Overview
Beyond Next Energy Co., Ltd. (“BNE”; Headquarters: Minato-ku, Tokyo; Representative Director: Koichi Yamaguchi), which specializes in consulting and insight services related to the power and renewable energy sectors, has launched a new support service for renewable power producers to forecast post-FIT electricity sales revenues beyond 2032.
Background
In 2012, Japan introduced the Feed-in Tariff (“FIT”) scheme, under which electric utilities purchase electricity generated from renewable energy sources such as solar and wind power at fixed prices for a period of 20 years.
In the early stages of the FIT scheme, purchase prices for solar power were set as high as JPY 40/kWh, which became a major driver behind the rapid expansion of solar power generation in Japan.
Beginning in 2032, these 20-year FIT contracts will start expiring sequentially, resulting in the end of fixed-price purchases by electric utilities (“post-FIT”). It is expected that approximately 7 GW of renewable energy projects, mainly solar power projects, will enter the post-FIT phase during 2032–2033 alone.
Options Available to Renewable Power Producers After FIT Expiration
When fixed-price purchases by electric utilities end, renewable asset owners may consider the following options:
• Continue selling electricity under the current configuration, including sales into the JEPX wholesale electricity market, sales to electricity retailers, and provision of environmental value to end-users through corporate PPAs
• Make additional investments such as repowering or battery storage installation, and in addition to selling electricity into the JEPX wholesale electricity market (including arbitrage opportunities), participate in ancillary service markets and capacity markets, while also selling electricity to retailers or providing environmental value through corporate PPAs
• Sell the asset to another company
• Decommission the power plant
Usefulness of “30-Minute Interval” Forecast Data for Post-FIT Revenue Forecasting
To determine which of the above options is most appropriate, it is necessary to estimate future electricity sales revenues after FIT expiration, which in turn requires future wholesale electricity market price forecasts.
BNE provides such future wholesale electricity market price forecasts at 30-minute intervals.
Although future revenue estimates can be calculated using market price forecasts with lower granularity, such as monthly average prices, 30-minute interval wholesale electricity market price forecasts are essential when evaluating battery storage installation, including estimation of arbitrage revenues in the JEPX wholesale electricity market.
In addition, when negotiating future electricity sales with retailers or discussing corporate PPA arrangements with end-users, the use of detailed forecast data enables price discussions and decision-making based on quantitative assumptions.
Contents of BNE’s “Post-FIT Electricity Sales Revenue Forecasting Support Service”
BNE offers the following services for estimating post-FIT electricity sales revenues. We welcome inquiries from renewable asset owners who may be interested in these services.
1. Provision of Long-Term Wholesale Electricity Market Price Forecasts (30-Minute Intervals)
Provision of long-term electricity market price forecasts covering more than 10 years after FIT expiration (in principle through 2050; longer periods available upon request), covering all nine power market areas in Japan except Okinawa.
Price:
JPY 1.2 million per area (excluding tax)
2. Future Electricity Sales Revenue Forecasts for Individual Power Plants
Forecasting future electricity sales revenues for individual renewable power plants using the above price forecasts, including estimated revenues from battery storage arbitrage, ancillary service markets, and capacity markets (in principle through 2050; longer periods available upon request).
Price:
To be discussed based on customer requirements
Appendix: Methodology for Long-Term Wholesale Electricity Market Price Forecasting
Future electricity market prices are forecast using a “merit-order model,” which reflects the mechanism by which electricity market prices are determined.
However, rather than using a simplified merit-order approach that merely ranks power sources based on marginal costs, BNE adopts a model that more closely reflects actual market conditions. The model incorporates must-run generation such as baseload power sources with limited output flexibility (including nuclear power plants), minimum thermal generation required for frequency stability, and interconnection flows between power market areas.
The model also reflects long-term electricity demand forecasts published by the Organization for Cross-regional Coordination of Transmission Operators (“OCCTO”), generation fleet outlooks by area, and future CO2-related costs, and provides 30-minute interval market price forecasts. Forecast data will be updated annually.
This service does not provide forecast data based merely on extrapolation of historical trends. Rather, it provides forecast data derived using the same framework as actual electricity price formation mechanisms, based on demand forecasts, generation outlooks, and marginal cost assumptions. BNE believes that this approach provides persuasive and practical data for estimating future electricity sales revenues.
(Note)
Merit-order model:
A model in which power plants are ranked in order of marginal cost (the additional cost required to generate one additional kWh of electricity), and dispatched sequentially according to electricity demand. For example, wind and solar power have low marginal costs because they do not require fuel costs and are therefore dispatched first. As demand increases, higher-cost generation sources such as coal-fired and LNG-fired thermal power plants are dispatched sequentially.
Contact Information
Tel: +81-3-5843-8695
Email: contact@beyondnextenergy.co.jp
Company Information
Company Name:
Beyond Next Energy Co., Ltd.
Representative:
Koichi Yamaguchi, Representative Director
Address:
2F, 3-9-10 Shinbashi, Minato-ku, Tokyo
Established:
May 2020
Capital:
JPY 10,000,000
Business Description
• Practical consulting and business support services related to power, renewable energy, and battery storage businesses
• Long-term wholesale electricity market price forecasting
• Long-term FIT non-fossil certificate price forecasting
• Support for grid connection of data centers and battery storage systems
• Analysis and insight services regarding electricity market price trends and future outlooks
• Information services related to energy policies and regulations
• Renewable energy and battery storage simulation services
URL:
https://beyondnextenergy.jp
