New Law on Renewable Energy Business

Hello everyone.

This is Sho Yamasaki from Kuraken Tokyo office.

Every Wednesday I will write an article in English.

On February 25, 2020, a new law was passed, including the FIT Act.

"Bill to Amend the Electricity Business Act to Establish a Robust and Sustainable Electricity Supply System"

Too long name.

I couldn't find any explanations regarding this law in English, so today I'll try to do it as concise as I can.

The law has four main important contents, I think.

1.FIT will shift to the FIP(Feed In Premium)

2.Introduction of a reserve system for disposal costs

3.Introduction of an automatic revocation system for power plants whose start of operation has been delayed

4.Establishment of a levy-like collection system for grid construction that contributes to the expansion of renewable energy deployment

The law is scheduled to go into effect in April 2022.

Let me explain 1 by 1.

1.FIT will shift to the FIP(Feed In Premium)

This will force the majority of solar and wind power developed after 2022 to sell their electricity through the wholesale market. However, almost of all of them can not deal directly with that wholesale market, because they don't have any know-hows, they will have to belong to some kind of balancing group.

2.Introduction of a reserve system for disposal costs

The Ministry of Economy, Trade and Industry (METI) has already announced the introduction of a disposal and stockpiling system for photovoltaic power generation, and as a concrete step in the future, developers will be required to take steps to change their business plans and apply for certification of "methods of removal and other treatment of waste generated by dismantling, etc. of facilities".

3.Introduction of an automatic revocation system for power plants whose start of operation has been delayed

Under the recent amendment to the law, the certification will be automatically revoked if a power generation facility does not start operating by the deadline set for each facility.

4.Establishment of a levy-like collection system for grid construction that contributes to the expansion of renewable energy deployment

As in the case of the levy system, the funds for this "grid installation subsidy" will be collected from general consumers through the retail electric utility companies. In other words, this is an additional charge on top of the levy, which means that consumers will have to pay more.

I think all of those topics are very effective, especially reserve system for disposal costs will be required both of new and existing players.

We have to be carefully and keeping eyes on what happens in the future.

Thank you for reading!

From Tokyo office.