Japan Targets Big Solar Subsidies, Revives Nuclear Push

• Japan’s LDP moves to end >1MW solar subsidies, citing Chinese panel risks, as PM Takaichi backs nuclear restarts and perovskites to hit FY2040 energy mix goals.

Japan’s ruling Liberal Democratic Party proposed ending feed-in-tariff subsidies for solar projects over 1 megawatt, arguing falling costs make them viable and citing energy-security concerns over Chinese-made panels. Prime Minister Sanae Takaichi is prioritizing self-sufficiency and supports reviving nuclear power, with restarts planned at several plants including the Kashiwazaki-Kariwa facility.

The LDP’s draft bill, expected to be tabled in fiscal 2026 and likely to pass with coalition backing, follows environmental warnings about large solar farms and local pushback, including Kushiro’s declaration. Japan targets solar at 23%-29% and nuclear at about 20% of power by FY2040, while promoting next-gen perovskite panels.

How will Japan's FIT phaseout for >1MW solar reshape project economics and supply chains?

• Shift from subsidy-backed IRRs to merchant/contracted revenue: projects >1 MW will lean on corporate PPAs, retail wheeling, and balancing market revenues; basis and price cannibalization risks will require higher equity returns or longer PPA tenors.
  
• Higher financing costs: lenders will demand stronger offtake quality, hedging, and reserve accounts; WACC rises 100–300 bps without FIT floors, pushing developers toward club deals and balance-sheet financing.
  
• Contract structuring evolves: inflation-linked PPAs, floor-price collars, and hybrid merchant-plus-PPA models become standard; curtailment and imbalance penalties are increasingly priced into contracts.
  
• Co-location premium on storage: DC/AC-coupled batteries used to capture peak prices, reduce curtailment, and provide FCR/FRR services; capacity revenues and arbitrage become key to bankability.
  
• Site selection repriced: fewer marginal land projects pencil; higher value on interconnection-ready, low-curtailment nodes and behind-the-meter industrial sites; agrivoltaic and rooftop-mega projects gain share.
  
• BOS and EPC optimization: tighter engineering to raise capacity factors (bifacial + trackers where terrain allows), higher inverter loading, and O&M digitalization to shave LCOE in the absence of FIT.
  
• Greater use of advanced modules: n-type TOPCon/HJT and high-wattage bifacials to lower capex per watt and balance cannibalization; more scrutiny on long-term degradation and PID/LETID warranties.
  
• Rise of corporate clean-power procurement: export manufacturers, data centers, and chemicals anchor long-tenor PPAs; RE100 and Scope 2 goals underpin demand but require granular hourly matching.
  
• Grid and market integration costs internalized: projects budget for congestion, redispatch fees, and curtailed hours; value shifts to flexibility, forecasting, and participation in ancillary markets.
• Consolidation among developers/EPCs: smaller players struggle without guaranteed tariffs; M&A and platform roll-ups accelerate to achieve scale in procurement, financing, and O&M.
  
• Domestic supply-chain push: incentives for local cells/modules, inverters, and EMS; tighter origin tracing, cybersecurity, and ESG due diligence raise compliance costs but diversify away from single-country dependence.
  
• Potential trade measures: anti-circumvention reviews and standards on forced-labor and carbon footprint tighten module sourcing; longer lead times and working-capital needs for compliant supply.
  
• Price volatility management: module ASPs remain globally driven, but Japan-specific logistics, certification, and yen FX hedging gain importance; developers seek multi-call procurement and indexed pricing.
  
• Recycling and end-of-life economics: without FIT, residual value matters—take-back schemes and glass/silver recovery can improve project IRRs and satisfy permitting.
  
• Insurance and performance guarantees: stronger reliance on availability guarantees, curtailment extensions, and merchant revenue cover; insurers probe extreme weather and wildfire exposure.
  
• Repowering and hybridization: older FIT sites evaluated for repower plus storage to capture market revenues; interconnection rights become strategic assets.
  
• Community and permitting dynamics: projects bundle local benefit schemes, agrivoltaics, and biodiversity plans to expedite approvals and reduce opposition that can erode merchant economics.
  
• Developer capabilities shift: trading desks, forecasting, and battery dispatch expertise become core; partnerships with retailers and aggregators scale route-to-market.
• Timelines and pipeline triage: late-stage FIT-sized projects race to COD; early-stage >1 MW pipeline is reprioritized toward contracted, storage-ready, and grid-favored zones.