6 Oct. 2022
Challenges for boosting renewables undersoaring energy prices

Yasushi Ninomiya (Ph.D)
Senior Researcher/Group Manager
Renewable Energy GroupElectric Power Industry/New & Renewable Energy Unit
Institute of Energy Economics Japan (IEEJ)IEEJ © 2022

IEE JAPAN1

Massive increase in RE capacity and its share over the past 10 years

RE capacity massively increased over the past 10 years after FIT launched in 2012
Solar PV has overwhelmingly dominated the RE growth, up from 4 GWDC in 2010 to 74 GWDCin 2021, in contrast to little growth of other RE resources such as hydro, wind and biomass
RE share in total generation has also increased; from 10% in 2010 to around 21% in 2021(GW) 140(%)
20120

FIT launched

100

15

Solar PVGeothermal

80

Bioenergy

1060

WindHydropower40
5RE share

20IEEJ © 2022

002010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021e
Source︓IRENA Renewable Electricity Capacity and Generation Statistics and others2

RE 2030 target requires further rapid growth over the next 10 years


RE target was set at 36 - 38% RE electricity by 2030, up from 19.8% in 2020
To meet the target, share of RE in electricity generation needs to be continuously increasedby 1.6 % point p.a. which is higher than the average of 1.2% point p.a. over the past 5 years
Particularly, the share of solar PV is expected to increase substantially from 7.9% in 2020 to13.9-15.9% in 2030

Elecricity generation in FY 2020（1001TWh）（RE share 19.8 ％）Biomass, 2.9%
Onshore wind,
0.9%

Geothermal,
0.3%

Electricity generation in FY 2030（934TWh）（Targeted RE share 36 - 38％）
Biomass, 5.0%

Geothermal, 1.2%

Offshore wind, 1.8%
Onshore wind, 3.6%

Solar PV,
7.9%

Gas, 20.0%

Hydro, 7.8%
Gas, 39.0%

Nuclear, 3.9%

Solar PV,13.9-15.9%
Coal, 19.0%

Oil, 6.3%
Hydro, 10.5%
Coal, 31.0%

Nuclear,20.0-22.0%

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Oil, 2.0%
Hydrogen/Anmonia,
1.0%
Source︓Energy Statistics FY 2020 (in Japanese), 6th Energy Strategies (in Japanese)3How far we need to increase RE capacity to reach 2030 targets?
Significantly large amount of newly capacity addition, around 35GWAC, requires for solar PV
Offshore wind also requires capacity addition of at least 5GW up from almost zero in 2021
Due to such huge volume of capacity addition over the next decade, RE policies primarily
focus on solar PV at the present, and secondly on offshore wind(GW) 120

110

Target：103.5-117.6GWAC

1009080

Addition required
Additional
capacity
newly required

7060

FIT/FIPcertifiedbut not
FIT/FIP certified
capacity
but not
in operationin operation

Target: 50.7GW

5040

既に稼働
In operation

30
Target: 17.9 GW

20Target: 5.7 GW

10Target: 8GW

Target: 1.5GW0IEEJ © 2022Solar PV

Onshore wind

Offshore wind

Geothermal

Hydro

Biomass

Source︓Author based on METI published date as of 31 March 2022 (in Japanese)

4However, annual addition of RE has diminished recentlyAnnual addition of RE capacity, notably solar PV, diminished significantly in 2021, thelowest record of 5GW since 2012
A number of reasons can be given for this decline including:FIT price for large scale solar PV sharply declined becoming less attractive due to competitive auction
FIT for large scale solar PV has been gradually phased out, shifting to newly introduced FIP in 2022
Unused land suitable for large scale solar PV has been not much left any more after massive
development over the past 10 years
Conflict b/w local community and RE developer has increasingly occurred, leading to tougher
regulation on RE development on the municipality level(GW) 12
1086Solar PVGeothermal

4

Biomass
Onshore wind

2IEEJ © 2022

Hydro0
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Source︓IRENA Renewable Electricity Capacity and Generation Statistics

5

Challenge #1: How to increase RE capacity to meet the 2030target?
While further rapid expansion of RE capacity is necessary to meet the 2030 RE target, atthe same time, the declining trend of RE growth is observed, calling for stronger/additional
policies including…

Individual Issues

Stronger/additional policies needed for further RE capacity growth

Decline of FIT prices due tocompetitive auction••

Shifting of public financial support
scheme from FIT to FIP••(same as above)
Fostering new business such as innovative aggregators and accurate forecasting ofVRE generation as part of infrastructure for RE business under FIP

Shortage of unused land suitable
for large scale solar PV likedismantled factory site andabandoned golf course•••••Utilisation of unused lands whose owners are legally unregistered;
Development of abandoned farmlands and reservoir for solar PV
Promotion of further installation of solar PV over farmland
Utilisation of unused public lands around airports for solar PV installation (2.3GW)
Promotion of installation of roof-top solar PV on newly built dwellings (3.5GW);
Obligation in Tokyo Metropolitan area currently under discussion (1.4GW)
Obligation of roof-top solar PV installation on newly built public buildings undernational/local governments (6GW)•Conflict b/w local community andRE developer leading to tougher
regulation on RE development on
the municipality level
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Boosting RE capacity growth for self-consumption being independent from publicfinancial support of FIT/FIP
Promotion of RE business model from “feeding into the grid” to “self-consumption”
like PPA (10GW)••

Transition from the conventional unrestrained RE development to legal positive
zoning that officially designates areas to promote active formulation of RE projects
proactively (4.1GW)
Active involvement of national government in overcoming of land constraint for RE
development faced by local governments

6

Solar PV has become cost competitive as wholesale price ramped upSince November 2021, LCOE of solar PV is broadly lower than the wholesale price in JPEX
market even when 50% increase of capital/operation cost of solar PV compared to thebaseline case in 2021 price

Under this circumstance, solar PV is highly competitive implying that rooftop solar PV for selfconsumption is likely to be an attractive option for factories, commercial buildings and households(JPY/kWh)50403020

JPEXスポット市場インデックス
JPEX
spot price index
太陽光コスト50%上昇ケース
LCOE
Solar PV 50% cost up
太陽光コスト20%上昇ケース
LCOE
Solar PV 20% cost up

10

太陽光2021年ベースケース
LCOE
Solar PV 50 - 250kW
In 2021 price baseline

IEEJ © 2022

0

Source︓Author based on JPEX spot price index and other published materials (in Japanese)7Challenge #2: How to ensure sufficient amount of flexibility of gridto accommodate VRE?
As rapid growth of VRE generation, ensuring of flexibility of the power grid to accommodatea large volume of VRE has become a critical issueOn 22 March 2022, during heavy load in winter cold rainy day, only 1.7 GW of solar PV could
generate out of 15GW installed capacity in the Tokyo area
A large scale power outage was almost about to occur, but eventually avoided by full mobilising ofadditional thermal power, pumped hydro, interconnection line inflow and DR
Supply and demand in the Tokyo area: 21-23 March 2022

(GW) 50

Interconnection line
Pumped hydroSolar PV Hydro4030

Demandcurve

Solar PVSolar PV

20
Thermal power

100
Pumped hydroPumped hydro Pumped hydro

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Pumped hydroIt is absolutely vital to ensure sufficient amount of flexibility resources continuously over thenext decades in order to accommodate significant volume of VRE

IEEJ © 2022In short-run: DSM incl. DR, VPP and energy efficiency improvement are only possible solutions
In short/medium-run: Dispatchable power plants, improvement of grid operation and installation ofbattery storage
In long-run: Reinforcement/expansion of grid, interconnection line, P2G of excess RE electricity
8

Challenge #3: How to diversify solar PV supply chain?
Since the Ukrainian crisis occurred, security risks of over-dependent on specific countries
for energy supply have become apparentAs every production stage of solar PV supply chain is highly concentrated in a single country,
diversification of solar PV supply chain is required to reduce the security risks; however, no clear
answer is given yet
It is also highlighted importance of end-of-life management and recycling of solar PV modules

Share of polysilicon production capacity
N.America
5%

Asia excl. China
5%

Others 2%

Share of wafers production capacity
Others0.0%

Asia excl. China
1.8%

Europe9%

China
79%

IEEJ © 2022

China
98.1%

Source︓IEA Special Report on Solar PV Global Supply Chains 2022

9Challenge #4: How to ensure reliable supply of critical minerals?
Compared to thermal power plants, solar and wind generation equipment is relatively higher
dependent on scarce critical minerals
In particular, solar PV is heavily dependent on silicon implying that price and supply would be greatly
affected depending on supply of silicon
There is growing concern about risk of supply constraints on the critical minerals
It will be necessary to build a global cooperation to secure a stable supply of critical minerals as wellas efforts to reduce dependence on these minerals in solar/wind generation equipment



Minerals used for power generation plant(kg/MW) 16000
Rare earths

14000
12000

Zinc

Molybdenum

10000

Rare earths

Chromium

8000

Manganese

NickelZinc

6000

Molybdenum

Molybdenum
Silicon4000

Copper

Chromium
Manganese

Chromium
Manganese

CobaltNickel2000
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CopperContact: report@tky.ieej.or.jp

Chromium

MolybdenumNickel

NickelCopperOnshore wind

Solar PV

Chromium

CopperCopperCopperNuclearCoalGas0
Offshore wind

NickelSource︓IEA The Role of Critical Mineral in Clean Energy Transitions 202110