and expiration dates have been introduced.
In addition to cost reductions resulting from the learning effect, other benefits of
solar power generation were not reflected in the purchase price. For example, it is
easier to pass the environmental assessment for solar power generation than wind
power generation, and the construction period is very short. Energy companies
naturally chose to invest in solar power, as the purchase price was calculated at
roughly the same rate of return, but virtually any investment in solar power would
yield higher returns than other renewable energy sources.
21 Opportunities for Renewable Energy Introduction Through Feed-in Tariff (FIT). . .
397
generation equipment have been introduced to areas with low power demand
(Table 21.3).
The mismatch between the amount of certified renewable energy power generation facilities and demand for electric power is related to the endowment of natural
resources in Japan.
21.1.3 Designing a Fixed Price System for Renewable Energy
21.1.3.1 Learning Effect of PV System Technology
The nationwide bias in the introduction and certification of renewable energy toward
solar power is closely related to the learning effect of introducing solar power
generation facilities and the method of determining the purchase price in Japan.
When the FIT system was introduced, the Procurement Price Calculation Committee
set the purchase price for each type of renewable energy by adding an internal rate of
return (IIR) of roughly the same level to the cost base. If the investment effect is the
same, differences in the amount of certified renewable energy of different types
should be small, but the standard cost is that at the time of price setting. However, the
purchase price did not reflect that the cost of PV systems continues to reduce at a
significantly faster rate than that of other renewable energy power generation
facilities, due to the learning effect.
The average cost of a solar power generation system of between 10 and 50 kW
has decreased by 31% (procurement price, etc.) in 2 years (from July–September
2012 to September–December 2014; Price Procurement Committee 2015). Initially,
the purchase price of renewable energy was determined by the price at the time at
which the power generation company submitted its application. This led some
companies to wait for declines in power generation system prices before submitting
their applications. A typical example of this was seen in March 2014, when there was
a last-minute rush of renewable energy introduction before a new purchase price was
applied. Since 2014, the system has been gradually revised, the certification of some
inappropriate projects has been revoked, and expiration dates have been introduced.
In addition to cost reductions resulting from the learning effect, other benefits of
solar power generation were not reflected in the purchase price. For example, it is
easier to pass the environmental assessment for solar power generation than wind
power generation, and the construction period is very short. Energy companies
naturally chose to invest in solar power, as the purchase price was calculated at
roughly the same rate of return, but virtually any investment in solar power would
yield higher returns than other renewable energy sources.
21 Opportunities for Renewable Energy Introduction Through Feed-in Tariff (FIT). . .
397