Japan Renewable Alert 33: Enforcement of New Regulations on Overloading

September.08.2017

日本語: 過積載規制に関する新ルールの施行 

1. Enforcement of New Regulations on Overloading

Amendments to laws and ordinances related to overloading (kasekisai) restrictions (as discussed in our Alert Letters dated July 18, 2017 and July 21, 2017) were promulgated and made effective as of August 31, 2017.

The amendments are summarized below.

Summary: Changes to total solar cell output will now need to be submitted for amendment approval (henkou nintei).
Enforcement regulations: Changes to total solar cell output will be excluded from the scope of minor changes (keibi henkou).
FIT Price

Public Notice:
Amendment approval for changes to total solar cell output issued between April 1, 2017 and March 31, 2018 concerning solar facilities of 10 kW or greater and less than 2,000 kW "or solar power facilities of 2,000 kW or greater that are owned by operators with deemed approval (minashi nintei jigyousha)" shall be subject to price revision (as long as there are no other applicable causes for price revision, excluding (i) reductions of less than 20% of the total solar cell output or (ii) increases of less than 3 kW and less than 3% of the total solar cell output).

As discussed in our Alert Letter dated July 18, 2017, solar cell output increases of "less than 3 kW or less than 3%" were initially excluded under the proposed amendments.  In response to public comments that this gave larger scale projects an unfair advantage, the actual amended laws have implemented a stricter standard of "increases of less than 3 kW and less than 3%."

For solar power facilities of 2,000 kW or greater that are owned by operators with deemed approval (minashi nintei jigyousha), in the event that a change in solar cell output qualifies as a cause for price revision (kakaku kaitei jiyuu), the applicable FIT price has been set at JPY21 plus tax if the change is made within FY2017.

As discussed in our Alert Letter dated July 21, 2017, FIT price is not subject to revision if the notification of amendment of total solar cell output (henko todokede) was submitted before the amended laws went into effect, that is, by August 30, 2017, even if such amendment notification was not formally accepted until after such date.

Although many public comments called for remedial measures for projects that were unable to duly submit amendment notifications by August 30, unfortunately, no such measures have been implemented under the amended laws.  Therefore, if an operator wants to make a change to solar cell output on or after August 31 without having submitted an amendment notification by August 30, a new FIT price will be applied without exception, including cases where METI had granted the operator an extension for submission of the business plan (jigyou keikaku).

2. Approval of amendments to material matters concerning consent to interconnection: Does FIT price change if the planned commercial operation date is changed?

In addition to amending overloading restrictions, the amended laws remove "changes to material matters concerning consent to interconnection by electric utilities" from the scope of minor changes.   Such changes are now subject to FIT price revision in the event that an amendment approval (henkou nintei) is sought.

Initially, there was some concern among the public that even changes to the planned commercial operation date (jyukyuu kaishi yotei bi) or other schedule changes would be subject to price revision since it was unclear what exactly would be considered a "material matter" under the proposed amendments. 

In response, METI released a statement on August 29, 2017 explaining that a change would be subject to price revision only in cases of "a significant revision of the interconnection agreement that would in effect constitute a new agreement" and that the amendments did not otherwise alter how matters would be handled.  METI has subsequently stated that changes to the planned commercial operation date and other changes in schedule or operator would not be subject to price revision.  On the other hand, METI stated that the following two situations would be considered cases of "re-execution of an interconnection agreement due to changes to material matters" that would be subject to price revision:

(1) When an interconnection agreement is canceled due to non-payment of construction costs, failure to comply with curtailment rules or other reasons, and later re-executed; or

(2) When re-interconnection is contemplated due to (i) a change in the transmission system (network) of the access point (excluding in the case of "relocation (isetsu)"), (ii) a change in the facilities methods of new access lines (overhead vs underground lines), or (iii) a change in the constructor of new access lines (from applicant to general power distributor) for reasons attributable to the operator, and the interconnection agreement is later re-executed.    

Any changes related to the interconnection agreement should therefore be made with care.

3. Maximizing the public utility privileges of power producers

(1) Power producer system

Power producers (hatsuden jigyousha) constitute a new category of power company (denki jigyousha) created under the Electricity Business Act and have been in operation since April 1, 2016. 

Power operation (hatsuden jigyou) is defined as the supply to electricity retailers (kouri denki jigyousha) of a maximum interconnection power totaling over 10,000kW, using a power plant that has an output of 1,000kW or more and that meets other conditions.  Power producer status must be filed with the Minister of Economy, Trade and Industry.  Many of our clients qualify and have already proceeded with this process.

(2) Public utility privileges available to power producers  

While power producers are required to join the Organization for Cross-regional Coordination of Transmission Operators and submit procurement plans in addition to being subject to other obligations and regulations, they are also granted certain privileges under the law as power companies (public utility privilege (koueki jigyou tokken)).  Very few operators, however, seem to have a comprehensive understanding of the very significant merits that come with this status (especially in the development stages).  In addition to better known privileges such as exemption from the need to obtain permits for land conversion in the case of building transmission facilities on agricultural land or the ease of obtaining road occupancy permits, power producers may also enjoy privileges such as those outlined below.    

Law Privilege Applicable Activity
Electricity Business Act, Article 60 Right of way over third party owned property Construction and maintenance related to electric lines for power operation (excluding retailers) use
National Government Asset Act, Article 18; Local Autonomy Act, Article 238-4 Ability to create superficies, easements and other rights over administrative assets 1. Creation of superficies for electric lines managed by a power company

2. Creation of easements for ancillary facilities for electric lines managed by a power company
Act Concerning Utilization of National Forest Land , Article 7 Ability to borrow state-owned forests and fields over 5ha Power generation activities that have been approved by the head of a local public body and that meet certain other conditions

Fully understanding these public utility privileges is paramount to efficient and timely project development. Please contact Orrick for details.