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Japan to slash fixed prices for solar power feed-ins

Government aims to push out generators that bide their time

A solar power facility in Japan. Many companies have signed up to sell solar energy under the feed-in tariff, but have not actually taken any concrete steps to produce it.   © Reuters

TOKYO -- In an overhaul of a feed-in-tariff scheme introduced six years ago, the Japanese government will bring down prices promised to solar power producers in the past and ease the burden on the major power companies required to buy energy from them.

The aim is to shut down solar power producers that have signed up for the scheme but have yet to actually generate electricity, avoiding the risk of the producers coming online at once, and drowning utility companies in extra burdens.

The Ministry of Economy, Trade and Industry will propose a revision to the system early next week, targeting solar companies approved for the feed-in tariff in fiscal 2012 through fiscal 2014.

By shutting idle solar producers out, the government hopes to usher in new players ready to start producing power at lower cost.

It is rare for a government to backtrack on a price it has pledged. The original prices were set especially high as part of an effort to promote renewable energy, especially after the 2011 Fukushima nuclear disaster. But the reality was that many companies signed up only to wait for solar panel prices to fall, knowing that they were assured a profitable price to sell power at.

Under the new rules, any solar power producer that requests a connection to power transmission lines in April 2019 or beyond will be able to sell electricity only at rates from two years prior. Solar producers that initially received approval to sell for 40 yen (36 cents) per kilowatt-hour in fiscal 2012 can only sell for the fiscal 2017 price of 21 yen.

A company that has not yet started building facilities most likely will not be able to get up and running before the cutoff, and will be forced to sell electricity at a lower rate than it first signed up for.

Businesses that sign up for the tariff but produce no electricity in effect are locking out new players, since utilities need to reserve a certain amount of transmission capacity for all producers approved for the feed-in tariff. The new rule is meant to push out companies that were sitting on their contracts with no concrete plans to start generating solar power.

Of the solar power capacity claimed under the program from fiscal 2012 through 2014, when prices were high, around 24,000 megawatts has not actually being used.

Meanwhile, Kyushu Electric Power on Friday requested that solar power generators halt operations for part of Saturday. The utility has the ability to supply 12,930 MW during peak sunlight hours, but with falling temperatures reducing the need for air conditioning, demand is expected to be only 8,280 MW. Even after sending some of the excess outside the Kyushu region and storing some, it was expected to have 430 MW left over.

A large imbalance in the supply and demand of electricity can cause widespread blackouts. Kyushu Electric is trying to close the gap by reducing solar power generation in the hours between 9 a.m. and 4 p.m.

This is the first time in Japan that a utility has asked renewable energy producers across a large area to cut output. Solar power has grown in Kyushu, the southernmost of Japan's four main islands, and met more than 80% of electricity demand in Kyushu Electric's service area on some days in August.

Nikkei staff writers Yuta Takagi and Yukinori Hanada contributed to this article.

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