Japan Approves 16% Solar-Tariff Cut on Falling Costs From July

(Bloomberg) — Japan approved a proposal to cut the
incentive for solar power by as much as 16 percent as the costs
of operation and maintenance fell.

The tariff for applications approved from April 1 to June
30 will be lowered to 29 yen (24 cents) a kilowatt-hour from 32
yen as proposed last month by a panel in charge of reviewing the
country’s renewable-energy incentives.

The tariff will be reduced again to 27 yen a kilowatt-hour
beginning in July, the Ministry of Economy, Trade and Industry
said in a statement Thursday. The rates are good for 20 years.

The cut in July will mark the end of a three-year premium
period for solar. Japan introduced an incentive program for
clean energy in July 2012, with tariffs set higher at the outset
to encourage investment.

The reduced rates for solar projects reflect lower
operating and maintenance costs for solar projects while the
capacity factor, an indicator of how often a power generator
runs for a specific time, has improved, according to a February
document by the panel.

While the incentives boosted solar installations across the
country, capacity for other renewables such as wind and
geothermal hasn’t increased as much.

Japan also set a new tariff for woody-biomass projects
smaller than 2 megawatts at 40 yen a kilowatt-hour for 20 years.
The current rate of 32 yen will only apply to projects with a
capacity of 2 megawatts or larger beginning April 1.

The ministry kept tariffs for other types of clean energy,
including geothermal and wind, unchanged for next fiscal year,
following recommendations by the panel.

To support the incentive program, costs are passed on to
consumers as surcharges.

The surcharges for an average home will more than double to
1.58 yen a kilowatt-hour from the current rate of 0.75 yen,
according to the statement. The increase will amount to 474 yen
a month for an average home, compared with the current monthly
surcharge of 225 yen.

To contact the reporter on this story:
Chisaki Watanabe in Tokyo at
cwatanabe5@bloomberg.net

To contact the editors responsible for this story:
Reed Landberg at
landberg@bloomberg.net
Tony Barrett, Ana Monteiro

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