FIP conversion of FIT power sources (so-called FIP formation) has become a hot topic.
FIP conversion is an economical method of accelerating the payback of investment in storage batteries by installing storage batteries alongside photovoltaic power generation equipment, charging during the low wholesale price period and discharging during the high wholesale price period, thereby gaining economic benefits.
However, because of the complexity of the FIP system, it is difficult to understand how the economic benefits are achieved by converting from FIT. In the following, we will explain the specific methods of FIP conversion.
First, let us briefly explain the difference between FIT and FIP schemes (details of the schemes are omitted below for the sake of clarity).
FIT is a system under which electricity generated from renewable energy sources is purchased at a fixed price (the price level varies depending on the year of commencement of operation). In contrast, FIP is a system that adds a certain premium to the wholesale electricity market price obtained by individual renewable energy sources, and maintains (or attempts to maintain) a purchase level similar to that of FIT.
(Examples of figures)
A Feed-in tariff for FIT power sources: 30 yen/kWh
B Wholesale electricity market price of FIP power supply: 8 yen/kWh*.
*Price calculated based on the average power generation pattern of each renewable energy source
C Premium for FIP power sources: 22 yen/kWh (=A-B)
Based on the above formula, individual renewable energy sources that have converted to FIP will receive a premium of 22 yen/kWh in addition to the wholesale market price based on their power generation patterns.
The question here is how much the wholesale market price of each FIP-converted renewable energy source will be.
To begin with, the wholesale market price of 8 yen for FIP power sources, as shown in the numerical example, is the wholesale market price based on the actual power generation of all renewable energy sources in each area.
However, if an individual FIP converted renewable energy source generates electricity in a different pattern from the average, the wholesale electricity market price obtained by that source will be different. This means that the power supply will be sold at 34 yen (= 12 yen + 22 yen), which is a benefit of 4 yen compared to the 30 yen before the FIP conversion.
This is where the storage batteries come in: by converting FIT solar facilities to FIP and installing storage batteries at the same time, the power generation pattern can be greatly changed by repeatedly recharging during the low wholesale price period and discharging during the high wholesale price period.
This can significantly increase the wholesale market price of the FIP-converted solar equipment and at the same time earn a premium (22 yen in the numerical example).
In particular, the benefits of recharging during times when solar power generation is curtailed are extremely large, significantly shortening the payback on the investment in storage batteries, and allowing the economic benefits to continue to accrue thereafter.
This type of FIP conversion (FIP formation) is currently underway in Kyushu and other regions where renewable energy curtailment is active, and this type of movement is expected to spread as renewable energy curtailment expands regionally in the future.
From the perspective of reducing solar curtailment, METI has adopted a policy to encourage FIP by promoting such a business model that utilizes storage batteries. The conversion of FIT power sources to FIP is expected to become a business opportunity for solar and storage batteries in the future.