In advance of the Act for Partial Amendment of the Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Utilities (2016 Act No. 59) that was established on May 25, 2016 and is coming into effect on April 1, 2017, at the end of July, the Ministry of Economy, Trade and Industry ("METI") announced an Ordinance for Partial Amendment of Enforcement Regulations for the Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Utilities (2016 METI Ordinance No. 84) together with a Notice of Partial Amendment of the Notice on Procurement Price and Procurement Period (July 29, 2016 METI Notice No. 212). The METI Agency for Natural Resources and Energy has also released various related documents and information.

Below is a summary of the much awaited amendments to the rules for setting Commercial Operation Date ("COD") cutoff dates and revising Feed-in Tariff ("FIT") price upon changes to panels.

I. Setting of COD Cutoff Date

1. Applicability

Applicable to PV projects that enter into grid interconnection agreements on or after August 1, 2016.

※ Specifically, such interconnection agreements must include matters related to payment of contribution in aid of construction; note that the names of applicable documents may vary depending on the electric company and scale of the power facility.

2. COD Cutoff Date

  1. Projects that obtain FIT approval in or after FY2017

    • 10kW and over: 3 years from approval date to COD
    • Less than 10kW: 1 year from approval date to COD
  2. Projects that obtained FIT approval in or before FY2016

    In principle, the initial date for calculation is the date of deemed approval under the New FIT Approval System (April 1, 2017 in principle). If, however, 1) approval is obtained on or after July 1, 2016 and an interconnection agreement is executed within 9 months after the day following the approval date; or 2) the project participates in the grid bidding process and an interconnection agreement is executed on or after April 1, 2017 but within 6 months of the date on which bidding ends, then the initial date for calculation is the date on which the interconnection agreement is executed.

3. Past Due Measures

10kW and over: FIT price is reduced or FIT term is shortened. Specific details (e.g. 5% reduction of the FIT price or 1 year reduction of FIT term for each year of delay) are to be determined after consideration by the Committee for Procurement Price, etc. this fall or later.

Less than 10kW: Approval becomes void.

II. Amendment of FIT Price Change Rules

Under the current rules for PV projects, if an application is made prior to COD for changes pertaining to PV module manufacturer or type, drop in conversion efficiency or drop in output that is equal to or greater than both 10KW and 20%, then the FIT price will be revised to the price that is applicable when the changes are approved. Under the amended rules, however, the FIT price will remain unrevised in the following cases even when changes are approved (the FIT price will continue to be changed to the price applicable upon approval if there is an increase in output).

1. Applicability

Applicable to PV projects that enter into grid interconnection agreements on or after August 1, 2016.

2. Amended Rules (changes are highlighted in yellow)

※ The FIT price applicable to "Revision" items is the FIT price for the fiscal year containing the later of either the date on which the interconnection agreement is executed or the date on which the change is approved. For "No Revision" items, the FIT price is not revised, even after a change is approved.

As described above, although PV projects that enter into grid interconnection agreements on or after August 1, 2016 can make changes to panels without an impact on the FIT price, there is now a cutoff date for COD. Given the need to balance the expansion of renewable energy with controlling costs to the public, these measures are intended to reduce discrepancies between the costs to install facilities that are projected when the FIT price is determined and the costs that are actually incurred, particularly as panel prices and other power generating costs have continued to decline for PV projects.

To the disappointment of many project operators, the amendments to COD cutoff date determination and rules for panel changes do not provide for any exceptions or exemptions in the case of 1) projects that anticipate long-term construction periods to begin with; 2) projects that require longer periods of time for interconnection (including interconnection bidding process projects); 3) projects that require longer periods of time to obtain environmental assessment and other permits and approvals pursuant to ordinances; and 4) projects that have already purchased panels and other equipment.

Further consideration must therefore be given to the construction period, the permits and approvals process and panel selection for PV projects that enter into grid interconnection agreements on and after August 1, 2016.

Amendments made under this latest ordinance also prescribe matters pertaining to application forms, approval standards, release of approval information, obligating distributors to purchase renewable energy and other transitional measures related to project planning approval under the new system.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.