Solar Sharing Now (2020) and Then (2014)

Overview of major changes in Japan's FIT system and solar sharing over the past six years.

It seems that many readers of this blog are interested in solar sharing rather in goats and chickens. I certainly get more inquiries about solar sharing. (Actually since we stopped selling eggs, I've got, unsurprisingly, exactly zero inquiries about chickens, while I got dozens about solar sharing.) 

Our farm, which started generating solar power in 2014 and pasture-raising chickens in 2015,  was one of the earlier solar sharing farms. The situation surrounding solar sharing have changed a lot since then. Now, in 2020, things couldn't be more different. The many developments in Japan and around the world in the past 6 years are quite exciting.

I summed up the major changes below. They are presented as a comparison between then (2014) and now (2020) .

Five major changes:

1. Solar sharing is finally in the global spotlight.

2. Number of solar sharing farms in Japan surged.

3. Feed-in-tariff (FIT) plummeted.

4. Many new rules and restrictions were added to the FIT system. 

5. Solar sharing is now part of Japan's official policy.

Below is each point in more detail.

1. Solar sharing is finally in the global spotlight.

THEN (2014)

Six years ago, solar sharing (prevalent term in Japan) or agrivoltaics (prevalent term outside of Japan), was an unknown thing. Online search would give you few precious hits. There were few solar sharing farms in Japan or worldwide. The concept and the technology existed, but it was yet to be discovered by the masses (and businesses and policy-makers). 

Six years ago, we struggled to find a PV installation company that would be able to build the solar sharing design for us. It didn't exist in company portfolios, there was zero know-how. For our installation company, we were their first solar sharing customer. Small-size solar panels (which are preferred in solar sharing design), were hard to find. Before solar sharing, there was no demand for small-size panels so PV manufacturers were not making them.

NOW (2020)

Today (as of October 2020), online search of "solar sharing" gave me over 364 million results (this is a lot even if you subtract the results related to the other meaning of solar sharing - a form of community financing of solar projects), while "agrivoltaics" search turned out over 44,000 results. 

Today, most PV installers in Japan offer solar sharing construction (although their designs wildly vary and some are not exactly what Mr. Nagashima, the father of solar sharing in Japan, had in mind). Small-sized panels are now widely available and don't have to be custom-manufactured (therefore over-priced) any more.

As for the world attention, the first international solar sharing conference ever, AgriVoltaics 2020, was held in France on Oct. 14-16 and, according to the website, had 350 participants from 38 countries (Too bad I could not participate). This is something no one could imagine six years ago. There have been annual solar sharing conferences Japan, but no international/world-wide conferences as far as I know.

2. Number of solar sharing farms in Japan surged.

THEN (2014)

When we applied for the Feed-in-Tariff (FIT) system in the 2013 fiscal year (which ends in March 2014 in Japan), the number of solar sharing farms in Japan was very small - according to the Ministry of Agriculture data, there were 96 permissions given in 2013 (so they were only built in 2014). 

NOW (2020)

In 2020, there are at least 2000 solar sharing farms in Japan, and the number may be much higher (we have to wait for the statistics).

According to the latest available data from Japan's Ministry of Agriculture, in 2018 there were 1,992 solar sharing farms built on farmland in 2018, with the growth rate of about 300-400 new farms every year between 2014 - 2018. If you extrapolate this trend to the year 2020, there should be at least 2,600 farms today by a conservative estimate. 

Graph based on data from Japan's Ministry of Agriculture on the number of issued farmland conversion permits for solar sharing. 
営農型太陽光発電について

By the way, this number - 1,992 farms in 2018 - does not include our and many other farms that were not built on farmland (農地）. Solar sharing farms that were built on other types of land don't require the farmland conversion permit (農地転用許可), therefore are not counted in the above statistics (which shows the number of issued conversion permits for solar sharing purposes).

By the way, our farm was built on miscellanous land (雑種地).

In our case, the fact that the farm is not 'official' farmland has its advantages and disadvantages. 

The major advantage is that we are spared the oversight of the Agricultural Committee. Because our farm is not farmland, farming is optional, not mandatory for us. (That's why I was able to take a break from chicken farming without having to tear down the solar panels too, which is what technically would happen if it was farmland).  

The major disadvantage is high property tax we have to pay. Non-farmland in Japan is taxed much higher than farmland. 

3. Feed-in-tariff (FIT) plummeted. 

Feed-in-tariff is the price at which the utility company (in our case Tokyo Electric Power Company - TEPCO) buys the electricity from renewable electricity producers like us. This price is fixed for the duration of the contract, which is (in our category) twenty years. This means that TEPCO will buy electricity from our farm for twenty years for the price that was set in 2013 when we applied for FIT. The tariff gets lower every year (reflecting declining installation costs), so those who applied for FIT in the years after us will have a contract for the price corresponding to their application year. The 2020 tariff (13 JPY)  is about one third of the 2012 tariff (40 JPY), as you can see in the graph below.

Graph below shows the FIT change between 2012-2020 in the category 10kW - 50kW (Where our farm belongs)

Source: Agency for Natural Resources and Energy

THEN (2014)

As mentioned above, we applied for FIT in the fiscal year 2013, so we sell electricity to TEPCO for 36 JPY + 10% consumer tax. (So the actual price is 36 + 3.6 = 39.6 JPY. )

NOW (2020)

In 2020 the tariff is 13 JPY + consumer tax (that is, 14.3 JPY with tax). This is super low, but the price of solar panels and all other installation costs went down too.

The goal of the FIT system is to eventually make solar power competitive without government subsidies, so the tariffs were bound to fall from the start. It's great news for Japan that they are now as low as they are. This is a world wide trend. 

Bad news for investors: solar power is not anymore as wonderful investment opportunity as it used to be. 

4. Many new rules and restrictions were added were to the FIT system

THEN (2014)

The FIT application process wasn't exactly easy to navigate even 6 years ago, but overall the system was simpler and in some areas even under-regulated. Stricter rules  - patches to the various loopholes and flaws - were added later as they surfaced.  

NOW (2020)

Japan's FIT system in 2020, with many new rules and restrictions, is much more complicated than in 2014, but most of the changes are for good. Two major changes include the introduction of (1) auction system and (2) "local use requirement." 

(1) Auction system

In 2017, auction system (入札制度) was introduced for solar power projects larger than 2000 kW. Bidders who offer the lowest price (for which they can sell electricity and still be profitable) are granted permission to build their projects. This should motivate large investors to reduce costs so they can offer competitive prices in auction. The size of projects where auction applies was later reduced to 500 kW. This is the area of large corporate investors so I'm not familiar with details. (For comparison, the size - the installed capacity - of our farm is only 40 kW.)

(2) "Local Use Requirement"

Since 2020, new solar power projects in the small-scale category (installed capacity 10kW - 50kW) have to fulfill the following two conditions, which are together called local use requirement (地域活用要件) . 

Condition 1: At least 30% of electricity must be used directly, only the rest can be sold (sent to public grig). So solar power projects can only sell surplus electricity, not all electricity as before. This may sound like not-so-big deal, but it's in fact a game changer. It effectively prevents people with money to buy cheap land in the countryside, pave it with solar panels and enjoy the FIT revenue without living or doing any business there - without contributing anything to the local community. This is how many ground-mount solar projects popped up all over Japan in the past few years, spoiling the view, creating solar deserts in neighborhoods and contributing nothing to the locals, thus turning many residents against solar power. Now with the new rule, you have to use at least 30% of the electricity locally and only sell the rest, which is impossible if you don't live or do any business or don't make some friendly arrangement with the locals. It effectively prevents investors from pursuing community-insensitive solar projects that were so rampant before.

Condition 2: Solar power projects must now have minimum equipment to supply off-grid electricity to local community in case of natural disaster, including the ability to black start (restore power generation on its own). There must be a PCS (Power Conversion System) of at least 10 kW capacity that can be switched to off-grid operation.

However, here is where solar sharing is special. Solar sharing on farmland only needs to fulfill Condition 2 to get the FIT approval (and of course it still needs the approval from Agricultural Commission etc as always). So if you do solar sharing, you can still sell all electricity you produce. However, this applies to solar sharing on farmland only. So our farm, built on miscellaneous land, would not be eligible (which is fair enough).

5. Solar sharing is now part of Japan's official policy.

THEN (2014)

6 years ago, solar sharing was treated exactly the same way as roof-top or ground mount installations - no special treatment despite the fact that solar sharing has so many benefits (especially in comparison with ground-mount projects). If your land was non-farmland, you had no incentive to choose solar sharing, as the construction costs are higher and electricity revenue-per-land area is smaller than in conventional ground-mount systems. 

As for farmland, solar sharing was and still is the only design allowed on farmland, which is in Japan highly regulated, but solar sharing came with a lot of extra bureaucratic hardship, so the hurdles were quite high.

NOW (2020)

Today, with regard to solar sharing on non-farmland, nothing has changed. There is still no incentive to build solar sharing on non-farmland. 

However, solar sharing on farmland is in completely different situation. Several years of statistical data show that solar sharing is really helping protect farmland. This is because solar sharing, by promising stable income from electricity production, but tying this income to the condition of farming, works as a strong economic incentive for the farmers to continue farming, or even start cultivating once abandoned plots. Japanese policy makers finally took notice and solar sharing is now promoted as one of the ways to help avoid, or at least slow down, the ominous increase of abandoned farmland taking place in Japan in the past few decades.  

As of October 2020, solar sharing was explicitly mentioned in the following national-level policy documents, and probably some others that escaped my attention:

- Basic environmental policy of the Ministry of Agriculture, Forestry and Fisheries (農林水産省環境政策の基本方針)

- Agriculture, Forestry and Fisheries Research Innovation Strategy 2020 (農林水産研究イノベーション戦略2020)

- Fifth Basic Environment Plan (第5次環境基本計画)

- Japan's Long-term Strategy under the Paris Agreement (パリ協定に基づく成長戦略としての長期戦略)

- Basic Plan on Food, Agriculture and Rural Areas (食料・農業・農村基本計画)

- Growth Strategy Follow-up Plan (成長戦略フォローアップ案)

For the FIT system overview and tariff change in different categories over the years, please check the chart below. 

FIT system overview 2012-2020. Click to enlarge.

All graphs and charts in this post were created by Slavka Batorova using information from Japanese government sources.