Japan turns to coal as COVID-19 delays solar projects

In the wake of the COVID-19, electricity demand in Japan has dropped and power prices have declined. The electricity sector is further impacted by ongoing economic contraction, delays in the shipment of photovoltaic (PV) modules from China, and low nuclear availability.

These factors are leading to the use of coal and gas to support the baseload power requirement in Japan, says data and analytics company GlobalData.

Solar is the major driving force for renewable deployment in the country. Before the COVID-19 outbreak, revisions in the tariff structure and grid interconnection issues were likely to slow down deployment. Amid these tumultuous times, the country witnessed a halt in construction activity, which is expected to further delay the installation of fresh capacities.

With hiccups on the solar front, coal is expected to continue to play an integral role in the country’s power sector. Despite the low power demand, the abnormal weather conditions and low availability of nuclear facilities are expected to support the high consumption of coal for electricity generation. In the first three months of 2020, Japan imported 44.8 million tons of coal, which increased by 3.4% in comparison to 43.3 million tons imported in the first quarter of 2019.

Somik Das, Senior Power Analyst at GlobalData, comments: “Japan, in its quest to meet the target of having 24% of its energy use from renewables by 2030, made investments in the solar and offshore wind a priority. However, these efforts are expected to experience a set back due to the COVID-19 outbreak. As China forms an integral part of the solar supply chain, the onset of the pandemic has affected the shipment of photovoltaic modules and other equipment for many Japanese developers.

“As per the last amendments to Renewable Energy Act, solar projects have to meet strict deadlines to reach commercial operation, the government has released aid to help the projects bound by power purchase agreements (PPAs). In the $1.1tn stimulus package, the government has made provisions of $1bn for the development of onsite renewables which are expected to support corporate power purchase agreements under their commitment to the RE100 initiative.”