Japan to add 17 GW of new solar by the end of 2020 – Fitch

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U.S. credit, macro and industry solutions firm Fitch Solutions Macro Research, part of the Fitch Group, predicts that a further 17 GW of solar PV plants will be connected to the Japanese grid between 2018-2020.

According to its outlook for Japan’s solar energy sector, this additional power comprises the project backlog under the country’s FIT program and should come online by December 2020 – the final deadline for projects, which secured a FIT contract. If realized, the new capacity would raise the country’s cumulative installed PV capacity from 48.6 GW at the end of 2017, up to approximately 65.6 GW at the end of 2020.

Fitch’s outlook, however, envisages a strong contraction for the period 2021-2027, where just 14 GW of new installations are expected to be deployed. This slowdown will be mainly due to two well-known issues in the Japanese solar market – grid-constraints and land availability – but also on the back of the transition from FITs to auctions, which will provide a lower than expected outcome.

This cautious outlook for the long-term trajectory of the sector is also informed by the steep decline facing the feed-in tariffs available to residential and company-level solar power projects,” Fitch analysts said, adding, “At the company level, tariffs are to be reduced from JPY18/kWh to JPY8 .5/kWh by 2022-24, while household installations will face a reduction from the JPY26 /kWh available currently to JPY11/kWh by 2025-27.”

Commenting the recent outcome of Japan’s second solar auction, which took place in mid-September, Fitch said it was the result of a gap in the prices offered by the government under the mechanism, and the prices required to attract project developers to bid in the auction. “In fact, the upper limit for bids was set at JPY15.5/kWh, while the lowest bid from all nine bidders was submitted at JPY16.4 7/kWh,” said the experts.

In the auction, the Japanese government allocated around 197 MW of solar capacity. Japan’s Ministry of Economy, Trade and Industry (METI) expressed a measure of disappointment over the fact that the lowest winning bid was still JPY 0.97/kWh above its targeted ceiling.

In the first solar auction held in 2017, just 140 MW of solar were assigned.