Energy & Infrastructure Alert | June.27.2017
Under certain conditions, a FIT facility approval (setsubi nintei) that was obtained under the old FIT Act prior to the April 1, 2017 enforcement of the Amended FIT Act may be deemed a FIT business plan approval (jigyo nintei) under the Amended FIT Act and transferred to the new FIT scheme thereunder. In such case, a business plan (jigyo keikaku) for the project must be submitted before a specified deadline. This Alert Letter discusses a number of cautionary points related to submission of such business plans.
(1) Business plans may be submitted electronically or in paper form. In principle, the deadline for submission is September 30, 2017, but for projects that (a) obtained FIT facility approval in or after July 2016 or (b) are participating in the power source interconnection project offering process (dengen setsuzoku anken boshu process), the deadline is within six months of executing an interconnection agreement with a power company.
The deadline is specifically for "submission" of the business plan, and therefore does not require that review by METI be completed by such deadline or prohibit correction (hosei) (revision of incomplete descriptions, submission of supplemental documents, etc.) by the operator if necessary after the deadline. While failure to meet the applicable deadline will not immediately invalidate the subject approval, failure to submit a business plan at all would result in revocation of approval.
(2) METI has reported that it is currently proceeding its review process of business plans submitted by the operators, but such process is currently taking longer than expected, where even fully complete submissions are taking two months or more to review in some cases. Given such delay in their review, as we will discuss below, it is important to keep in mind how this situation affects the application process for approval of business plan amendments since any business plan which will be submitted onward would also require a certain period of time for METI's review.
As discussed in our previous Alert Letter, the business plan for a project approved under the old FIT scheme may be amended only after it has first been submitted and reviewed by METI and the project has been transferred to the new FIT scheme. Especially for those wind or biomass projects the FIT price of which will be reduced in case where those obtain their FIT approval after October 1, 2017, if any business plan change which would affect the FIT price (such as generation output change exceeding certain percentage) is expected, careful consideration for the potential length of METI's review period is quite important, because many of such changes would economically assume or require submission of FIT amendment applications for such changes prior to the deadline for securement of the existing FIT price.
In fact, in respect of the projects which will be subject to FIT price reduction after October 1, 2017, METI has officially notified that an application for a new FIT business plan approval or a FIT business plan amendment approval should be submitted by July 31, 2017 (or by June 30 for biomass) if a project wishes to secure the FIT price applicable to FIT approvals obtained by the end of September 2017, failure of which would result in the reduced FIT price applicable to FIT approvals obtained on or after October 1, 2017. In the case of a project contemplating an amendment to business plan that would affect the applicable FIT price, this means that METI's review of the business plan and transfer of the project to the new FIT scheme will need to be completed no later than July 31 (or June 30) at the latest in order to meet such application deadline. Given that it may take METI two months or more to complete its review process, it is crucial to time the submission of business plans correctly in relation to such application deadline.
If METI's business plan review is expected to take up until the due date for submission of such amendment approval application, it is also important to prepare and execute all necessary documents to be attached to such application in advance. Especially in the case of changes to generation output, an application for such amendment approval requires that the interconnection agreement reflecting such changes be included in the application documents. Therefore, after the business plan has been submitted, the operator should proceed negotiation and arrange execution of the PPA amendment in relation to the utility, in order that the operator may submit the amendment approval application for such change promptly after METI has completed its review of the business plan.
Given these circumstances, some of projects that have obtained FIT facility approval under the old FIT scheme may have to examine the possibility to re-apply for a FIT business plan approval under the new FIT scheme rather than opting for transitional procedures, which would require careful consideration.