On January 9, the Ministry of Economy, Trade and Industry decided to set the solar purchase price for business in fiscal 2019 to 14 yen / kWh. FIT purchase price declines by 4 yen from 18 yen / kWh in 2018, and it is reported that it will have a big impact on solar power generation business.
Why is it 14 yen?
What will happen in the future for the upper limit price of solar power bid and FIT purchase price after 2020?
It can be understood that the level of 14 yen reflects solar power bid result in the second half of 2018 published on December 18. At this time the upper limit price was 15.50 yen, the lowest bid price was 14.25 yen, the total bidding output was 197,000 kW. That is, the lowest bid price was taken as the purchase price. This has a strong message to the solar power industry. Even FIT will not set a purchase price that exceeds the market competitive price in the future, so it is felt METI’s decision that virtually no subsidy will be contributed.
As a background to this idea, first, the problem that solar power gives to the electric power system is becoming obvious. In FY 2018, resumption of supply of solar power generation was delayed at the time of Hokkaido Blackout. Also, Kyushu Electric Power Co. ‘s first suppression of solar power generation output was done. We have not found any practical answers to these issues.
In addition, it is also an important political factor that in fiscal 2019 the consumption tax rate rise (8% → 10%) is under way. The FIT public burden has already reached about 3 trillion yen (corresponding to 1% of the consumption tax rate), and strong criticism is seen. In order to smoothly realize the tax increase after the Upper House election in summer, there is a possibility of taking such measures as precaution.
In the future, how much will the upper limit price and FIT purchase price fall?
There are two factors that can be considered as the lower price limit.
First is the wholesale electricity market price. First of all, the thermal power generation cost which is burned down by the increase of solar power generation is the price for solar. In this paper, we told you that 9 yen / kWh can be an indicator of JEPX market price with reference to fuel cost of gas fire power.
Second is the so-called graduated FIT power supply purchase price since November 2019. The new power has already announced the purchase price of these power supplies, and at the present time it is commonly 10 yen or less. Power utilities will sequentially announce their purchase price after the end of 2019 fiscal year.
It is unthinkable that future purchase price of solar power generation will fall below these two levels. In addition, it is safe to assume that environmental premium will be added to these levels. In FY 2019, it decreased by 4 yen in the previous fiscal year and it was a big impact, but for the time being, it is considered that there is no significant price drop like this time.
However, there is a risk that people in the solar power generation industry should keep in mind in the medium to long term. Electric power companies are gradually forced to suppress the output of coal-fired power as solar power generation increases. In other words, reducing firing and heating power are now moving to coal power supply. In the medium to long term, as a purchase price of solar power generation including FIT, power utilities may argue the equivalent of coal-fired unit price.