Japan will cut its tariff for purchases of solar power by as much as 12 percent as costs to install systems to generate energy from the sun decline, according to an estimate by Bloomberg New Energy Finance.

The so-called feed-in tariff for solar could fall to as low as 37 yen (41 cents) per kilowatt hour for 20 years from a current rate of 42 yen per kilowatt hour, according to Yugo Nakamura, a Tokyo-based analyst with New Energy Finance.

A committee appointed by the government began talks yesterday on setting above-market rates for clean energy project applications for the year starting April 1.

Average system costs for non-residential solar, which includes photovoltaic panels, power conditioners and installation, has fallen to 280,000 yen per kilowatt since October, the Ministry of Economy, Trade and Industry said in a document posted on its website yesterday. That was 14 percent below the 325,000 yen per kilowatt amount used by the committee to set the solar tariff for the year ending March 31.

“Equipment costs for solar power have been declining considerably,” Toshimitsu Motegi, the minister for economy, trade and industry, said yesterday at a news conference. The solar tariff could possibly be cut somewhere in the range of 35 yen to 39 yen per kilowatt hour, Motegi said.

Under the incentive program for clean energy, the industry ministry sets tariffs based on proposals by the committee.

Japan’s feed-in tariff program started in July to promote clean energy after the 2011 Fukushima nuclear crisis.

Boost to Investment

The program has boosted investments in utility-scale solar projects and has prompted companies such as Softbank Corp., Japan’s third-largest mobile-phone company, to enter the market.

Solar pioneers Spain and Germany have been winding down subsidies in the form of feed-in tariffs, along with other European governments in the past two years. Developers have begun trying to build large-scale plants to sell electricity at market prices following a decline in equipment costs.

Solar panel prices have dropped to $0.8 per watt on Jan. 14 from $0.99 per watt on Jan. 16, 2012, according to data on multi-crystalline silicon module prices compiled by Bloomberg New Energy Finance.

Copyright 2013 Bloomberg

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