Offshore Wind: Introduction of a New Scheme for Interconnection
Under the Act on Promoting the Utilization of Sea Areas for the Development of Marine Renewable Energy Power Generation Facilities (Act No. 89 of 2018; the “
Offshore Renewable Energy Act”), enforced on April 1, 2019, offshore wind projects in general sea areas are to be conducted by operators selected through a public bidding process for Promotion Zones that are designated by the government (Minister of Economy, Trade and Industry and Minister of Land, Infrastructure, Transport and Tourism (the “
Ministers”)). The government has already designated several Promotion Zones; ten other zones have been identified as “having progressed to a certain stage of preparation” for potential designation, with four of these having been further recognized as “promising zones”(“
Generation Charge: Current Discussion and Future Outlook
There have been significant changes from the discussions we outlined in our Japan Renewable Alert 42 regarding the introduction of the generation charge (we referred to generation charge as “producer-side base charge (
hatsuden-gawa kihon-ryokin)” at the time; from now on, however, we will use “generation charge (
hatsuden-gawa kakin)” reflecting the current discussions). As the generation charge will affect cashflow for the entire duration of operations for all power sources, including FIT projects, it is a crucial issue that impacts profitability for developers, operators and investors of renewable projects and has prompted many recent inquiries from our clients. This Alert provides an outline of the current discussions.
Further Details of the FIP System
Other Matters Addressed in the Draft Ordinances
Future Outlook
In the upcoming fiscal years, we will see the implementation of critical changes to the REA, which has been amended by the “Act to Partially Amend the Electricity Business Act and Other Acts in Order to Establish a Resilient and Sustainable Electricity Supply System,” promulgated on June 12, 2020 (Act No. 49 of 2020; the “
Energy Resiliency Act”). In particular, the introduction as of April 1, 2022 of a new (1) FIP system, (2)decommissioning cost reserve scheme, and (3) nullification rule will have a significant effect on Japan’s renewable energy industry (
see item 1 of Japan Renewable Alert 51), and a draft of the METI ordinance (
The Nullification Rule and the Feed-in Premium (FIP) system, which will have significant impact on Japan’s renewable market, have recently received further clarification. Both instruments, as reported in our Japan Renewable Alert 44, will be introduced, effective as of April 1, 2022, by the amendments to the Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Utilities (Act No.108 of 2011; the “
REA”) pursuant to the Act to Partially Amend the Electricity Business Act and Other Acts in Order to Establish a Resilient and Sustainable Electricity Supply System (Act No. 49 of 2020; the “
Amendment Act,” and the REA as amended by the Amendment Act, the “
1. METI s Measures for Nonoperating Projects Now Open for
Public Comments
On September 7, 2020, the Ministry of Economy, Trade and
Industry (
METI ) announced the draft
outline of the amendments to regulations regarding the introduction
of arrangements for the Nullification Rule (described below), to be
effective on April 1, 2022 (the
Effective
Date ), and other points (the
Draft
seehere, available only in Japanese).
The Nullification Rule, intended to invalidate a FIT/FIP
approval if the project fails to commence operation within a
certain period of time from the approval (the
Nullification Period ), is to be
introduced by the Act to Partially Amend the Electricity Business