Post-FIT Japan: Manufacturers Promote Solar PV with Inverter-Integrated Energy Storage

The Japanese government has announced the new feed-in tariff (FIT) rate for the fiscal year 2015, effective April 1st. The new FIT rate for residential solar photovoltaic (PV) systems will be ¥33/kWh, down from ¥37/kWh the previous fiscal year.

“In a few years, the Japanese PV market will be shifted to the self-consumption mode, in which excess generated electricity (via PV) will be stored (instead of being sold) due to declining FIT incentive rates and raising electricity prices, and pushed by upcoming events such as the retail electricity deregulation in 2016 and utility restructuring of unbundling generation, transmission, and distribution in 2020,” said a manager from Sharp, a leading PV system maker in Japan. 

Credit: New Energy and Industrial Technology Development Organization (NEDO).

The fiscal year 2015 represents the end of “premium” FIT rates that the national government promised to provide during the first three years (2012-2015) of the FIT program. PV homeowners and PV industry participants are uncertain about how much a new buy-out rate will be after this fiscal year.  “People who are familiar with the electricity industry are projecting much lower rates — between ¥9 and ¥12/kWh,” commented a Japanese PV integrator about the post-FIT buy-out rate.

The post-FIT rates will also influence existing residential PV system owners’ economics. The excess-generated electricity buy-out for PV systems smaller than 10 kW, mostly residential systems, started in November 2009 before the FIT for PV systems larger than 10 kW was launched in July 2012. About 470 MW worth of residential PV systems were enrolled in the excess-generated electricity buy-out program in 2009 under the rate of ¥48/kWh for a period of 10 years. 

This means that the premium buy-out period will be over by the end of October 2019. The future rate for the excess output from the 470 MW of residential PV capacity is currently unknown.

Besides the reduced FIT and expiring FIT program, electricity prices in Japan have been increasing. For example, at the Kansai Electric Power Company’s service area, the average cost of residential electricity went up by close to 30 percent since the Fukushima disasters in March 2011. The utility is currently requesting an approval of a further rate increase of 10.23 percent.

PV Makers Promote Inverter-Integrated Storage Systems

A combination of low buy-out rates and high electricity prices will push Japanese PV homeowners to become more energy independent from utilities by integrating storage systems. 

Kyocera, a leading PV system maker in Japan, has released a new residential, hybrid energy storage system, in which an inverter function is integrated. The system marketed as “Multi DC Link” uses a lithium ion (Li-Ion) battery with a storage capacity of 7.2 kWh.

Kyocera Multi-DC Link Energy Storage System, Credit: Kyocera.

Regular PV systems with energy storage battery go through power conversions twice: converting direct current (DC) power from PV panels into alternate current (AC) power via an inverter; and AC power from the inverter into DC power to store in the battery. “By integrating the power conversion function of PV and energy storage, the Multi DC Link system can directory store DC power from PV into the energy storage, significantly reducing energy loss in the conversion process and therefore increasing the efficiency in storable power to 96 percent from 89.8 percent,” said Ichiro Ikeda, general manager of the solar energy marketing division at Kyocera Corporation.

Sharp, another leading PV system maker in Japan, has been marketing residential storage systems combined with a cloud-based platform. By accessing information such as weather forecasts, utilities’ rate plans, and the national government’s warning of voluntary power-saving, the system can determine the best times to release and store electricity for its consumers.

For example, if rain is forecast for the next day, the system will store electricity from the grid during the night when the electricity rate is the cheapest and release power during the daytime when the PV system cannot produce electricity.

Sharp promotes its hybrid storage systems to those who bought PV systems from Sharp in the past.  Similar to Kyocera’s, Sharp’s cloud-based storage systems also include a power conversion function (inverter). Because inverters generally need to be replaced every 10 years, “We recommend our hybrid storage systems to owners of PV systems that need to replace an inverter or that reach the end of the (10-year) warranty,” said the manager at Sharp. 

The National Government Supports Batteries

Although interest in and sales of storage systems is slowly rising, the system cost is not economical yet. The average battery cost is around ¥200,000 to ¥300,000/kWh in Japan. To support deployment of energy batteries, the Japanese government started providing incentives for stationary lithium-ion energy battery systems in 2014.

During the fiscal year 2014, the government had a budget of ¥10 billion to support about 20,000 systems. “For the fiscal year 2015, the budget is supposed to be ¥13 billion,” said Ikeda. 

There are currently 125 storage battery systems listed as eligible to receive an incentive. For a residential system, the maximum incentive is ¥1 million. The calculation for incentive payments is determined based on three pricing points:

  1. (Pre-tax) purchase price,
  2. Market standard price (determined by the national government, reflecting the current market conditions) and
  3. Target price (that the government projects will be reached in 3 years).

When the purchase price is higher than the standard price, the incentive will be one-third of the difference between the purchase price and target price. When the purchase price is equal to or lower than the standard price, the incentive will be two-thirds of the difference between the purchase price and target price.

For example, one of Sharp’s cloud-based, stationary lithium-ion energy battery systems (storage capacity of 4.4 kWh) has a standard price of ¥1,540,000 and a target price of ¥476,000. If the system is purchased at ¥1.6 million, above the standard price, the incentive will be approximately ¥370,000 while if the system is purchased at ¥1.5 million, below the standard price, the incentive will be approximately ¥680,000.

Japan’s Incentive Calculation for Stationary Lithium-ion Energy Battery Systems 

The reason behind this calculation method, providing higher incentive for systems with lower retail prices, is to encourage system makers to bring down the system cost.

While the U.S. residential solar PV market celebrated surpassing the 1-GW market for the first time in 2014, the Japanese residential PV market was over 2 GW in 2014.  Although the market in 2014 experienced the first market decline since 2007 and is expected to be rather flat for 2015, Japan has cumulatively installed over 7.5 GW of residential PV capacity.  This is potentially a significant storage system market, if the inverters of those systems are replaced with hybrid storage systems in coming years.  

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Junko Movellan is a Solar Industry expert who writes and analyzes the US and Japan PV downstream markets. She has more than 15 years of experience in the PV industry, analyzing industry trends and developing business strategies for global companies. She previously worked as a Senior Analyst at Solarbuzz and as a Market Development Analyst at Kyocera. She is based in California, USA.

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