Japan: Japan's Solar PV Market – Some Observations

 Japan has seen significant investment in its renewable energy market, especially in solar photovoltaic ("PV") projects, since the introduction of the feed-in-tariff ("FIT") regime for renewable energy in July 2012 (un-der the Act on Special Measures Concerning Procurement of Renewable Energy-Sourced Electricity by Electric Utilities (the "Renewable Energy Act")). The FIT regime was adopted to accelerate more investment in the renewable energy sector and introduce greater diversity in Japan's power mix following the Fukushima earthquake and the subsequent shut down of nuclear power plants across Japan. This article will provide a brief overview of the Japanese solar PV market and the effects of some of the recent legislative changes to the FIT regime on such market.


The Japanese FIT regime came into effect on July 1, 2012 and at the time was among the most generous in the world. The FIT regime obliged utility companies to purchase (at designated rates for fixed periods) electricity generated by renewable energy pro-ducers approved by Japan's Ministry of Economy, Trade and Industry ("METI"). Dif-ferent FIT rates were set for different types of renewable energy sources (e.g., solar, wind, biomass, etc.). The generous FIT rates coupled with the long-term power pur-chase agreements with utility companies attracted significant interests from investors, both domestic and foreign. Japan enjoyed a vibrant market for renewable power, in particular in the solar sector which accounted for approximately 60% of the total FIT applications in Japan. As at the end of 2016, the installed solar capacity in Japan stands at around 43GW; this accounts for around 4.3% of the total 2016 electricity pro-duction according to METI data. The Japanese government is currently forecasting so-lar power generation to meet around 10% of total energy demand by 2050.

Market Participants

Domestic Japanese solar developers, sponsors and trading companies were the initial pioneers in the solar energy sector. In addition to these typical players, the FIT regime also attracted non-traditional energy sector sponsors such as Softbank and asset man-agers to participate in greenfield solar projects, including rooftop solar. Following in the footsteps of the domestic developers/investors, non-Japanese developers, renewa-ble energy companies, private equity/investment funds, banks and even mining com-panies also sought opportunities to enter the Japanese solar market, investing directly or often partnering with local or other foreign investors/financiers. Wirsol (Germany), General Electric and Goldman Sachs (US), Gestamp Solar (Spain), Banpu and Kasi-kornbank (Thailand), Macquarie Group (Australia), Total (France) and Hanwha Asset Management (South Korea) are notable entrants into the Japanese solar market.

Other than development of greenfield solar projects, a secondary market has also started to take shape for investment in brownfield or late-stage greenfield solar assets or the acquisition of portfolios of solar assets. For example, in early 2016, Thailand-based Bangchak Petroleum acquired the entire Japanese solar power business of Sun-Edison which included operational solar projects across Japan. It is expected that this secondary market will grow; the appetite of new investors in turn provides a greater va-riety of exit options for solar developers in particular as solar projects reach commer-cial operation. In addition, as at the end of March 2017, three infrastructure funds holding predominantly interests in solar projects across Japan were successfully listed on Tokyo Stock Exchange's infrastructure fund exchange.

Funding Options

The Japanese "mega" banks and smaller regional banks have typically led the financing of Japanese solar projects. Some bank debt in the renewable sector (such as for wind power) achieved ratings (by Rating & Investment Information, a unit of the Nikkei Group). Other than conventional bank debt, a number of "green" rated project bonds have also been successfully placed. Japanese pension funds and life insurance compa-nies have also started to participate in the financing of renewable projects, including solar projects. For example, in February, Japan Post Insurance Co Ltd and The Dai-ichi Life Insurance Company closed a debt financing for two large-scale solar projects as part of their asset management partnership formed in March 2016. Participation by such non-traditional project lenders is perhaps unsurprising given the current ultra-low interest macroeconomic environment in Japan as these institutions seek better yields on their investments (compared to other fixed interest products such as govern-ment bonds). If interest rates continue to remain low in Japan, similar institutional in-vestors may follow suit in search of higher returns. The rating of project debt/bonds should further enhance the attractiveness of such products to such institutional inves-tors and provide further financing sources for solar and other renewable projects in Ja-pan.


Recent changes were made to the Japanese FIT regime (by way of amendments to the Renewable Energy Act) which took effect from April 1, 2017. These changes are driven by a number of objectives, including (a) achieving better control over the growth of re-newable projects, in particular the concentration in solar projects relative to other re-newable projects; (b) increasing competition and improving the cost-effectiveness of renewable projects to promote gradual independence from the FIT regime; and (c) re-ducing renewable electricity costs for the general public. Some of the key changes to the FIT regime are noted below.

New Certification System

Under Japan's current FIT regime, each renewable project has to be approved/certifi-cated by METI in order to be eligible for the relevant FIT rates. The recent changes to the FIT regime introduced tighter requirements to the certification process to require developers to provide more detailed information about their proposed project. For ex-ample, new applicants must now submit a detailed "business/project plan" setting forth information such as the location of the facility, proposed interconnection ar-rangements, maintenance plan and expected operation date. Existing projects deemed re-certified under the new system are also required to provide a project/business plan to METI by September 30, 2017. Failure to submit a project/business plan by the due date may result in the loss of the METI certification for existing projects. In addition, failure to commence operation within three years of the certification date may result in reduction in the purchase period or purchase price of the electricity produced by the relevant project.

From a developer/investor's perspective, the new certification and time limitation re-quirements impose additional burdens for the development of solar projects in Japan. However, the changes can also be seen as the next step in the evolution of the Japanese solar market in ensuring that "only the fittest projects survive" (i.e., delayed and less-viable projects will lose out to stronger and better-managed projects).

The speed at which investment has flowed into the Japanese solar sector has also given rise to grid connection issues; construction delays have also adversely impacted a num-ber of project sites. Currently, only about a third of the certificated solar projects have actually begun operation and solar company bankruptcies in Japan also hit a record high of 65 companies by the end of 2016.

These new "quality control" measures introduced by the Japanese government should result in better planning, management and growth of the renewable sector and lead to greater development certainty for developers and the actual successful implementation of renewable projects.

Competitive Auction

Another notable feature under the amended FIT regime is the introduction of a com-petitive reverse auction process for solar projects with a capacity greater than 2MW. Under the new system, METI will solicit bids from developers for a certain identified generation capacity. The first bid, planned for late 2017, is expected to be around 500MW. Bid prices may be offered by bidders, denominated in Japanese Yen, and each bidder will be required to post a bond in support of its bid submission together with a project/business plan.

The intent of such a competitive auction system is to promote greater competition among solar developers and ultimately lead to a reduced electricity price for consum-ers. Although the FIT regime has been effective in incentivising investments in the re-newable sector, the generous FIT rates have had an adverse impact on domestic elec-tricity prices as the costs of the Japanese FIT regime are (indirectly) borne by Japanese consumers in the form of a renewable energy levy included in their monthly electricity bill. The shift from a FIT regime to a competitive auction process for large-scale solar projects is unsurprising given solar projects have comprised the bulk of investment in the renewable sector to date. A competitive auction regime is also in line with the trend seen in a number of jurisdictions with maturing renewable energy markets such as Germany and Abu Dhabi of moving away from a FIT regime to market-based auctions.


The existing Japanese FIT regime has been an effective tool in growing solar energy generation capacity attracting a wide array of domestic and international investors. The low interest rate environment and debt liquidity provide a number of financing options and both traditional and non-traditional lenders are keen to provide liquidity to sup-port investments in Japanese solar projects.

Recent changes to the Japanese FIT regime will tighten the FIT certification processes and timeframe for developing solar projects in Japan. The nature of the new competi-tive auction system to determine pricing will also impact the economics of large scale solar projects. These measures are likely to lead to further consolidation of solar pro-jects in the Japanese market (providing acquisition opportunities) but also to a more disciplined solar power generation environment where only the strongest projects will survive.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions