Projects

General government authorisation

What government authorisations must investors or owners obtain prior to constructing or directly or indirectly transferring or acquiring a renewable energy project?

Physical construction of a renewable energy power plant requires various permissions and authorisations related to land use, land development and environmental protection, such as permission for the conversion of agricultural land, forest development permission, a satisfactory result from the environmental impact assessment and notification (the contents of which must be acceptable to the authority) of a large-scale development.

To be eligible for the FIT programme, it is also necessary to obtain a certificate from METI on the renewable energy project in question.

In transferring and acquiring a renewable energy project from one entity to another, the permissions and authorisations together with the METI certificate mentioned above need to be transferred effectively. For such transfers, procedures required by the relevant authorities must be taken, such as notification of the transfer to the authority. In the case that the acquirer is a foreign investor, the acquirer is required to obtain approval from the Minister of Finance as described in question 22.

Offtake arrangements

What type of offtake arrangements are available and typically used for utility-scale renewables projects?

Without any restrictions on project scale, a significant number of renewable energy projects are supported by the FIT programme, under which fixed-price (ie, the price set by METI depending on the type of renewable energy source and the output capacity of the project) and long-term (ie, 10, 15 or 20 years depending on the type of renewable energy source) offtaking is required of a licensed transmission utility.

Although credit rating of transmission utilities differs from utility to utility, credit support for a transmission utility (as an offtaker) is not normally required. Without such support, developers, owners, sponsors and financiers of projects normally accept the offtaking arrangement. Even if a transmission utility becomes insolvent, as long as the electricity transmission business in the region continues to operate, the owner of the renewable energy project would be able to enter into a new power purchase agreement with the company that takes over the transmission business. Since the purchase price and term of the offtaking arrangement are legally fixed under the FIT programme, the terms of the offtaking arrangement (except the period that has already expired) should remain unchanged even if the transmission utility becomes insolvent.

Procurement of offtaker agreements

How are long-term power purchase agreements procured by the offtakers in your jurisdiction? Are they the subject of feed-in tariffs, the subject of multi-project competitive tenders, or are they typically developed through the submission of unsolicited tenders?

Under the FIT programme, an owner of a renewable energy project with a certificate from METI has the right to request a transmission utility to enter into a fixed-price (ie, price set by METI depending on the typeof renewable energy source and the output capacity of the project), long-term (ie, 10, 15 or 20 years depending on the type of renewable energy source) power purchase agreement. A transmission utility is required to accept such request unless there is a legitimate reason not to. Further, legitimate reasons are strictly limited by and defined under the Renewable Energy Act. Generally, the purchase price under the FIT programme is set by METI annually. Since April 2017, the purchase price for solar power projects with 2MW or more output capacity will be set through a bidding process held by METI. The process includes a semi-annual, nationwide process where a developer may submit a bid for a FIT price (not greater than the maximum price set by METI) applicable to its own project. METI only grants FIT certificates to solar power projects that have secured a FIT price through the bidding process.

Operational authorisation

What government authorisations are required to operate a renewable energy project and sell electricity from renewable energy projects?

An owner of an electricity generation project with a certain level of output capacity needs to notify METI of its electricity generation business. In addition, in order to sell electric power under the FIT programme, the project owner must obtain from METI a FIT certificate for their renewable energy project.

Decommissioning

Are there legal requirements for the decommissioning of renewable energy projects? Must these requirements be funded by a sinking fund or through other credit enhancements during the operational phase of a renewable energy project?

Since April 2018, a project owner with a FIT certificate is obligated to hold a certain amount of funds in reserve to secure the costs to decommission its renewable energy facility. This was updated in July 2018 to require a project owner with a FIT certificate to also report a plan on reserving decommissioning costs and the status of the funds held in reserve. METI has commenced investigating measures to secure such reserved funds. METI is currently engaged in discussions on assigning the role of collecting funds for reserves from the sales revenue of each project to the Expense Sharing Coordinating Body, a special entity organised pursuant to the Renewable Energy Act. METI intends to introduce new regulations on this matter by March 2021.