By HIROKI HASHIMOTO/ Staff Writer
May 25, 2021 at 07:00 JST
Swaths of black silicon rectangles shimmer in the sun along the slope of a hill overlooking a residential neighborhood in Bungo-Takada, Oita Prefecture. The hill is lined with a staggering 7,600 photovoltaic panels.
Until recently, this mega solar farm was a fixer upper. But it has turned a corner, thanks to a new trend of solar farm flipping.
West Holdings Corp., a company based in Hiroshima’s Nishi Ward that rehabilitates mega solar plants, purchased it from its initial owner, fixed it up, and then resold it to a real estate company that deals in energy projects.
“The mega solar farms built so far in Japan have to be used more effectively,” said Nobuo Katsumata, a West Holdings director. “There are many solar farms that would not have been built in such a way if they were built now. That is why it is so important to have them carefully fixed so they can generate more power.”
After snatching it up, West Holdings quickly set to work on it, replacing degraded panels it found at the farm during a post-purchase inspection.
The solar farm has the capacity to output more than 2 megawatts, but it was only able to generate power at about 60 percent of that.
After repairs, that increased to about 90 percent, officials said.
Not long ago, building mega solar farms like this one was something of a boom industry. That is, until the economics started to change.
The trend in building them started after the government introduced a feed-in tariff (FIT) system for renewable energy options including solar power in 2012. Many companies decided to set up mega solar farms in the hopes of quickly netting high returns.
But the price for selling energy through the FIT system dropped year after year, squeezing profit margins and making similar operations less attractive.
While the number of large photovoltaic power plants grew sharply, growth recently flattened out, partly because Japan began to run out of plots of land properly suited for mega solar plant projects, making it increasingly difficult to build new ones.
The number of mega solar farms certified annually under the FIT system peaked at about 3,900 (total 14.6 gigawatts) in fiscal 2013.
By fiscal 2019, the figure had dropped to just 58 (total 200 megawatts).
Now, projects to rehabilitate mega farms are increasingly drawing interest because with a little elbow grease, the amount of power these large installations generate can be given a significant boost without having to build new farms.
West Holdings officials said there are many languishing solar farms in the country in desperate need of repairs and upgrades. Some have their panels pointed north, resulting in them soaking up less sunlight, while others are so densely covered with panels that maintenance workers are unable to move between them.
The company operates mega solar farms of its own, and has subsidiary companies tasked with procuring, installing, maintaining and managing photovoltaic panels, and selling green energy.
It started its mega solar farm rehabilitation business slightly more than two years ago and is proving successful.
The company made 4.9 billion yen ($45 million) from six projects in the first fiscal year of that business, ending in August 2020. It earned an additional 3.6 billion yen from six more projects in the six months after that.
It aims to earn 15 billion yen from 35 such projects in the year that ends in August 2021.
And it is not alone in the business of flipping farms.
Daiwa House Industry Co., for example, is planning an aggressive strategy to scoop up run-down solar power plants.
“Many solar farm operators are neglecting daily maintenance work,” said Toshiya Nagase, managing executive officer with Daiwa House. “We could improve their efficiency by taking the lead in their maintenance.”
Yano Research Institute Ltd. released survey results last September that said transactions in secondhand solar power plants grew by about 200 megawatts every year since fiscal 2017 and were expected to expand to 970 megawatts in fiscal 2020 and then even further to 1.21 gigawatts in fiscal 2021.
The market research firm said in its analysis that, apart from power utilities, a growing number of investors are purchasing used solar farms in the hopes of reselling them after increasing their value.
“We hope that more active transactions in used equipment will lead photovoltaic power plants to remain in stable operation over a longer time,” one industry ministry official said.
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