Japan: Renewable Alert Letter 31: Overloading Regulations

Overloading Regulations

On July 6, 2017, METI and the Agency for Natural Resources and Energy released proposals for revision of laws and ordinances related to long-speculated restrictions on overloading (kasekisai).

The proposed revisions are quite harsh in that if a solar power project that has obtained government approval under the FIT scheme were to subsequently add panels to increase total solar cell output above a certain level, the applicable FIT price would be the current price in effect at the time of such increase for the entire generation output as opposed to the increased portion alone.

Outline of such proposed revisions are as follows:

Summary: Changes to total solar cell output will now need to be submitted for amendment approval (henkou nintei)
Enforcement regulations: Changes to total solar cell output will be excluded from the scope of minor changes (keibi henkou)
FIT Price Public Notice: Amendment approval for changes to total solar cell output issued between April 1, 2017 and March 31, 2018 concerning solar facilities of 10 kW or greater and less than 2000 kW "or solar power facilities of 2000 kW or greater that are owned by operators with deemed approval (minashi nintei jigyousha)" shall be subject to price revision (as long as there are no other applicable causes for price revision, excluding (i) reductions of less than 20% of the total solar cell output or (ii) increases of less than 3 kW or less than 3% of the total solar cell output)

While METI has not specifically stated when the revisions are to be implemented, it has been reported in the media that they will go into effect no later than in September of this year at the latest following the August 4 deadline for public comments (as discussed below) and the subsequent consideration period.

Although the proposed revisions are not expected to be applied retroactively to operators that in the past overloaded after having acquired their FIT approval, they present an issue for operators that wish to change total solar cell output for a facility that was approved under the old FIT system.

That is, under the current new FIT system, an operator may submit an advance notice of such change (jizen henkou todokede) for METI's acceptance only after a Business Plan stating pre-change total output has first been submitted to and reviewed by METI. In this regard, it should be noted that METI's principle position is that the total solar cell output after the contemplated change may not be stated in the Business Plan, and that METI's review of Business Plans is currently delayed (see June 27, 2017 Alert Letter).

Further, note that an advance notice of change will not be considered formally "accepted" by METI until it has completed its review, currently requiring between one and two months.

Given this timeline, the proposed revisions are likely to already be implemented and in effect by the time changes to total solar cell output have been able to be completed for projects that were approved under the old FIT system. Turmoil in the market may be unavoidable if the proposed revisions are implemented without some sort of appropriate grace period, especially considering that although changes to total solar cell output has been categorized as a minor change under the old FIT system, minor change notices for such changes could not be submitted after January 21, 2017 due to system transition, and further that under the new FIT system, while an operator cannot make any changes to the project which has been approved by March 31, 2016 before METI has reviewed the Business Plan and completed such review, many of the projects have not yet been transferred to the new system due to delayed review process by METI, substantively frustrating such changes.

Public comments regarding the proposed revisions are being solicited at the link below through August 4, 2017.

http://search.e-gov.go.jp/servlet/Public?CLASSNAME=PCMMSTDETAIL&id=620117031&Mode=0 (only in Japanese).

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.

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