Japan PV Market

Japan's PV Market: Booming Amidst Challenges
Japan has been experiencing a significant boom in solar energy development, with more than 6.7 GW of photovoltaic (PV) projects approved between July 2022 and January 2023, according to the Ministry of Economy, Trade and Industry (METI). Over 47 percent of these projects exceed 1 megawatt (MW), earning the local moniker of "Mega Solar." As Japan progresses with these large-scale solar installations, questions arise about whether it can ascend to become the world's second-largest PV market. Despite the optimism, several challenges remain, particularly concerning grid capacity and stability.

Grid Issues and Regional Disparities
As Japan brings more Mega Solar projects online, grid capacity has become a critical concern. Hokkaido Power Electric Company, one of Japan's investor-owned utilities, reported that its ultra-high-voltage transmission capacity for PV systems over 2 MW is currently capped at 400 MW. By March 31, the utility had received applications totaling four times this capacity. Consequently, three-quarters of the applied projects cannot access the grid or must reduce their scale. Hokkaido has notified large project applicants about this grid capacity shortfall. METI has urged project developers to consider less congested regions for new solar developments.

The Hokkaido region, with its available and relatively inexpensive land, accounts for about 25 percent of large PV projects approved under the national Feed-in Tariff (FIT) scheme, despite the utility serving less than 3 percent of the national electricity demand. This regional imbalance underscores the need for more strategic distribution of solar projects to optimize grid usage and maintain stability.

FIT Adjustments and Regulatory Changes
The national FIT mandates utilities to provide grid access and purchase all power generated from renewable systems, with some exceptions. However, to ensure grid stability, METI announced emergency plans on April 17, allowing utilities more leeway to restrict or deny grid access. The original FIT rules included a 30-day compensation rule, where utilities had to compensate renewable developers if they were asked to limit electricity production for more than 30 days a year. METI is now considering removing this compensation requirement, with a final decision expected in mid-May.

Major Projects and Future Prospects
One of the largest PV projects in Japan is a 400-MW (AC) project on Ukujima island in Nagasaki Prefecture, developed by the German firm Photovolt Development Partners GmbH. Approved by METI in March before the FIT rate was reduced from ¥40/kWh to ¥36/kWh, the project will be phased in several stages. Electricity generated will be transmitted to the Kyushu mainland via a high-voltage direct current undersea cable, addressing regional demand disparities. Kyushu Electric Power Company, which has approved over 800 MW of Mega Solar projects, represents 25 percent of the national total. Despite grid capacity concerns, the company has yet to announce any access limitations.

Post-Fukushima Energy Transition
Following the March 2011 Fukushima Tsunami-Nuclear Disaster, Japan has been striving to replace nuclear power with natural gas and other energy sources. The FIT is central to diversifying Japan’s energy mix. However, achieving this requires not only sufficient grid capacity but also deregulating grid access to new electricity generators. A local developer noted, "First come, first serve. If you act quickly enough, you can be a winner," reflecting the competitive nature of the market. Another compared the situation to Spain’s renewable energy policy challenges, suggesting potential pitfalls in Japan's approach.

Japan's FIT program, modeled after Germany's, aims to establish a sustainable PV market. As the government continues to react and devise new regulations in response to emerging challenges, there is a risk of replicating the boom-and-bust cycle seen in Spain, where sustainable growth was not achieved. The ongoing adjustments and proactive measures will be crucial in determining the long-term success and stability of Japan's PV market.