Japan Considering Introduction of FIP Policy

2019/06/17 16:05
Kenji Kaneko, Nikkei BP Intelligence Group, CleanTech Labo
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Japan's Ministry of Economy, Trade and Industry (METI) summarized issues related to the drastic review of the feed-in tariff (FIT) policy and showed future directions by accepting proposals from IEA at a meeting of the Subcommittee for Introducing Large Amount of Renewable Energy and Next-generation Power Network June 10, 2019.

As for the summary of issues, METI stressed the "integration with the power system" in addition to "further reduction of costs and public financial burden," an issue that has been pointed out for some time.

Specifically, METI pointed out issues such as "With the current system, renewable energy-based power producers using the FIT scheme do not bear the responsibility of adjustment because of the imbalance exception even in the liberalized power market," "It is a system that evades the risk of unsold power because of the obligation of purchasing power" and "They are issues caused by the segregation from the power market." METI considers that renewable energy has no marginal cost and, theoretically, its price can be agreed 100% in the spot market.

On the other hand, according to METI, countries that adopted the FIT policy early are shifting to the "FIP (feed-in premium)" system in the aim of integrating the renewable energy markets. With the FIP system, when renewable energy-based power producers sell power at a market price (e.g. at the time of selling power to the wholesale electricity market), a premium is added. The premium is given in consideration of sale price and market changes.

At an experts' meeting that took place in the aim of discussing the revision of the FIT policy in 2015, MEIT showed the FIP system as one of the options. However, it was not adopted, and the "bidding system" was introduced instead. After that, the introduction of the bidding system for large-scale projects made some contributions to cost reduction, but the adjustment burden of general power transmission/distribution companies increased, raising an issue of how to deal with FIT-based renewable energy producers, which do not bear the adjustment cost because of the FIT imbalance exception.

Judging from the summary of issues announced this time, it can be said that METI has the following plans for the "drastic review": (1) shifting from the current purchase obligation of power transmission/distribution companies to the system in which renewable energy-based power producers select power purchasers such as negotiated transaction with retail electricity businesses and sale to the power market and (2) abolishing the FIT imbalance exception and placing the adjustment burden also on renewable energy-based power producers.