Japan Solar Update: No.111 (Aug 26 ~ 30, 2024)
The first Working Group on Power Generation Cost Verification convened on July 22 to assess and verify the costs associated with various forms of power generation. This group typically examines factors such as capital costs, operational and maintenance expenses, fuel costs, and decommissioning costs, in order to ensure accurate cost modeling for policy and planning purposes. During this session, the group likely reviewed updated data on different energy sources, such as solar, wind, nuclear, coal, and natural gas, to ensure that cost assumptions reflect the latest market conditions.
<Key points>
- The Ministry of Economy, Trade and Industry (METI) has established the Power Generation Cost Verification Working Group to conduct estimates of the power generation costs of each power source which serves as a reference for considering the energy mix
- Based on the continuity of power generation cost verification to date, etc., the “model plant method” was estimated
- As the installed capacities of variable renewable energy sources increase, the importance of grid stabilization costs such as “integration cost” will increase more than in the past, and it was agreed to deepen the consideration based on the results of the FY 2021 estimates
- As a new power source, it is planned to proceed with estimation as much as possible for advanced technologies such as perovskite solar cells (PSCs), offshore wind power, ammonia and hydrogen
- The Strategic Policy Committee plans to consider the energy mix as it proceeds with the formulation of the Seventh Strategic Energy Plan
- The Power Generation Cost Verification Working Group* was established to conduct an estimation of the power generation cost of each power source, which will serve as a reference for the consideration of the energy mix
* In the FY 2021 2021 power generation cost verification, the power generation costs as of 2020 and 2030 are estimated.
Overall framework of analysis
- Based on the continuity, etc. of the verification of power generation costs up to this point, estimation was conducted with a “model plant method” suitable for the evaluation of the power generation technology itself
- As the installed capacities of variable renewable energies such as PV and wind power increase, the importance of grid stabilization costs such as “integration costs” will increase more than in the past, and it was agreed to deepen the consideration based on the results of the FY 2021 estimates
Target Year
New power sources
Committee member Matsuo provided information on the evaluation of power generation costs by power source
- The “Analysis and Estimation Using a Model Considering the Location of Power Sources and Grid Constraints” (LCOE*) presented in FY 2021 and the latest study results were compared. The LCOE* of PV power generation in particular would decline significantly under the situation where EVs and heat pump water heaters are becoming more widespread, and the flexibility of the power system increases and so on
- It was pointed out that if the premise of the estimation is changed, the result will change, so it is necessary to be careful in dealing with the estimates
- From the next meeting onward, it is planned to proceed with discussions on the cost of each power source
- Based on the verification results of the Power Generation Cost Verification Working Group, it is expected that the Strategic Policy Committee will proceed with the consideration of the energy mix
Figure 1 Summary of deliberations at the Power Generation Cost Verification Working Group
Materials of the 1st meeting of the Power Generation Cost Verification Working Group (July 22, 2024), compiled by RTS Corporation