In June 2020 a bill was enacted pursuant to which the Japanese authorities can withhold a portion of payments under a power purchase agreement that will instead be placed in a reserve to cover decommissioning costs. While the final decommissioning regulations have not yet been published, a detailed outline of the regulations was recently published for public comment.
A significant component of the recently approved Proposal to Amend the Electricity Business Act for the Purposes of Establishing a Resilient and Sustainable Electricity System is the nullification of feed-in tariff (FIT) certificates. The Ministry of Economy, Trade and Industry (METI) has recently published a series of notices that provide further clarity on how the nullification will take effect and METI's intention to create exemptions for certain FIT certificate holders.
The Committee on Procurement Price Calculation of the Ministry of Economy, Trade and Industry recently announced a recommendation to set the maximum procurement price that bidders may propose in their development plans for offshore wind renewable energy power generation facilities at Y29 per kilowatt hour. This recommendation reduces the standard procurement price by approximately 20%. The reduction is not expected to affect the pre-tax internal rate of return for developers.
Since April 2018, the Ministry of Economy, Trade and Industry (METI) has required business operators involved in solar power generation to set aside a certain amount of funds in preparation for the decommissioning of solar power plants. However, as of January 2019, less than 5% of business operators had complied with this rule. As such, METI established a working group to tackle the problems with the discretionary decommissioning reserve regime.
The Ministry of Economy, Trade and Industry is considering the introduction of a power generation base fee for feed-in tariff (FIT) eligible power generation companies. The wheeling charge could affect current FIT-certified projects as well as future FIT-eligible projects. It is understood that the ministry is aiming to introduce this fee in 2023.