Here's how a shift from feed-in tariffs to auctions could drag Japan's solar power sector

It will transition to auctions for procurement of bigger solar projects.

Japan’s solar power sector could ease up as it transitions away from feed-in-tariffs (FiT) to competitive auctions for the procurement of solar projects with 2 megawatt (MW) or more, Fitch Solutions said. This, paired with FiT subsidy cuts for smaller-scale projects could slow down the growth of the sector which grew to 48.6 GW in 2017 from 23.5 GW in 2013.

“These changes seek to address the increasing concerns over the high costs of subsidising Japan's solar power expansion amid elevated retail electricity prices in the market,” Fitch Solutions explained.

The government-orchestrated push has been fueled by Japan's aim to displace natural gas and coal imports with renewable energy.

“Following the idling of the nuclear fleet, the move has conflicted with the overarching aim of reducing retail electricity prices,” the firm noted. “The transition to auctions will, therefore, seek to curb additional electricity price hikes in Japan.”

In this situation, companies and households could capitalise on the higher FiTs available currently, Fitch said. “This could lead to a short-term boom at the distributed solar capacity level, akin to what has been the case for utility-scale solar projects since 2013.”

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