The Japanese PV market has been growing very rapidly, thanks to the very generous feed-in tariff (FIT) program launched in July 2012. In fact, the FIT created over 70 GW of PV capacity demand in less than 2 and a half years and the government recently established new regulations to control output from solar into the grid.
To support continuous deployment of solar while keeping the grid stable, advanced Operations and Maintenance (O&M) service is expected to play a very important role in Japan.
According to the Japan Photovoltaic Energy Association (JPEA), Japanese on-grid PV installations in 2014 reached 9.28 GW, up 24% over 2013. One of the biggest changes brought by the FIT was the market shifting to the non-residential PV from the residential PV installations. In 2014, the non-residential segment accounted for 77% of the nation’s on-grid PV market, compared to just 15% in 2011, the pre-FIT period.
The recent market shift has created great demand for PV O&M services since large PV system owners need to ensure the maximum energy output and return on investment (ROI) under the FIT. The new O&M market has attracted new entries such as domestic project developers, Engineering, Procurement and Construction (EPC) providers, inverter and module makers through vertically integration.
The new opportunity also attracted foreign O&M providers with established years of experience in Europe and the US. Draker, a US solar monitoring and portfolio management company, is one of them.
The company expanded its business to Japan in 2013 through a distribution partnership with EKO Instruments, a Japanese manufacturer of solar radiation & photonic sensors and meteorological instruments.
The company, headquarted in Vermont, U.S, provides O&M services to a wide range of non-residential PV systems, ranging from 50 kW to 50 MW in size and offers portfolio asset management services for PV project developers, integrators and owners whose portfolios include 5 to 200 sites.
“In a rapidly emerging market like Japan, PV system owners and installers often deploy a very simple and inexpensive monitoring solution at first, and then later realize the need for more advanced features like automated fault detection, real time alarming, and portfolio analysis. With Japan's very high FIT rates, owners can realize improved system performance and higher investment yields by investing upfront in an advanced monitoring solution “commented Charles ‘Chach’ Curtis, CEO at Draker.
New Regulations to Control Output
Last year Japan faced some roadblocks due to the explosive number of interconnection applications. In fact, over 26.8 GW of PV capacity was approved in the month of March 2014 alone under the FIT program. Concerning the insufficient grid capacity, five out of ten Japanese electric power utilities put hold on processing interconnection applications for new projects.
To continue integrating higher levels of solar, the Ministry of Economy, Trade and Industry (METI) requested the utilities to conduct grid capacity analysis and came up with new rules. Under the new rules, the utilities can limit solar output that they purchase for up to 30 days a year without compensating owners.
According to Curtis, Draker offers control system, which allows PV owners to meet the METI’s new output control regulations. The company’s control solution integrates with its monitoring solution and provides owners, utilities and grid operators with functions such as real-time data, site control and inverter control.
Draker can monitor the switchgear at the point of interconnection and, in response to a command from the local utility or grid operator, can disconnect the system from the grid, turn up or down the amount of power feeding into the grid, and adjust the power factor.
Japanese Market Becoming Matured Market
According to the latest METI’s data, over 70.2 GW of PV capacity has been reserved between July 2012 and November 2014. Out of the 70.2 GW, only 21 percent has been completed and became operational, leaving 56 GW of PV capacity in the pipeline. Specifically, out of the 59 GW, 59% represents PV systems larger than 1 MW in size.
It has been frequently questioned how many of the pipeline projects will be actually built out and if so, when. There is a fear that the new regulation of limiting power output without compensation may make difficult for pipeline projects to be financed.
“METI's new rules, while not popular, will likely help the market mature and avoid the "boom and bust" development cycles that have plagued other markets like Italy and Spain,” said Curtis, having positive perspectives on the Japanese PV market. “By tightening application requirements, for example, METI will reduce the number of unviable projects that never get built by ensuring proper financing is arranged, siting is adequate, economics are viable, and experienced developers are utilized. For experienced solar developers and investors, the Japan market is still very attractive and returns on investment are still comparatively high relative to other countries,” continued Curtis.
Topics like the above will be discussed at the conference Solar Asset Management Asia, taking place in Tokyo on June 24-25. This leading conference dedicated to the operational phase of Solar PV will focus on the Japanese market and bring together over 150 local and international service providers, EPCs, asset owners and investors.