In 2017, with the feed in tariff (FiT) scheme becoming increasingly fiscally unsustainable, Japan introduced renewable energy auctions. As of October 2020, Japan had conducted five solar photovoltaic (PV) and two biomass auctions, and launched a zone-specific offshore wind auction in June 2020. A feed in premium (FiP) scheme was announced in 2020 to be introduced in 2022.

The five solar PV auctions have awarded almost one-third of the originally announced volumes (574 megawatt (MW) awarded out of a total 1,663 MW auctioned). In addition, no biomass project has yet been contracted through renewable energy auctions.

The challenge in solar PV auctions has mainly been in retaining qualified bidders, as many dropped out during the process. Developers indicated that constraints regarding grid connection and land availability, as well as strict bond confiscation rules in the first round, reduced their interest in placing bids.

At the solar PV auctions, average awarded prices fell by more than 35% between the first and fifth rounds. The first saw a weighted average awarded price of JPY  19.64 (Japanese yen)/kilowatt hour (kWh) 1 (USD [US  dollar] 174/ megawatt hour [MWh]) in November 2017, while the fifth saw an average awarded price of JPY 12.57/kWh 2 (USD 115/MWh) in January 2020. Yet solar PV prices in Japan are still higher than the global average, which was USD 56/MWh in 2018. Solar PV prices in Japan are also high compared to those achieved in other countries with similar macro-economic conditions and level of development of the solar PV energy sector.