Solar PV cheaper than LNG-power in Japan makes massive deployment possible
Tomas Kåberger,Chair of Executive Board, Renewable Energy Institute
Romain Zissler, Researcher, Renewable Energy Institute
Massive introduction of renewable energy is only possible if efficient regulation and industrial learning reduce costs so that renewable energy costs are less than those of fossil and nuclear energy. In many parts of the world that has now become reality.
So far, the situation in Japan has appeared very different. A combination of barriers to access the grid, unfavourable treatment once connected, difficult technical requirements and tedious rather than effective environmental regulations creating costs has made it difficult for the Japanese industry to gain the experience and to learn to build as efficiently as in countries with lower barriers to modern technologies. As a result, despite high feed-in tariffs offered to those who manage all the costs, only solar PV has been deployed on a relevant scale yet.
But when Japanese industry gets to practice, that industry efficiently proves its ability. Bloomberg New Energy Finance is the global authority on economic data on energy investments. Their recently published data on Japan shows that despite falling prices on gas in Japan (~$7/Mbtu in fiscal year (FY) 2016, -54% compared with FY2014 according to Japan Ministry of Finance), the best solar PV plants now provide lower cost electricity than the average gas fired power plant (chart).
Table: Assumptions behind Low Cost Solar PV in Japan 2017 – h1
|Exchange rate||$1 = ¥104.92|
|Plant capacity||1 MW|
|Operation duration||25 years|
|Capital expenditures (CAPEX)||$1,718,411/MW|
|Operating expenses (OPEX)||$14,296/MW/year|
|Project internal rate of return (IRR)||6%|
Source: Bloomberg New Energy Finance, Levelised Cost of Electricity
As we have said many times: The progress of renewable energy technologies is a blessing for Japan. Combining the manufacturing efficiency of the Japanese industry and the solar, wind, geothermal and biomass resources of Japan makes Japan an energy rich country in the 21st century.
The breakthrough for solar is the first step making massive introduction of cost efficient renewable power possible. With good governance the other parts of the Japanese industrial skills will follow, providing a mix of electricity from hydropower, biomass fuelled thermal plants, geothermal, wind and solar plants that together will provide stable, low cost electricity to the Japanese households and energy dependent industries.