Analysis ofSolar Power Generation Costs
in Japan 2021
October 2021

Acknowledgements
In compiling this report, several power plant operators provided us with cost data of their plants, as wellas advice regarding analysis. Although we are not able to list the names of each individual, we would
like to express our sincere gratitude to everyone who cooperated in this study.

AuthorKeiji Kimura, Senior Researcher, Renewable Energy InstituteDisclaimer
Although the information contained in this report is based on information available at the time of its writing,Renewable Energy Institute cannot be held liable for its accuracy or correctness.

About Renewable Energy InstituteRenewable Energy Institute is a non-profit think tank which aims to build a sustainable, rich society basedon renewable energy. It was established in August 2011, in the aftermath of the Fukushima Daiichi Nuclear
Power Plant accident, by its founder Mr. Son Masayoshi, Chairman & CEO of SoftBank Corp., with his
own resources.

----Part of this publication was supported by the German Federal Ministry of Economic Affairs and Energy.

Contents
INTRODUCTION: STUDY BACKGROUND AND OBJECTIVES............................................................. 1
1 CHARACTERISTICS OF INVESTMENT COST STRUCTURE ........................................................... 3
1.1

TRENDS IN INVESTMENT COSTS .......................................................................................................... 3

1.2

SOLAR MODULE COSTS ....................................................................................................................... 4

1.3

INVERTER COSTS ................................................................................................................................ 5

1.4

MOUNTING SYSTEM COSTS ................................................................................................................. 6

1.5

GRID CONNECTION COSTS .................................................................................................................. 92 FACTORS IMPACTING INVESTMENT COSTS ............................................................................... 11
2.1

INVESTMENT COSTS BY CERTIFICATION YEAR .................................................................................... 11

2.2

INVESTMENT COSTS BY CONTRACT TYPE .......................................................................................... 12

3 STRUCTURE OF OPERATION AND MAINTENANCE COSTS ........................................................ 14
3.1

OPERATION AND MAINTENANCE COST BY PLANT SIZE ........................................................................ 14

3.2

CHANGES IN OPERATION AND MAINTENANCE COSTS OVER TIME ....................................................... 16

3.3

OPERATION AND MAINTENANCE COSTS BY CERTIFICATION YEAR ....................................................... 17

SUMMARY OF ANALYSIS FINDINGS .................................................................................................. 18

Introduction: Study Background and Objectives
This report is the follow-up to a report we published in 2019, “Solar Power Generation Costs in Japan:
Current Status and Future Outlook” (the “2019 report”), and it analyzes the most recent trends in solar PV
costs in Japan. In the same way with the 2019 report, the analysis is based on cost information obtained
from solar PV power plant operators on investment costs and operation and maintenance costs and looks
again at the current cost structure of solar PV in order to analyze the current status of solar PV generation
costs in Japan.

Methods of the study
We administered a questionnaire in July 2021 to a random sampling of approximately 1,000 solar PV
plant operators in order to clarify the current cost structure of solar PV and its determinant factors. The
study targeted commercial providers, so solar PV facilities owned by individuals (regardless of size) wereautomatically excluded from the scope. Cost information was requested on power plants that had alreadystarted operation between the years of 2018 and 2021.
The cost analysis covers investment costs and operation and maintenance costs. The two categories
were further subdivided into cost components, and respondents were asked about them in thequestionnaire (Table 1). Questions were also posed on information for use in cost analysis (the plant’s
installed capacity, etc.).
Table 1: Cost components

1Overview of the data
The data obtained from the questionnaire is summarized below (Table 2). In total, 62 sets of cost data
were collected. Most of the data, 52 sets, was from medium-size power plants (system withcapacity
between 50 kW and less than 2,000 kW). The total installed capacity of all plants surveyed was 93 MW.
The installed capacity of utility-scale power plants was highest, approximately 57 MW of the total, and theaverage capacity of these plants was 14 MW. The installed capacity of medium-size power plants, which
provided the most data sets, was around 36 MW, and their average capacity was 694 kW. Solar PV plants
tend to have solar cells in excess of their installed capacities. Overall, the plants had solar cells withgenerating capacity of 123% of their installed capacity (below, this ratio is called the “inverter load ratios(ILRs)”). The ILRs was highest at small-size power plants (267%). At medium-size plants and larger, theratio was around 120% on average.
Table 2:

Overview of data collected

Note: Small-size plants are system with under 50kW. Medium-size plants are system with capacity between 50kW andless than 2000kW, and Utility-scale are system with capacity 2000kW and over.

As can be seen, the installed capacity of the plants (AC capacity) differs from the installed capacity of
their solar PV modules (DC capacity). This is why, in the following analysis, when discussing the unit priceper kilowatt, it is necessary to clarify whether the prices being discussed are per unit of plant capacity or
per unit of solar PV module capacity. As shown above, overloading is the standard practice regardless ofthe plant’s size, and solar PV module, mounting system, installation, and other costs are closely
proportional to solar PV module capacity (DC based). For this reason, unless otherwise indicated, thestudy’s analysis uses the unit cost as per solar PV module capacity (kW DC).

2

1

Characteristics of Investment Cost Structure
1.1 Trends in investment costs

First, investment costs in recent years have generally been declining, with 2020 as the exception (Fig. 1).
In 2018, plants with investment costs of over 200,000 yen per kilowatt were the majority, but in 2019, plants
with costs under 200,000 yen increased, and in 2021, costs fell to around 150,000 yen. From the above,it can be seen that investment costs are trending down. In 2020, there is large variation in the data that ischaracterized by a broad distribution of investment costs, from extremely high to low.
Regulatory changes made by the government is potentially one of the reasons for the higher investment
costs in 2020. The Agency for Natural Resources and Energy in 2018 introduced new rules aimed at plants
not yet in operation. The rules mandate that plants certified under the Act on Special Measures Concerning
Procurement of Electricity from Renewable
EnergySourcesbyElectricity

Utilities(“Renewable Energy Special Measures Act”)
between fiscal 2012 and fiscal 2014 must
promptly begin operating if they are not yet inoperation and have not set a deadline fordoing so. While the deadlines differedsomewhat depending on the plant’s size, therules mandated that operations start by theend of 2020.1 It is possible that there was a
last-minute rush by the aforementioned plants
to begin operating in 2020. In fact, in thesample data obtained by the questionnaire, aFig. 1 Investment cost annual trendconspicuously high percentage of plants thatlaunched in 2020 were certified between

Note: The bar graph shows quartiles from 25% to 75%. The
gradient lines in the graph denote median values.

fiscal 2012 and fiscal 2014.
Next, looking at individual cost items, the unit costs for solar PV modules, mounting systems, andtransforming equipment and installation have been falling across the board, except in fiscal 2020 (Fig. 2).
Installation costs have also been declining. At the same time, other facility costs and ground preparation
costs have been rising slightly, while inverter costs, development and design costs, and grid connection
costs were unchanged.

1

According to “New Measures on Non-operation of Approved Facilities for Photovoltaic Power Generation under the
Feed-in Tariff (FIT) Scheme (Summary of Revisions)” issued by the Agency for Natural Resources and Energy in 2018, thedeadline for applicable facilities to begin operating was March 31, 2020 for plants less than 2 MW, September 30, 2020 for
plants of 2 MW or more, December 31, 2020 for plants subject to regulatory assessment.

3

Fig. 1 Average unit price by cost item

1.2 Solar PV module costs
Solar PV module costs account for the largest proportion of total investment costs. As shown in Fig. 3,
module unit prices have been declining markedly. In 2018, the median price was around 60,000 yen /kW,but in 2021, it was approximately 30,000 yen/kW, so the cost has fallen by roughly half.

Fig. 3 Unit prices for solar modules
Note: The bar graph shows quartiles from 25% to 75%. The gradient lines in the graph denote median values.

4Fig. 4 shows solar PV module shares by manufacturer region. As can be seen, Chinese andTaiwanese manufacturers account for nearly half the market. Japanese manufacturers have a 36%
share. Looking at module unit costs by manufacturer, Chinese and Taiwanese modules have the lowest
unit costs, with a median price of 42,000 yen/kW (Fig. 5). Unit costs for modules from Japanesemanufacturers, however, are the highest, with a median price of 56,000 yen/kW. As a characteristic ofJapanese modules, extremely high-priced modules are used in some cases, with per-kilowatt prices inexcess of 200,000 yen.

Fig. 4 Share by manufacturer region (numberof power plants)

Fig. 5 Module unit costs by manufacturer region
Note: The bar graph shows quartiles from 25% to 75%. The
gradient lines in the graph denote median values.

1.3 Inverter costs
Overall, there have been no consistent changes in inverter costs over time. Large variations were foundin cost, as exemplified by a widening gap between the 25th and 75th percentiles from 2019 to 2020 (Fig.
6). Based on the median value, costs increased greatly in 2020 and then returned to their previous levelin 2021. This trend is prevalent with medium-size power plants, which has a large sample size, and costs
have also been decreasing at small-size and utility-scale power plants. The high costs in 2020 are
potentially due to the regulatory factors discussed above (see Footnote 1).

5

Fig. 6 Trends in inverter unit prices (quartiles)
Note: The bar graph shows quartiles from 25% to 75%. The gradient lines in the graph denote median values.

1.4 Mounting system costs
Mounting system costs have been consistently decreasing. The median cost has fallen from around
30,000 yen/kW to around half that in 2020, around 15,000 yen/kW (Fig. 7).

Fig. 7 Trends in mounting system costs (quartiles)
Note: The bar graph shows quartiles from 25% to 75%. The gradient lines in the graph denote median values.

As shown in Fig. 8, mounting systems can be classified into four main types. Their unit costs are shownin Fig. 9, and it can be seen that the ground screw and ramming methods are the least expensive, while
concrete is the costliest.

6

Fig. 2

Typical mounting system designs and installation methods

Source: Inaba and Watanabe (2012), “Trends in Photovoltaic Power Generation Systems and Toshiba’s Approach,”Toshiba Review, Vol. 67, No. 1

Fig. 9 Mounting system unit costs by type (quartiles)
Note: The bar graph shows quartiles from 25% to 75%. The gradient lines in the graph denote median values.

Mounting system design, however, has a major impact on installation difficulty and man-hours, so when
thinking about overall investment costs, it would be premature to evaluate based on the mounting system
unit cost alone. When installation costs are viewed by mounting system type, concrete is the least
expensive system (Fig. 10). At the same time, there is substantial variance in the ground screw method.
The 75th percentile has plants with costs close to 40,000 yen/kW, while in the 25th percentile, theinstallation unit cost is approximately 10,000 yen/kW, which is the same level as the concrete method.
Therefore the cost variance is nearly fourfold even within the same method.

7

Fig. 10 Installation unit costs by mounting system type (quartiles)
Note: The bar graph shows quartiles from 25% to 75%. The gradient lines in the graph denote median values.

In light of the above, mounting system unit costs combined with installation unit costs are defined as
installation-related costs, and these costs were analyzed. Mounting system unit costs and installation unit
costs both change substantially, so construction-related cost averages are shown for each year (Fig. 11).
There appears to be no clear advantages among the methods, but the ground screw method tends to berelatively inexpensive. Next are the ramming method and concrete method. The sample size for the castin method is minimal, so its cost trends are difficult to evaluate.

Fig. 11 Trends in installation-related costs by mounting system type (averages)
Note: The bar graph shows quartiles from 25% to 75%. The gradient lines in the graph denote median values.

81.5 Grid connection costs
Grid connection costs vary significantly due to a range of factors. The factors believed to have a major
impact on grid connection costs are the voltage level connected and the distance to the connection point.
We compared averages for the three voltage classes, small-size, medium-size, and utility-scale, and theresults are shown in Fig. 12. As a general trend, the higher the voltage class is, the higher the gridconnection cost per kilowatt.

Fig. 12 Average gird connection cost by voltage class

Looking at these trends in grid connection costs, the costs for medium-size plants, which have a largea sample size, are generally increasing (Fig. 13). However, as can be seen in the data from 2019 to 2021,
there are large discrepancies in the costs themselves. This suggests that grid connection costs largely
depend on individual site characteristics. Though this being the case, the 25th percentile and the medianvalue continued to rise from 2018 to 2021, so, overall, it can be concluded that grid connection costs are
increasing.

Fig. 13 Grid connection costs at medium-size plants (quartiles)
Note: The bar graph shows quartiles from 25% to 75%. The gradient lines in the graph denote median values.

9Next, we look at the relationship between grid connection costs and distance for medium-size plants.
Fig. 14 shows the relationship between connection costs and connection distance, and it can be seen aweak correlation (simple correlation coefficient R=0.44).

Fig. 14 Relationship between grid connection costs and connection distance at medium-size plants

Finally, we look at grid connection costs based on who installed the connection. Typically, the plant
operator contracts construction to a transmission and distribution operator, pays electricity charges, andhas the power lines installed. In some cases, however, the plant operator builds the power lines to theconnection point itself. Fig. 15 shows construction costs by contractor at medium-size power plants.
Connection costs per meter, as it can be seen, are lower when the plant operator does the constriction
work itself than when it contracts the work to a power company.

Fig. 15 Comparison of connection unit costs (10,000 yen/m) at medium-size plants102

Factors Impacting Investment Costs

The previous chapter analyzed investment costs based on various factors. In this section, we look atother factors that potentially impact investment costs. This was taken up in the 2019 report, and it will belooked at again here.

2.1 Investment costs by certification year
First, there are differences in investment
costs by the certified fiscal year under the
Renewable Energy Special Measures Act. In
Japan, there are differences in procurement
price depending on the fiscal year the plant wascertified under the Renewable Energy Special
Measures Act. The procurement price between
fiscal 2012 and fiscal 2014 was between 32
yen/kWh and 40 yen/kWh, and the price infiscal 2020 was 13 yen/kWh (or less), so
substantially lower. These differences in the
procurement price could be having an impact

Fig. 3

Percentage of sample plants by fiscal year ofcertification

on investment costs.
As shown in Fig. 16, 15% of the plants in thisyear’s sample were certified in the initial periodof the Renewable Energy Special Measures
Act, between fiscal 2012 and around fiscal
2014. Most of the plants in the sample, 58%,
were certified in fiscal 2018 or fiscal 2019.
This looks at the relationship between the
procurement price and investment costs. We
took the average investment cost for eachprocurement price category and looked at thecorrelation between this average and the
procurement price. The simple correlation

Fig. 17 Correlation between investment cost andprocurement pricecoefficient was 0.567, indicating a correlation(Fig. 17). This suggests the possibility that procurement prices are impacting investment costs.

11

2.2 Investment costs by contract type
Secondly, we analyze differences in investment costs from the type of contract. Depending on thecontract type, there are different degrees of management and involvement of the plant operator in design,
procurement, construction, and so forth, which is why the type of contract has the potential to impact the
cost.
There are three basic ways in which design,
procurement, and construction are carried out forsolar PV plants. The first is contracting to a primarycontractor (EPC contractor) to undertake the entire
project, design, procurement, and construction. Thismethod is called EPC blanket contracting. The EPC
contractor is contracted to handle system design,material procurement, arrangement of various
subcontractors, and supervision of construction. The
second method involves the plant operator procuring

Fig. 4

Percentage by contract typethe primary materials for the plant and then contracting other work—detailed design, construction, etc.—
to another contractor. This is called a BOP arrangement. The third way solar PV plants are built is by theplant operator conducting design, procurement, and construction in-house and then selecting andcontracting companies separately when outsourcing. This is referred to as “separate engagement.”
Comparing investment costs by the different contract types, as was the case in the 2019 report,
investment costs tend to be higher with EPC blanket contract and lower with the BOP and separate
engagement approaches (Fig. 19). In particular, almost all projects with investment costs of 200,000 yen
or greater were contracted via EPC blanket contracting. However, even with the EPC method, at the 25th
percentile, there are cases of projects with investment costs equivalent to the separate engagement
method, which represents a slight change from the situation in the 2019 report.

12Fig. 5Investment cost by contract type: quartiles

Note: The bar graph shows quartiles from 25% to 75%. The gradient lines in the graph denote median values.

133Structure of Operation and Maintenance Costs
3.1 Operation and maintenance cost by plant size
Operation and maintenance costs are greatly impacted by the plant’s size. Compared to medium-sizeand larger plants, small-size plants have high average operating and maintenance costs per kirowatt (Fig.
20). However, there is no major difference in average operation and maintenance costs between mediumsize and utility-scale plants.
Subdividing the costs we can see that thecost per kilowatt tends to be lower in larger
size plants, except for lease fees and daily
operations management and monitoring costs(Fig. 21).
Regarding daily operations management
and monitoring costs, the reason there is nodifference in impact between medium-size andutility-scale plants is believed to be due to thecost of appointing a dedicated chief electricalFigure 20: Average Operation and Maintenance Costs

engineer, as was discussed in the 2019 report.

by Plant Size

Specifically, “Solar PV power plants generating 50 kW or greater are required under Japan’s Electricity
Business Act to appoint a dedicated chief electrical engineer. In particular, power plants generating 2000
kW (utility-scale) or greater are not allowed to appoint a chief electrical engineer serving a concurrent roleat another power plant, nor outsource this role to a contractor—a specialist, dedicated engineer must be
employed” (2019 report). As was the case in the 2019 report, it is possible that the cost of this full-time
position is impacting the cost of daily operations management and monitoring at utility-scale plants.

14

Fig. 21 Average costs by item and plant size

15

3.2 Changes in operation and maintenance costs over time
We next look at changes in operation and maintenance costs over time. These costs are largely
impacted by the size of the plant, so changes should be considered for each size category. This report
looks specifically at changes over time (averages) at medium-size power plants, which has a large sample
size. As can be seen in Fig. 22, it is difficult to note any consistent trends. It could be concluded that costs
have been generally flat.

Fig. 22 Average operation and maintenance costs over time (medium-size plants)

Subdividing the costs further, the trends differ for each cost item (Fig. 23). Downward trends can beseen in insurance costs and lease fees. Insurance costs are generally proportional to investment costs,
so it can be surmised that they have been declining as investment costs have fallen. It is unclear from thedata though why lease fees are decreasing. There has been no changes in the trend for daily operational
management and monitoring costs, regular inspection costs, and weed removal costs. Costs have trended
upward for accident response and repair costs (including reserves). It is standard practice to record
accident response and repair costs, but it can be seen that in 2018 and 2019 almost no costs wererecorded. Since 2020, these costs have been recorded or paid at a rate of 600 yen/kWh/year. This study
is unable to determine whether the increase beginning in 2020 is due to actual expenditures or reserves
being set aside.

16

Fig. 23 Average operating and maintenance costs by item over time (medium-size plants)

3.3 Operation and maintenance costs by certification year
For operation and maintenance costs as well, we considered whether the certification year is having aneffect on the costs; which is to say, whether they are impacted by the procurement price. As with investment
costs, we investigated the correlation between the procurement price and average operation andmaintenance costs at plants with the same procurement price. The results are shown in Fig. 24. The simple
correlation coefficient is 0.659, which indicates a relationship. As was the case with investment costs,
operation and maintenance costs are higher at plants with high procurement prices.

Fig. 24 Average operation and maintenance costs by procurement price17

Summary of Analysis Findings
This cost study was conducted as a follow-up survey to the cost questionnaire of solar PV operators
conducted in 2019. The analysis methods also generally follow the methods used in the 2019 report. The
findings of the study, rather than overturning the findings of the 2019 analysis, generally reinforce the 2019
report’s conclusions.
Investment costs for solar PV generation have been decreasing over time. It is clear the unit costs forsolar PV modules, which account for the highest proportion of investment costs, have been decreasingover time. Installation costs and mounting system costs are also decreasing, and it is possible that
installation techniques have been progressing each year. At the same time, inverter costs have been flat,a trend that differs from the findings of the 2019 report, but 2020 was likely impacted by regulatory factors.
It was also found that grid connection costs have been increasing slightly. This potentially suggests a
decrease in sites with favorable grid connection conditions.
Regarding the factors governing investment costs, we considered the impact of the procurement priceunder the Renewable Energy Special Measures Act and the impact of the contract type. As a result, a
correlation was found between the level of procurement price and investment costs. Investment costs werealso seen to change depending on the contract type. In particular, with EPC blanket contracting, investment
costs tend to be higher. However, even with the EPC approach, at the 25th percentile, there was nodifference with the separate engagement approach.
Regarding operation and maintenance costs, it is clear that they are affected by the size of the plantoverall, but utility-scale plants do not enjoy scale benefits with respect to operational management andmonitoring costs. As explained in the 2019 report, it is possible that the cost of hiring full-time chief electricalengineers is still having an impact. There are no clear trends in the changes in operation and maintenancecosts over time, but it is possible that they have been flat. As to other factors governing operation andmaintenance costs, the study again found a connection to the level of procurement price.
Based on the above, solar PV generation costs are decreasing with the continued decline in investment
costs. At the same time, the possibility that the procurement price is affecting cost levels, as found in the2019 report, was reconfirmed in this study. It is possible that the rise in investment costs in 2020 inparticular is being additionally affected by the operation start deadline that was set in 2018 by the Agency
for Natural Resources and Energy. Further, it is impossible to ignore the impact of the cost of full-time chief
electrical engineers. These points are regulatory impacts, and changing the regulations would likely help
lower costs.

18

Analysis of Solar Power Generation Costs in Japan 2021

October 2021

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