Review may shake-up PV in Japan

A “shake-up” of Japan’s booming solar market could be triggered by the government’s review of sluggish PV projects, further opening the door to foreign companies, industry sources tell Recharge.

The government is scrutinising more than 1,400 PV projects that were approved under its initial, highly generous ¥42 ($0.41) per kWh feed-in tariff (FIT), but which have since failed to move forward.

Judgment on the stuck projects will be meted out in two phases, with punishment likely to come in the form of a rescinded FIT offer.

Projects that have secured neither land rights nor a module-supply contract have until the end of March to do so. Many of these projects are likely to be inherently unviable, and may not be worth buying, industry sources say.

On the other hand, projects that have secured either land or a module-supply contract — but not both — will have until August to get on track. It is these projects which present the biggest opportunity for established PV developers and suppliers, and perhaps most especially for foreign companies.

The August round of reviews “will cause a shake-up”, says the Japan manager for a major European solar EPC player, speaking to Recharge on the condition of anonymity. “We expect to see some good buying opportunities as that date looms.”

Many of these projects are backed by small and inexperienced local developers lacking the know-how and financial wherewithal to take them forward. Local developers may seek to bring more experienced partners on board to help them meet the August deadline, or simply sell their projects to new developers who intend to re-apply for a lower FIT.

It is here where foreign developers may have the biggest edge, says Naoaki Eguchi, a Tokyo-based attorney with Baker & McKenzie. With the ability to boost project economics through the use of Chinese modules, foreign developers may be able to undercut Japanese bidders.

“Japanese financial institutions don’t like Chinese panels yet, so Japanese developers need to source Japanese panels — which are [more expensive],” says Eguchi. “That’s a disadvantage.”

Bloomberg New Energy Finance analyst Ali Izadi-Najafabadi, however, believes that none of the frozen projects will be bought — or indeed ever be built.

“METI’s review process is about weeding out applications that were unlikely to lead to real projects due to land acquisition and grid challenges,” he says.

Mika Ohbayashi, director of the Japan Renewable Energy Foundation, says the review is a “good thing” because the presence of so many tiny developers has been a “disturbance”.

“If they’re eliminated, then just serious businesses will remain,” she says.