Raising the Floor Price of the Non-Fossil Value Market and Stimulating the PPA Market
October 2, 2025
The Ministry of Economy, Trade and Industry (METI) held a meeting of experts (Subcommittee on Large-Scale Introduction of Renewable Energy and Next-Generation Power Networks). At the meeting, a report was presented on the non-fossil value trading market (non-fossil certificate system), where contract prices have remained stuck at the lower limit. This has depressed the environmental value of the PPA (Power Purchase Agreement) market, and one proposed response was to raise the floor price going forward.
If contract prices in the non-fossil value trading market rise in the future, the “additional” renewable energy value of PPAs will be properly recognized, which is expected to drive up contract prices. This would enhance the business viability of solar power generation through PPAs and potentially stimulate new development projects.
On the renewable energy value trading market (FIT certificates), transaction volumes have been steadily increasing. However, in every auction to date, supply has far exceeded demand, keeping weighted average contract prices close to the floor level. Some observers note that “the market price of FIT certificates available to consumers has effectively functioned as a benchmark for environmental value,” and that “since cheap electricity can be purchased at floor prices with a ceiling already set, consumers have little incentive to sign medium- or long-term PPAs.”
To address this, the government has decided to promptly review raising the minimum price (currently 0.4 yen/kWh) and lifting contract prices. Furthermore, the government will also examine revising the maximum price (currently 4.0 yen/kWh), weighing its advantages and disadvantages, given that unlike when the FIT certificate market was first established, today’s market is based on voluntary procurement mechanisms.
In the case of the Obligated Market under the Advanced Energy Management Act (non-FIT designated renewable certificates), there have been times when contract prices reached the ceiling. However, in many auctions, supply still exceeded demand, with contract prices stuck at the lower limit (0.6 yen/kWh). Commentators have noted that “the likelihood of unsold electricity remaining on the market is determined by the supply-demand balance set by the government,” and that “since average market prices are deducted from FIP subsidies, if FIP power sources that cannot (or do not) sign PPAs remain in the market, it will be difficult to secure revenue from these deductions.”
To address this issue, some experts argue that further adjustments in supply-demand balancing should be considered, both to minimize certificate surpluses and to reflect the fundamental role of certificates as a means of fulfilling obligations under the Advanced Energy Technology Development Act.
