RENEWABLE ENERGY INVESTMENT RISK ANALYSIS FOR LOW-CARBON CITY... 272.6 challenges
The current Japanese electricity system employs a centralized energy gen-
eration system that is dominated by ten regional electricity companies
(FEPC 2014 ). Regional electricity companies independently prioritize
certain energy sources based on costs and profits. Thus, to some extent, in
promoting renewable energy, companies that produce electricity employ
their own energy balance strategies, which affect renewable energy pro-
motion levels in Japan. In addition, under the current grid system, only
limited electricity surpluses in a region can be traded with other elec-
tricity companies due to limitation of transmission capacity (Komiyama
and Fujii 2014 ), and electricity companies must thus manage their own
electricity generation capacity levels and stabilization of electricity supply
(MOEJ 2009 ).
To further promote renewable energy installation while increasing the
ratio of renewables in the electricity energy system, Japan must identify
ways of mitigating risks resulting not only from prices and quantities but
also from the FIT system and policy changes. Two years after the intro-
duction of the FIT system, a gap was found between actual installed solar
power generation levels and the number of registered FIT applications.^11
Although nearly all the registered capacities of less than 10 kW solar PV
have begun operations (83 % had been installed by July 2014), most reg-
istered capacities managing more than 10 kW have not yet begun opera-
tions (only 14 % has been installed). Investors typically wait for low solar
panel prices to maximize solar power business profits, which may imply
that when registering FIT to ensure the fixed FIT price in the early part
of the year which is higher than in the later part of the year, companies
expect cost declines and wait for lower prices in a solar panel module with
learning effects (Nemet 2006 ; Zwaan and Rabl 2003 ).
An FIT system policy change was instituted in April 2014 when the
government revised rules on the registered government approval capac-
ity of FIT.^12 Installation capacity levels under FIT system increased
from 9.8 GW in March 2014 to 13.2 GW in September 2014 for more
than 10 kW solar PV.^13 Although renewable energy installed capacity
increased from 1.9 to 2.9 GW for six months from March to September
2014 in Kyusyu area, the excess capacity of expecting renewable energy
generation was revealed. The Kyusyu electricity power company real-
ized that—although a maximum electricity demand level within the
Kyusyu electricity power company was 16.71 GW—the registered
government-approved renewable energy capacity exceeded maximum