Introduction

On February 3, 2025, the Procurement Price Calculation Committee of the Ministry of Economy, Trade and Industry published its "Opinion on Procurement Prices, etc. from FY2025 onwards" (hereinafter referred to as "This Opinion").
The Opinion includes revisions to the Feed-in Tariff (FIT) and Feed-in Premium (FIP) schemes, including important changes such as a transition to a new support scheme for rooftop solar power generation and excluding imported biomass power generation with a capacity of 10 MW or more from the support list.
This article explains these changes in detail and delves into the background and impact of the policy changes.
In particular, we will explain what points companies should take into consideration when considering the introduction of renewable energy sources and electricity procurement.

Contents of the "Opinion on Procurement Prices, etc. for FY2025 and Beyond" dated February 3, 2025

The key points of the opinion can be summarised as follows:

Revision of FIT/FIP prices

From fiscal year 2025 onwards, procurement prices will be reduced in order to improve the market competitiveness of renewable energy. As a result, the following revisions will be implemented.

Solar power generation

Residential use (less than 10kW)
19 yen/kWh → 18 yen/kWh
This adjustment takes into account the downward price trend over the past few years, and further fluctuations are expected in the future depending on market price trends.
As initial costs continue to fall, adoption in households is likely to accelerate.

For business use (10kW or more but less than 50kW)
12 yen/kWh → 11 yen/kWh
The pricing is designed to encourage the spread of rooftop solar panels on commercial facilities and factories, while also taking into account the need to move away from FIT.
It promotes the expansion of corporate self-consumption and contributes to reducing electricity costs.

Wind power generation

Onshore wind (general)
21 yen/kWh → 20 yen/kWh
Price adjustments aimed at improving the profitability of large-scale wind power projects in areas with good wind conditions.
Improving facility utilization rates is expected to lead to further optimization of power generation costs.

Onshore wind power (small and medium scale)
25 yen/kWh → 24 yen/kWh
The aim is to reduce dependence on FIT while maintaining opportunities for small-scale power generation companies to enter the market.
Measures to expand the scope of business development by taking into account the power generation characteristics of each region.

Biomass Power Generation

General wood biomass (domestic resource)
24 yen/kWh → 23 yen/kWh
Along with revitalizing the domestic forestry industry, it also promotes market operations at fair prices.
We will strengthen the utilization of forestry by-products and promote the circular use of resources.

Unused wood biomass
32 yen/kWh → 31 yen/kWh
Although efforts to utilize unused resources will continue, a certain degree of cost reduction is required.
The creation of a new support system to improve profitability may be considered.

Imported biomass power plants of 10MW or more are not eligible for support (details below)
Reduce import dependency and strengthen domestic sustainable energy supply.

Background to the policy change

The following factors are believed to be behind this policy change:

Improve market competitiveness

The cost of renewable energy has fallen significantly in recent years, and it can be said that it is becoming market competitive in many countries.
In response to this trend, Japan is also able to gradually reduce its support systems and encourage market-led growth.
In particular, as technological innovation in solar and wind power generation progresses and power generation efficiency improves while accelerating cost reductions, establishing a sustainable market structure that is not dependent on FIT will become an important policy goal.
In addition, as the market price of natural energy matures and stable growth is expected, renewable energy operators need to manage their operations independently amid market competition, and are likely to be required to explore new business models while managing the risk of price fluctuations.
Specifically, companies may consider utilizing self-consumption renewable energy sources or entering into power purchase agreements (PPAs).

Energy Security

Currently, in order to ensure a stable supply of energy, there is a need to promote the utilization of domestic resources and reduce dependence on imported fuels.
In particular, as the supply of fossil fuels is increasingly at risk due to recent changes in the international situation, such as the situation in the Middle East and Ukraine, it has become increasingly important to improve Japan's domestic renewable energy production capacity.
By promoting the use of domestic resources, we can achieve local production and consumption of energy, which will also contribute to the development of the local economy.
In addition, although this is not a matter of national security, the construction of a distributed energy system can ensure the stability of power supply in the event of a disaster and increase the stability of long-term energy strategies.

Decarbonization and sustainability

Although the introduction of renewable energy sources is progressing, it appears that the current situation calls for a review of whether it is appropriate to continue the current support system in the future.
The government is believed to be considering introducing a new incentive system such as this one in order to lower market entry barriers for renewable energy while promoting sustainable growth.

Specifically, in order to accelerate the achievement of the CO2 emission reduction target, in addition to existing policies, subsidies and tax incentives to encourage companies to invest in decarbonization may be strengthened .
In addition, it is likely that relaxing regulations regarding the introduction of renewable energy facilities and ensuring a stable supply through grid optimization will become key policy issues in the future.

These changes are seen as a key measure to promote healthy growth in the renewable energy market and ensure a sustainable energy supply for businesses and homes.

Regarding the transition of rooftop solar power to the "Initial Investment Support Scheme"

Changes to the support scheme

According to this opinion, from 2025 onwards, residential solar power generation systems of less than 10kW will be removed from the FIT system and switched to a new "initial investment support scheme."
This change will increase subsidies for installation costs while reducing the revenue model from selling electricity.

Background and Objectives

The reasons and objectives behind this change are as follows:

Ensuring economic sustainability

The FIT system was introduced to promote the spread of renewable energy, but the long-term financial burden was considered an issue.
In particular, the increase in renewable energy surcharges borne by electricity consumers became an issue, and the sustainability of the system continued to be called into question.
This change to the system is expected to aim to transition to a sustainable support system by mitigating further burdens on consumers and increasing the market competitiveness of renewable energy.

Strengthening market competitiveness

It has been pointed out that under the previous FIT system, solar power generation companies were heavily dependent on revenue from selling electricity, and price formation based on market principles did not function adequately.
The purpose of this change is believed to be to support power generation companies so that they can operate independently.
In particular, with regard to residential solar power generation, a clear policy will be put in place that encourages self-consumption of surplus electricity rather than selling it, and there will be a strong demand for locally produced and locally consumed electricity.

Improving household energy self-sufficiency

We believe that the aim is to stabilize electricity supply and demand by making the main use of solar power generation for self-consumption.
By encouraging self-consumption solar power generation, it is hoped that peak demand for electricity can be reduced and the burden on the power grid can be lightened.
This will strengthen the stability of energy supply and reduce the risk of power supply shortages in the event of a disaster. When combined with a home storage battery, it will make it possible to use electricity generated during the day at night, which is likely to contribute to improving energy self-sufficiency.

Impact and future prospects

We believe the impact of this intention and future prospects are as follows:

Increase in capital investment

It is easy to predict that increased subsidies for installation costs will encourage the adoption of solar power generation systems.
In particular, as the initial investment burden for homes and businesses will be reduced, the barrier to new adoption will be lowered, making it easier for many households and businesses to consider installing solar power generation.
As the government strengthens its subsidy system, it will become possible to recover investments in a short period of time in an increasing number of cases, which is expected to further accelerate the spread of renewable energy.

Decreasing revenue from electricity sales

With the abolition of FIT, there will no longer be a guarantee on the price at which electricity is sold, making it difficult for power generation companies to secure stable profits (which they have previously been able to secure, regardless of size).
As a result, the increase in large-scale solar power generation projects aimed at selling electricity may slow down, and instead the introduction of power generation facilities for self-consumption may progress.
In particular, it is expected that an increasing number of companies will shift their focus to optimizing their own electricity usage rather than selling surplus electricity.

Increased use in conjunction with storage batteries

There is also the possibility that the market for home storage batteries will expand in order to maximise self-consumption.
By adjusting the balance between power supply and demand, storage batteries can also be used as a backup power source during power outages, thereby contributing to a stable supply of energy.
Both central and local governments have introduced policies to promote the spread of storage batteries, and it is expected that the market for household and industrial storage batteries will continue to expand in the future.
In particular, "zero energy houses (ZEH)," which combine solar power generation with storage batteries, are becoming more widespread, and it is expected that the number of households and businesses that can become self-sufficient in energy will increase.

Regarding the exclusion of projects using imported biomass of 10MW or more from FIT/FIP support

As mentioned above, the government has decided to exclude imported biomass power generation projects of 10 MW or more from FIT and FIP support from fiscal year 2025 onwards.

Background and Objectives

Strengthening energy security

Promoting the use of domestic biomass resources and reducing dependency on overseas sources has become an important issue in Japan's energy policy.
In recent years, the instability of the energy supply, which is easily affected by changes in the international situation, has become a problem. In order to ensure a stable power supply, it is necessary to make maximum use of energy sources that can be procured domestically.
The underlying reason for this is thought to be that by utilizing domestic biomass resources, dependence on imported fuels can be reduced, energy self-sufficiency can be improved, and the use of energy can be contributed to the revitalization of local economies.

Reduction of CO₂ emissions

Reducing transportation distances is essential to reducing CO2 generated during fuel transportation and realizing a carbon-free society. However, imported biomass fuels emit greenhouse gases during transportation from overseas, so reducing their use will also help reduce the environmental impact.
By promoting the use of domestic resources, it will be possible to reduce overall CO2 emissions and build a sustainable energy supply system.

Improved economic rationality

Promoting the independence of biomass power generation in the domestic market and reducing the fiscal burden will be key to ensuring the sustainability of long-term energy policy.
Under the FIT system, electricity has been purchased at a fixed price with the aim of promoting the spread of renewable energy, but in the future, it will be necessary to shift toward making biomass power generation self-sufficient by utilizing market mechanisms.
Furthermore, greater utilization of domestic resources will lead to the development of the local economy and contribute to ensuring the stability of energy policy.

Impact and future prospects

The possible impacts and future prospects of the exclusion of imported biomass power generation projects of 10 MW or more from FIT and FIP support are as follows:

Changes in strategies for power generation companies

As imported biomass power generation projects of 10 MW or more have been excluded from FIT and FIP support, power generation companies will be forced to reconsider their fuel procurement for projects they plan to proceed with in the future.
Given the increasing risk of fuel price fluctuations, power generation companies need to develop stable and sustainable procurement strategies before proceeding with future projects.

Promoting the use of domestic resources

This may lead to greater utilization of unused biomass in Japan.
Specifically, it is expected that using wood and organic waste generated as by-products of forestry and agriculture as energy sources will promote local production and consumption of energy.
This will contribute to revitalizing the local economy, and by strengthening ties with local forestry and agriculture, it is expected that new energy businesses will be created.

Changes in corporate electricity procurement strategies

There is likely to be an increased shift away from biomass to other renewable energy sources.
Specifically, it is thought that there will be a shift to energy sources such as solar and wind power, whose generation costs are falling.

summary

This opinion is likely to have a significant impact on Japan's renewable energy market.
In particular, the changes to the support scheme for rooftop solar power generation described above and the exclusion of support for imported biomass power generation of 10 MW or more are considered to be factors that directly affect the strategies of the energy industry and companies.
It will be necessary to keep a close eye on how this opinion will be reflected in the future.