This Week the Japan photovoltaic Energy Association and the Japan Wind Power association reported to METI on the status of their respective industry, with a focus on current development and generation costs.
Without much surprise both industries are reporting rising costs, moving further away from METI’s LCOE targets.
METI had been expected PV to generate power at ~7¥/kWh and Onsore Wind at 8-9¥/kWh in 2030.
However both associations are reporting that the historical trend of lower costs has stopped for the last couple of years and the perspective are bleak regarding any progress in the near future.
The main reasons cited are increasing material costs due to inflation and cheap yen, and the increasing difficulty to develop new projects. People familiar with the industries already know that land is scarce and EPC capacity limited. The increase of curtailment rates and, for PV, the theft of cables add to the issue.
Someone will have to pay for this increase in costs. The associations are hinting at higher FIT/FIP so the burden would ultimately fall on the consumers. But assets are increasingly monetized through PPAs and signing contracts at higher prices rather than filling big corporations pockets with public money could be another option.
In any case, small developers with limited know-how or resources to execute PPAs are increasingly left out of the game. And the recent announcement by METI of introducing a “Qualified Long-Term PV Producer” license will only add to their difficulties.
Overall, this is bad news for METI’s long term decarbonization plan, and this will have to be accounted for in the expected 7th basic energy plan. It also brings the question, what if renewable energy generation costs do not keep decreasing forever?