Japan Renewable Alert 34: Deadline for commencement of operations for wind power, etc.

Energy & Infrastructure Alert | February.21.2018

日本語: 風力発電設備等についての運転開始期限の設定 

METI recently released an outline of proposed ordinances partially amending the FIT Act and is currently accepting public comment. The following items are of particular interest.

1. Deadline for commencement of operations for wind power, etc.

As is the case for solar power facilities of 10kW or more, any wind, hydro, geothermal or biomass facility that is newly approved in and after FY2018 will have to shorten its procurement period in monthly units commensurate with a delay in the start of operations.

For wind facilities, the deadline for commencement of operations is 4 years from the date of FIT approval, although this may be extended to 8 years in cases where environmental assessments are required pursuant to the Environmental Impact Assessment Act.  METI's policy is to not allow extensions, etc. for the commencement of operations in the case of projects that plan for an interconnection construction period exceeding 8 years.

2. Revision of price upon output increase for wind power

The FY2018 FIT price will be applied to wind projects if the later of the two days listed below occurs in FY2018 (and likewise thereafter in accordance with the price designated for each fiscal year).

  • Date of approval under Article 9.3 of the FIT Act
  • Date of amendment approval under Article 10.1 of the FIT Act (limited to the amendments below)
    • Increase in output (excluding increase deemed necessary after an interconnection assessment prior to the commencement of operations by the general power distributor or other counterparty to the interconnection agreement)
    • Decrease in output of 10kW or more and equivalent to or greater than a 20% change prior to the commencement of operations (excluding decrease deemed necessary after an interconnection assessment by the general power distributor or other counterparty to the interconnection agreement)
    • Amendment of category prior to the commencement of operations
    • Amendment of substantial matters related to the interconnection agreement

Previously, an increase in output would not result in price revision for wind projects if the increase was made before the commencement of operations and was not "10kW or more and equivalent to or greater than a 20% change".  There was no revision of price at all if the increase was made after the commencement of operations. Under METI's proposal, however, wind projects will now be treated in the same way as solar projects and be subject to price revision upon increase in output.

Although the deadline for submission of FY2017 applications for amendment approval (henkou nintei) was originally January 12, 2018, METI has confirmed that it will be accepting applications until the end of March 2018.

For projects that have obtained deemed approval (minashi nintei), an application for amendment approval cannot be submitted unless a business plan (jigyou keikaku) has been submitted first. Many of these projects will therefore enter FY2018 without being able to apply for amendment approval even if they plan to increase output. If a project participates in the "power source interconnection project offering (dengen setsuzoku anken boshu) process" with an output that is more than what was originally approved and then seeks approval for the increase after the offering process is finished, for now, it seems that the project will be subject to the price applicable at the time that approval is sought (according to METI, this is because the increase is not attributable to an "interconnection assessment prior to the commencement of operations by the general power distributor or other counterparty to the interconnection agreement").

Please contact Orrick for further information and assistance as we are currently engaged in discussions with METI regarding this issue.

3.  Proof of right to use land for wind power

For projects applying for FIT approval for the first time, non-solar power projects will now also be required to attach evidence of rent, transfer or other arrangements with landowners when applying for FIT approval if they seek a grace period (180 days from the day after the date of amendment approval, or 3 years in cases where environmental impact assessments are required by law or ordinance) for submission of formal documents in proof of the right to use land for power facilities (lease agreements, etc.).  As no details have been provided on the type of evidence required for public lands, etc., METI should be requested to handle this issue with careful attention.

4. Proposed FIT Prices

The major FIT price proposals are shown below. (Gray highlighting indicates prices that were already decided prior to FY2017. Consumption tax and local consumption tax are indicated with "α".)

Renewable Energy Facility Category

FIT Price (/kWh)

Procurement Period

Power Source

Size

FY2018

FY2019

FY2020

Solar

Equal to or greater than 10kW and less than 2,000kW

JPY18+α

20 years

Solar (under bidding process)

Equal to or greater than 2,000kW

Bid Price+α

20 years

Wind (onshore)

JPY20+α

JPY19+α

JPY18+α

20 years

Wind (bottom fixed)

JPY36+α

20 years

Wind (floating offshore)

JP36+α

JPY36+α

20 years

Wind (onshore 'replace')

Geothermal

JPY17+α

JPY16+α

JPY16+α

20 years

Biomass (methane fermentation (biomass derived))

JPY39+α

JPY39+α

20 years

Biomass (woody biomass derived from forest thinning)

Less than 2,000kW

JPY40+α

JPY40+α

20 years

Biomass (woody biomass derived from forest thinning)

Equal to or greater than 2,000kW

JPY32+α

JPY32+α

20 years

Biomass (general woody biomass and biomass from harvest of agricultural products (excluding biomass liquid fuels))

Less than 10,000kW

JPY24+α

20 years

Biomass (construction material waste)

JPY13+α

JPY13 +α

20 years

Biomass (general waste and other biomass)

JPY17+α

JPY17+α

20 years

Biomass (under bidding process)

Bid Price+α

20 years

(Notes) The categories of "less than and equal to 20kW" and "greater than 20kW" for wind power (onshore) have been combined for FY2018, and wind power (offshore) has been divided into the categories of "bottom fixed" and "floating" for FY2018.

Close attention should be paid to offshore wind as the pricing for floating offshore was suddenly added this year; further, just this month, the committee for FIT pricing issued "an opinion on pricing for FY2018 and beyond" in which it stated that in case usage rules for "general ocean area (ippan kaiiki)" is established, a bidding process would be used for offshore wind projects that is subject to such rules.          

The deadline for public comments is March 8, 2018. Please click here for details.