Japan’s Lowered PV Feed-in Tariff May Cause ROI Decrease 3-5% : TrendForce

Japan’s Ministry of Economy, Trade and Industry (METI) announced it will lower PV Feed-in Tariff (FiT) in fiscal year 2014. For PV systems with capacity of 10kW and above, commercial PV FiT will be revised down from 36 yen per kW (tax-excluded) to 32 yen, while residential FiT is to be dropped from 38 yen to 37 yen.

“Due to the PV FiT revisions, the Return Of Investment (ROI) is decreasing for large Japanese power plants,” said Arthur Hsu, Research Manager of EnergyTrend. “ROI for large PV power plants in 2014 will be 8-12%, a decrease of 3-5% compared to last year.”

Hsu’s analysis is based on the conditions of lower module and cells prices than before, but same level of construction, land and funding costs. The calculations also takes into account impact from higher consumption taxes; spot prices; sunlight conditions; and power plant locations.

The possibility of low ROI (less than 10%) for PV system might impact sales of some power plants, hence system manufacturers will want to reduce costs. However, as module prices in Japan hit an all-time low there is limited room for further price cuts. Nonetheless, module manufacturers’ capacity expansions may start driving module prices down in 2H14 and system prices may consequently drop. Under this scenario, ROI of power plants is likely to rebound.

This Week’s Price Quotes

This week Taiwanese manufacturers purchase poly-Si at a relatively high price of US$ 20.489/kg, an increase of 1.56% from last week. This is because of stable spot prices and poly-Si supply shortages. Price quotes from Taiwan-made wafers, cells and modules have been revised downward, due to lower prices quotations from Chinese manufacturers. Wafer prices decreased 0.57% to US$1.052/piece, while price of cells dropped 0.75% to US$0.395/watt compared to last week. Additionally, module prices dropped 4.7% to US$0.629/watt.