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FIP calculation

Background​

Feed-in premium is the main subsidy scheme in Japan. The FIP premium depends on the plant's subsidy rate, which is specific for each plant, and the prices on the electricity market at present and over the last financial year. Calculation of the FIP is essential for estimating the revenues of solar plants, as this often represent a significant portion of revenues.

In our platform, we calculate the FIP for each asset using actual prices for the past, and using forward price curves for the future.

Calculation logic​

For year YY and month MM, and subsidy rate RR:

  1. Calculate PavgP_{avg}: average between spot price PsP_s and intraday price PiP_i weighted over volumes for each time slot Vs,ViV_s,V_i
Pavg=(Ps⋅Vs+Pi⋅Vi)/(Vs+Vi)P_{avg} = (P_s \cdot V_s + P_i \cdot V_i)/(V_s + V_i)
  1. Calculate Pavg(Y−1)P_{avg}(Y-1): average of PavgP_{avg} weighted over total PV generation in the area for year Y-1
  2. Calculate Pavg(M,Y−1)P_{avg}(M,Y-1): average of PavgP_{avg} weighted over total PV generation in the area for month M in year Y-1
  3. Calculate Pavg(M,Y)P_{avg}(M,Y): average of PavgP_{avg} weighted over total PV generation in the area for month M in year Y
  4. Calculate Preference,raw=Pavg(Y−1)+(Pavg(M,Y)−Pavg(M,Y−1))P_{reference,raw} = P_{avg}(Y-1) + (P_{avg}(M,Y) - P_{avg}(M,Y-1))
  5. Calculate PnfveP_{nfve} as the weighted average over volume of the latest available 4 results of quarterly auctions for non-fossil certificates
  6. Calculate PreferenceP_{reference}: if Preference,raw+Pnfve≤0P_{reference,raw} + P_{nfve} \leq 0 then Preference=0P_{reference} = 0 else Preference=Preference,rawP_{reference} = P_{reference,raw}
  7. Calculate Preference,total=Preference,raw+Pnfve−PbalancingP_{reference,total} = P_{reference,raw} + P_{nfve} - P_{balancing}
  8. Calculate adjustment factor FF: total PV generation during the month / total PV generation during slots when prices are >0.01 yen/kWh in the month.
  9. Calculate Ppremium,raw=R−Preference,totalP_{premium,raw} = R - P_{reference,total}
  10. Calculate Ppremium=Ppremium,raw⋅FP_{premium} = P_{premium,raw} \cdot F
  11. Ppremium=max⁡(Ppremium,0)P_{premium} = \max(P_{premium}, 0)
note

The FIP premium is constant throughout each month, except for slots where prices are exactly 0.01 JPY/kWh (price floor): in that case the FIP premium is zero.