Japan to Abolish 'Purchase Obligation,' 'Imbalance Exception' for Renewable Energy

2019/08/09 12:36
Kenji Kaneko, Nikkei BP Intelligence Group, CleanTech Labo
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Japan's Ministry of Economy, Trade and Industry (METI) announced an interim report that it made on the "drastic review of the feed-in tariff (FIT) policy at the end of fiscal 2020," which it has been discussing since April 2019.

The announcement was made at a meeting of the Subcommittee for Introducing Large Amount of Renewable Energy and Next-generation Power Network Aug 5, 2019.

According to METI's plan, it will (1) shift from the policy of promoting all kinds of renewable energy-based power sources by using the FIT scheme, (2) separate them into "competing power sources," which are encouraged to improve cost competitiveness, and "local power sources," which are used in local communities and (3) consider different institutional approaches.

With the different institutional approaches, the competing power sources will be encouraged to integrate with the power market as well as to cut costs through a bidding system. As for the local power sources, MEIT will maintain the basic framework of the current FIT scheme and consider the integration with the power market in consideration of the characteristics of power sources, it said.

In regard to the design of the system for the competing power sources, METI plans to decide the details from now but showed four directions this time.

First, METI will abolish "purchase obligation," which was imposed on power transmission/distribution companies under the current FIT policy, and renewable energy-based power producers will sell electricity by themselves. Second, METI will abolish "imbalance exception," with which power transmission/distribution companies provide a service of predicting the amount of power generation, and renewable energy-based power producers will predict the amount by themselves.

Third, the unit price of electricity will not be fixed, and it will change in accordance with the price in the power wholesale market. Fourth, though METI will secure a certain level of predictability regarding investment recovery, it will decrease the level of support for it.

METI's plan was announced for the drastic review of the FIT policy. (source: Nikkei BP)