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.

FIP premium calculation logic

For year $Y$ and month $M$, and subsidy rate $R$:

1. Calculate $P_{avg}$: average between spot price $P_s$ and intraday price $P_i$ weighted over volumes for each time slot $V_s,V_i$

$$P_{avg} = (P_s \cdot V_s + P_i \cdot V_i)/(V_s + V_i)$$

2. Calculate $P_{avg}(Y-1)$: average of $P_{avg}$ weighted over total PV generation in the area for year Y-1
3. Calculate $P_{avg}(M,Y-1)$: average of $P_{avg}$ weighted over total PV generation in the area for month M in year Y-1
4. Calculate $P_{avg}(M,Y)$: average of $P_{avg}$ weighted over total PV generation in the area for month M in year Y
5. Calculate $P_{reference,raw} = P_{avg}(Y-1) + (P_{avg}(M,Y) - P_{avg}(M,Y-1))$
6. Calculate $P_{nfve}$ as the weighted average over volume of the latest available 4 results of quarterly auctions for non-fossil certificates
7. Calculate $P_{reference}$: if $P_{reference,raw} + P_{nfve} \leq 0$ then $P_{reference} = 0$ else $P_{reference} = P_{reference,raw}$
8. Calculate $P_{reference,total} = P_{reference,raw} + P_{nfve} - P_{balancing}$
9. Calculate adjustment factor $F$: total PV generation during the month / total PV generation during slots when prices are >0.01 yen/kWh in the month.
10. Calculate $P_{premium,raw} = R - P_{reference,total}$
11. Calculate $P_{premium} = P_{premium,raw} \cdot F$
12. $P_{premium} = \max(P_{premium}, 0)$

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.

FIP compensation calculation logic

Once the monthly FIP premium value is known, we calculate the FIP compensation by multiplying the FIP premium by the effective energy exchanged eligible for FIP.

Below, we describe a case that includes assets with batteries and grid charging enabled.

This logic is based on the official METI documentation. For each time slot t within month M:

$$R_{\text{FIP}} (t) = \begin{cases} P_{\text{premium},M} \Big( E_\text{solar-to-grid}(t) + \lambda_M E_\text{battery-to-grid}(t) \Big) & P_{\text{day-ahead}}(t) > 0.01\\ 0 & P_{\text{day-ahead}}(t) = 0.01 \end{cases}$$

With $\lambda_M$ the fraction of battery energy coming from solar during the month:

$$\lambda_M = \frac{\sum_{t \in M}{E_\text{solar-to-battery}(t) } }{ \sum_{t \in M}({E_\text{solar-to-battery}(t) + E_\text{grid-to-battery}(t)})}$$

note

For assets without a battery, $E_\text{battery-to-grid}$ is zero, thus the only contribution is from solar. For assets with a battery but without grid charging, the $E_\text{grid-to-battery}$ is zero, thus $\lambda_M=1$ and all the battery discharge contributes to FIP revenues.