Japan’s Ministry of Economy, Trade and Industry (METI) has announced the results of the sixth auction for solar projects with a generation capacity of more than 250 kW. It has selected 255 projects with a combined capacity of 368.8 MW in the procurement exercise, after having initially accepted project proposals with a combined capacity of 526.5 MW for review. The capacity of these projects ranges from 300 kW to 68.6 MW.
METI has also revealed that in the procurement exercise the lowest price offered was 10.00 yen per kWh and the highest was 12.00 yen per kWh. The average winning price was 12.57 yen per kWh. Originally, METI had planned to allocate around 750 MW of solar capacity in the auction and had set a ceiling price of 12.00 yen per kWh.
One of the key issues solar developers have to address in Japan is land availability – in part due to restrictions on the use of abandoned agricultural sites – and grid constraints. This has been the primary reason for lesser bids at the set ceiling tariff.
Prior to this round, in the fifth auction held in January 2020, the lowest price offered was 10.99 yen per kWh and the highest 13.00 yen per kWh, for an average price of 12.57 yen per kWh. In this round, METI selected solar power projects with a combined capacity of only 39.8 MW in the procurement exercise, after having initially accepted 72 project proposals with a combined capacity of 185.6 MW for review.
In the fourth auction held in the summer of 2019, the lowest price was 10.50 yen per kWh, while the highest price was 13.99 yen per kWh and the average price was 12.98 yen per kWh. In the third auction finalized in January 2019, the ministry had selected seven projects with a total capacity of 196.6 MW. Average price was 15.01 yen per kWh, with the lowest bid 14.25 yen per kWh and the highest bid of 15.45 yen per kWh. The second auction, held in September 2018, was a bit more successful in terms of capacity, with around 197 MW and a lowest bid of 16.47 per kWh. In another under-subscribed first auction held in November 2017, only 140 MW of a hoped-for 500 MW of capacity was awarded, at an average price of 11.49 yen per kWh.
REGlobal’s Views: The ministry had introduced auctions in an attempt to drive solar prices down, but for now, the desired capacities are not being met under this model even after altering the lowest threshold for bids from a 2 MW minimum to 250 kW this year. Nevertheless, the shift from large-scale solar’s dominance to distributed and rooftop solar growth is paving the way for a surge in household energy storage, which is emerging rapidly under a steep government target.