Coal news and updates

New solar power projects aim to skirt purchase price cuts

Japanese leasing companies and others look to snap up pre-owned solar power plants and rent out panels to home users, new takes on the lucrative solar business as pending cuts to power purchase prices take the shine off new developments.

Solar power producers are increasingly selling off older farms because of the cost and effort associated with maintenance and inspection, creating a market for secondhand facilities. Mitsubishi UFJ Lease & Finance unit MUL Energy Investment plans to create a fund of tens of billions of yen as early as summer to buy farms that have been approved for participation in the government's feed-in-tariff scheme, under which utilities buy electricity from producers at set prices. Banks and other institutional investors will put up the necessary capital.

The Mitsubishi Research Institute and Mitsubishi UFJ Morgan Stanley Securities will soon create their own fund of roughly 50 billion yen ($462 million). Working with maintenance companies, including affiliates of major utilities, is seen enabling the project to turn a profit.

Shifting landscape

Japan's solar power industry, supported by standard prices, has drawn great interest in recent years as a promising investment target. Power sales were widely seen yielding high, stable returns relative to those available from stocks and bonds.

 The government now plans deep purchase price cuts aimed at capping the growing burden the scheme imposes on the public. The rate for commercial solar power is seen falling from 40 yen in fiscal 2012 to around 17 yen or 18 yen per kilowatt-hour in fiscal 2019. The rate for household solar power systems is set to drop from 42 yen to around 24 yen.

But older facilities already in the system will be allowed to continue selling power at their current prices. This will let their operators, including the companies now looking to snap them up, lock in steady profits.

Others in the industry are working to leave the feed-in-tariff system altogether. ONE Energy, formed by companies including Orix and NEC, began offering for rent last year residential solar power systems including panels and compact storage batteries. The company is working with homebuilder Tama Home to grow the operations. Other partners are to be taken on going forward.

Residential solar panels help consumers lower their electricity costs and are not aimed at selling power to utilities. Building up operations in household power will let companies maintain steady business regardless of further reductions in tariffs.

Source: nikkei.com