FIP system changes PV business! What kind of change will it bring to the photovoltaic business?

Organize the structure of the FIP system and think about the future business model.

In the FIP system, the market price
Income fluctuates in tandem
As the name of Feed-in Premium suggests, the FIP system that has finally begun to move is a mechanism for exchanging renewable energy power with a premium (subsidy amount) added. When a renewable energy power generation company sells electricity in the wholesale electricity market, instead of purchasing it at a fixed price as in the FIT system, a certain premium is attached to the electricity selling price.

出典：資源エネルギー庁

FIP／FITを選択可。
ただし対象は年々小さく

Under the FIT system, renewable energy generators did not have to be concerned about market prices, but under the FIP system, fluctuations in market prices are directly reflected in the difference in income. The FIT system was expected to be more stable in management, but the FIP system may be more profitable. The FIP system is a system for stepping up to the independence of renewable energy, and aims to secure investment incentives and reduce the burden on the public while promoting integration into the electricity market.

FIP制度／FIT制度の対象区分

Source: Agency for Natural Resources and Energy

FIP / FIT can be selected.
However, the target is getting smaller year by year
The transition from the FIT system to the FIP system will proceed in stages. For solar power, power generation equipment of 50 kW or more is subject to the FIP system, but in 2022, the FIT system may be selected if it is less than 1,000 kW. The target of this selection system will be reduced year by year to less than 500kW in 2023 and less than 250kW in 2024.

Target classification of FIP system / FIT system

Source: Agency for Natural Resources and Energy

Premium calculation method.
Required balancing
The income of the renewable energy power generation company (FIP income) under the FIP system is the income from selling electricity plus a premium. Premium is the "base price" minus the "reference price". The standard price is calculated based on the estimated amount of cost required to efficiently supply renewable electricity, and also taking into account a certain amount of profit. This base price shall be at the same level as the procurement price under the FIT system, and shall be fixed over the delivery period.

The reference price is determined based on the annual average market price of the previous year, taking into consideration the monthly average market price of the current year, the monthly average market price of the previous year, the amount equivalent to the non-fossil value, the balancing cost, and the like. Since this reference price is to be updated monthly, the premium calculated from the base price and reference price also changes monthly.

The FIP system requires renewable energy power generation companies to issue a "planned value" of the power to be generated and match it with the actual "actual value". This is called balancing, and if there is a difference (imbalance) between the planned value and the actual value, a cost (penalty) must be paid to compensate for the difference. This was exempted by renewable energy power generation companies under the FIT system, but it is not exempted under the FIP system. Therefore, in the reference price, consideration is given to imbalance risk in the form of "balancing cost". However, this consideration is a transitional measure and is gradually reduced every year.

FIP system income image

Source: Agency for Natural Resources and Energy

Premium (calculated monthly using the formula below)
= Standard price-Reference price x kWh

Selling power to aggregators
Bilateral transactions become more active
Under the FIP system, a renewable energy power generation company (FIP certified company) must sell the generated power by itself while considering balancing. However, the seller does not necessarily have to be the wholesale electricity market, and it is possible to sell to a retail electric power company through bilateral transactions, or to contract with an aggregator and sell electricity while receiving various support.

As a matter of fact, it is a high hurdle for small and medium-sized renewable energy power generation companies to suddenly take responsibility for balancing and enter the wholesale electricity market. Regarding the small-scale renewable energy power generation business, it is expected that the aggregation business will develop, such as bundling them, buying and selling them, and acting for balancing.

Main trading methods under the FIP system

Source: Agency for Natural Resources and Energy