Japan Panel Proposes Solar Tariff Cut of as Much as 16% on Costs

(Bloomberg) — Japan is considering reducing the incentives
for developers of solar power projects by as much as 16 percent
to reflect lower operating and maintenance costs.

The tariff for applications approved between April 1 and
June 30 could be cut to 29 yen per kilowatt hour from the
current rate of 32 yen under a proposal presented today by a
panel in charge of reviewing the country’s renewable-energy
incentives. The tariff would be cut again to 27 yen per kilowatt
hour beginning in July, the panel recommended.

The lower tariff could cool investments in Japan’s booming
solar market by making it less attractive for developers eager
to lock in contracts at some of the highest rates in the world.

The tariff reductions are part of an annual review of the
mechanism used by Japan to encourage investments in renewable
energy. The incentive, known as a feed-in-tariff, offers long-term contracts to clean energy producers at above-market rates.
Japan’s feed-in-tariff rates are for as many as 20 years.

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

Data compiled by the ministry showed operating and
management costs for solar projects have declined while the
capacity factor, an indicator of how often a power generator
runs for a specific time, has improved.

The recommended tariffs require approval by trade minister
Yoichi Miyazawa.

Japan also plans to set a separate, higher tariff for small
woody-biomass projects to encourage power generation that taps
into unused, domestically available resources.

The panel proposed setting a new tariff for woody-biomass
projects smaller than 2 megawatts at 40 yen per 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, according to a document by the panel.

Tariffs for other types of clean energy, including
geothermal and wind, should remain unchanged next fiscal year,
the committee recommended.

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
Iain Wilson, Abhay Singh

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