ProjectsGeneral government authorisation
What government authorisations must investors or owners obtain prior to constructing or directly or indirectly transferring or acquiring a renewable energy project?
The 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 feed-in tariff (FIT) programme, it is also necessary to obtain a certificate from the Ministry of Economy, Trade and Industry (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 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 of its acquisition of shares or similar types of equity in a Japanese entity that is involved or will be involved in electricity business (ie, power generation from renewable energy source).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 type of 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 large-scale solar power projects (with 500KW or more output capacity, as of April 2020) 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. Also, 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?
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 and also report a plan on reserving decommissioning costs and the status of the funds held in reserve. This requirement has, however, had limited effect as project owners were free to decide the level and timing to reserve such decommissioning costs. In response to this situation, the government has proposed an amendment to the Renewable Energy Act that requires project owners to reserve funds externally by a third-party agency, with an exception for projects that satisfy certain stringent criteria to reserve the funds on its own. This requirement will initially apply to solar projects with an output capacity of more than 10KW, under which a portion of the proceeds from the sale of electricity will be withheld by the third-party agency on a monthly basis, starting 10 years before the end of the FIT procurement period (the long-term period during which a transmission utility must purchase from renewable energy project owners all available electric power at a fixed price).