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Foreign panel makers gain ground in Japan's solar power market

Cost-competitive foreign players bring down purchase prices 30%

A Canadian Solar power plant in Kumamoto Prefecture.

TOKYO -- Solar-farm operators backed by foreign panels makers are making inroads into the Japanese power market, with four overseas players clinching contracts to sell electricity through government-led bidding Tuesday.

A total of eight companies received contracts for nine projects in the latest bidding. The lowest accepted price was 17.2 yen (15 cents) per kilowatt-hour, down 30% from 24 yen in fiscal 2016, while the highest offer was 21 yen. The price in 2012 when the feed-in-tariff system was introduced was 40 yen.

The Ministry of Economy, Trade and Industry introduced a reverse auction process for mega solar farms with a capacity of over 2,000kW, whereby power companies provide their desired selling price, and contracts are awarded starting with the lowest tender. The aim is to improve on the feed-in-tariff system, which sets the price at which utilities must buy electricity generated by renewable energy, and bring down prices.

Overseas competition

A Japanese arm of Canadian Solar--a leading solar panel makers with production centers in China--was one of the four foreign companies.

Handling everything from panel production to plant construction and maintenance gives the company a cost advantage, said Jeff Roy, president of Canadian Solar's Japanese unit.

Affiliates of South Korean panel maker Hanwha Q Cells and Spanish solar energy company X-Elio also won contracts. X-Elio, which operates plants in 18 countries, can procure cheap panels as well as other components. The company sees an opportunity in Japan for its relatively high prices compared to other countries that sell solar power-generated electricity at around 10 cents.

The price competitiveness afforded by cheap panels has enabled foreign players to expand presence in the Japanese market. Overseas makers' products are up to 30% cheaper than their Japanese counterparts, a significant difference when considering that panels constitute as much as half of a solar power plant's expenses. The business cost in Japan per kilowatt is double Europe's level, at about 300,000 yen, according to METI.

Japanese energy companies are increasingly adopting cheap panels from foreign makers as well. Chiba-based Hina, which offered the lowest tender, uses Chinese-made panels. Half of the Japanese companies that won bids are believed to use panels from overseas, giving little benefit to domestics makers.

The feed-in-tariff system was created to help renewable energy take root in Japan by initially setting high purchase prices. The burden on citizens grew, however, as higher costs were passed on through electricity bills. The government introduced the auction system to reduce prices and correct the issue.

The bidding was aimed at securing 500,000kW in capacity, but the total output of awarded contracts was only about 140,000kW. Many Japanese companies seemed to have deemed such an auction unprofitable and chose not to participate.

The ministry will hold two rounds of bidding a year starting fiscal 2018.

(Nikkei)

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