Japan threatens to cut solar power subsidies

The Japanese government is threatening to cut existing solar power project subsidies angering the power producers and investors that say the cuts will undermine their profitability and violate earlier agreements.

The Ministry of Economy, Trade and Industry (METI) last month proposed that companies granted permits for solar projects between the fiscal years of 2012 to 2014 under so-called Feed-In-Tariffs that guarantee minimum power prices submit applications by March 2019 to connect to the grid, according to Reuters.

Companies that miss the deadline will see their price guarantees under the tariffs of 32 to 40 yen ($0.28 to $0.36) per kilowatt hour (kWh) cut to 21 yen per kWh. Public comments for the proposal are due by Wednesday.

Japan introduced the FIT to spur solar developments to fill the power gap after the country closed its nuclear power plants following the 2011 Fukushima disaster. Japan’s FIT levels are among the highest in the world, compared to $0.19 per kWh in Germany and at least as much as those in Spain.

METI has said the cuts are necessary to reduce the public burden of the FIT subsidies, which are added to consumers bills.

At the same time, METI is likely unhappy with the amount of unfilled permits. Data from the ministry shows 23 percent of the total capacity approved in fiscal year 2012 is not operating, with 49 percent approved in 2013 and 59 percent approved in 2014 also not operating.

Investors and operators in solar projects are angry with the proposals, threatening lawsuits against the government for breaching the earlier contracts. A similar decision by Spain in 2013 led to compensation payments to investors.