Japan's first solar auction pushes prices down by nearly a quarter

[TOKYO] Japan's first auction for contracts to provide solar electricity pushed prices down by nearly a quarter from a previous system, but the cheapest bid was still more than eight times a record-low achieved recently in overseas markets, government data shows.

The lowest accepted price for solar projects was 17,200 yen (S$208) per megawatt hour (mwh), according to documents from the Ministry of Economy, Trade and Industry (METI), which handled the auction.

That was down from 24,000 yen per mwh in the year through March 2017 for projects approved under METI's feed-in-tariff programme set up in 2012 to encourage a switch to renewables after the Fukushima nuclear disaster.

A recent solar power auction in Mexico yielded bids as low as US$17.70/mwh, the latest in a series of ever lower prices for sun-powered projects that is upending energy markets around the world.

"It is encouraging to see prices in Japan coming down. However, it is worrying that prices are falling faster in other parts of the world," said Tomas Kaberger, energy and environment professor at Chalmers University of Technology in Sweden and chairman of the Renewable Energy Institute in Tokyo.

"Costs for solar power in Japan are almost three times as high as in countries in Europe with the same solar resources,"he added.

High guaranteed prices in Japan for solar power, which were set at 40,000 yen/mwh hour in 2012, led to a surge in investment as project developers sought to lock-in high returns for the 20-year payment periods.

But the government has been steadily cutting prices to reduce the burden on electricity users, who have the guaranteed rates added to their bills. The introduction of auctions was the latest step in attempts to cut costs.

The government was seeking bids for 500 megawatts of capacity, but secured valid bids for just over 140 megawatts, according to METI.

Japan's solar power capacity has soared to more than 40,000 gigawatt-hours from virtually zero before 2012.

The country plans to generate 24 per cent of its power from renewables by 2030, up from 14.6 per cent in 2015, according to the industry ministry.

REUTERS