Japan Approves 16% Solar-Tariff Cut on Falling Costs From July

Japan approved a proposal to cut the incentive for solar power by as much as 16 percent as the costs of operation and maintenance fell.

The tariff for applications approved from April 1 to June 30 will be lowered to 29 yen (24 cents) a kilowatt-hour from 32 yen as proposed last month by a panel in charge of reviewing the country’s renewable-energy incentives.

The tariff will be reduced again to 27 yen a kilowatt-hour beginning in July, the Ministry of Economy, Trade and Industry said in a statement Thursday. The rates are good for 20 years.

The cut in July will mark the end of a three-year premium period for solar. Japan introduced an incentive program for clean energy in July 2012, with tariffs set higher at the outset to encourage investment.

The reduced rates for solar projects reflect lower operating and maintenance costs for solar projects while the capacity factor, an indicator of how often a power generator runs for a specific time, has improved, according to a February document by the panel.

While the incentives boosted solar installations across the country, capacity for other renewables such as wind and geothermal hasn’t increased as much.

Japan also set a new tariff for woody-biomass projects smaller than 2 megawatts at 40 yen a kilowatt-hour for 20 years. The current rate of 32 yen will only apply to projects with a capacity of 2 megawatts or larger beginning April 1.

The ministry kept tariffs for other types of clean energy, including geothermal and wind, unchanged for next fiscal year, following recommendations by the panel.

To support the incentive program, costs are passed on to consumers as surcharges.

The surcharges for an average home will more than double to 1.58 yen a kilowatt-hour from the current rate of 0.75 yen, according to the statement. The increase will amount to 474 yen a month for an average home, compared with the current monthly surcharge of 225 yen.

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