TEPCO Applies New Method to Solve Problem of Stagnant Solar Projects

Payment of contribution in aid of construction or cancellation of contract

2019/03/27 13:46
Kenji Kaneko, Nikkei BP Intelligence Group, CleanTech Labo

Japan's Ministry of Economy, Trade and Industry (METI) announced the results of TEPCO Power Grid Inc's efforts to secure an available capacity of a power grid at a meeting of the Grid Working Group (WG) of the New and Renewable Energy Subcommittee March 18, 2019.

This time, METI announced that TEPCO Power Grid has implemented a scheme of canceling grid connection contracts with power companies having power plants that have not started operation for a long period of time and have not paid contribution in aid of construction and that 84% of such plants (359) canceled the contracts or withdrew for fiscal 2012.

METI plans to increase available capacity by promoting the application of this "canceling scheme" to the service areas of general power producers other than TEPCO Power Grid and freeing capacities occupied by stagnant projects.

With the canceling scheme of TEPCO Power Grid, the company first reissued bills and newly asked the 359 commercial low-voltage plants (total capacity: about 10,000kW) that have applied for grid connection in fiscal 2012 but have not yet paid the contribution in aid of construction to pay the contribution. At that time, it enclosed a "letter for canceling application" and asked them to send back the letter if they do not have a will to connect to a power grid.

As a result, 58 of the 359 plants paid the contribution, and 301 canceled their contracts or withdrew. So, it became clear that about 80% of them will not connect to the grid, creating a new available capacity.

As for power plants that have not paid the contribution in aid of construction, TEPCO Power Grid has (1) 22,010 (about 830,000kW) commercial low-voltage plants that applied for grid connection in fiscal 2013-2016, (2) 414 (about 320,000kW) high-voltage plants that applied for grid connection in fiscal 2012-2016 and (3) six (780,000kW) extra-high-voltage plants that applied for grid connection in fiscal 2012-2016. And the company plans to move forward with the canceling procedure by using similar schemes.

New capacity of about 3,000,000kW across Japan

If about 80% of the commercial low-voltage, high-voltage and extra-high-voltage power plants that applied for grid connection in or after fiscal 2013 also cancel their contracts or withdraw, a free space of more than 1,000,000kW will be created in the service area of TEPCO Power Grid.

If the canceling scheme is applied to the service areas of other companies, in accordance with the policy of METI, and a similar percentage of power plants cancel their contracts or withdraw, a new capacity of about 3,000,000kW can be created in Japan.

Originally, in order to obtain certification based on the revised feed-in tariff (FIT) policy implemented in April 2017, it is necessary to conclude a grid connection contract after paying the contribution in aid of construction to a power company. However, in fact, there seem to be many projects that were certified without paying the contribution because they repeatedly extended the payment due date.

On the other hand, many power plants that have not been operated for a long period of time face the reduction in purchasing price or are required to start operation by a newly-set deadline due to the FIT rules changed in December 2018. Some of them gave up on commercialization, and others found it difficult to sell the project (certification and right to connect to a power grid). As a result, many projects were "locked up" while keeping their grid capacities.

To solve such a problem, METI has been revising the rules of the policies for power transmission/distribution business so that power companies can refuse grid connection and revoke capacities allocated to power plants that have not paid the contribution in aid of construction.

This time, it was a great achievement that 80% of the targeted plants had canceled their contracts or withdrawn in the service area of TEPCO Power Grid, which actually carried out the canceling scheme. And it is expected that the "exit" of locked-up projects will make it easier for new projects to connect to power grids.