Japan's Power Market News 2022/W45

Japan to build another 1.3GW of onshore wind following the second FIT auction

OCCTO initiated Japan’s second onshore wind FIT auction in July 2022, offering sites totaling 1.3GW with a maximum FIT of 16￥/kWh for 20 years. The FIT will start four years after the award date, which means projects that take longer than that to build will be penalized with a shorter FIT period.

The results were published on November 4th. The auction was oversubscribed, with a total capacity of 1.65GW bid from 38 projects. Thirty projects totaling 1.29GW were selected. The lowest winning bid was 14.8 ￥/kWh, and the highest was 16.0 ￥/kWh. The weighted average price was 15.6 ￥/kWh.?These prices remain high compared to solar PV’s latest FIT and FIP auctions, hovering around the ￥10/kWh mark, and to recent German Onshore wind auctions where average prices were EUR0.059/kWh (￥8.6/kWh). What’s more, there is no sign that the gap will close. Japanese renewable project developers have complained of rising costs for the past few months and expect the trend to continue for the foreseeable future. The size of the selected projects ranges from 151MW to 330kW. Only five projects were smaller than 1MW, followed by one project of 2MW, one of 8.4MW, and the remaining 23 projects above 20MW.

The auction was dominated by three companies that won 70% of the total available capacity. Tokyu Fudosan won seven projects totaling 415MW; Japan Renewable Energy won 265MW from six projects; and Green Power Investment won 235MW spread across two projects. Five of the winning projects were failed bids from the previous auction that made more competitive offers in the second round.?

This was the last FIT auction for onshore wind, and from next year the auctions will be for FIPs. FIT projects already have the option to convert to the FIP system. Some of this round’s winners could take this up if market conditions and financing access allow it.

METI’s 2030 wind generation target (including onshore and offshore) is 5% of the energy mix - equivalent to roughly 20GW of installed capacity. Currently there is about 5GW of onshore wind installed. Despite success in this auction, it looks like METI will have to increase the volume and speed of its offers to achieve the target.

Sources: OCCTO’s auction rules publication, OCCTO’s results publication

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