Solar Auctions in Japan

PV magazine reports on discussions in Japan to introduce auctions as a method to save costs into the Japanese feed-in tariff system.

That is a bad idea. Auctions will increase costs, not reduce them.

If Japan wants to reduce costs, the first thing they should do is stop paying people at historical rates. Right now, you can go get your project approved at some point in time, at the rates in force then, and then wait a couple of years for prices to go down before you actually start building it.

That doesn’t make sense. Pay everyone at the rate in force when they actually start producing.

That’s what Germany has been doing for a decade. And Germany has just stopped doing this with the first solar auctions.

The winners in the first auctions have 24 months to actually finish their projects. Since it only takes months or weeks to finish a solar project, they can build at price levels two years later and get paid at present price levels.

That’s a fundamental flaw in the German auction model. Japan should refrain from making the same mistake.

 

Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003, lenzblog.com).

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