Due to a fall in feed-in tariff (FiT) rates, return on investment (ROI) for large PV power plants in Japan could fall this year by as much as 5% compared to last year, according to Taiwan-based analysis firm EnergyTrend.

The Japanese Ministry of Economy, Trade and Industry (METI), which is responsible for setting tariff schemes based on the recommendations of a panel of experts, recently issued FiT ratesfor 2014.

The new rates will be implemented as of 1 April, when Japan’s new fiscal year begins. Commercial tariff rates have dropped from¥36/kWh (US$0.35) to ¥32/kWh (US$0.32), representing a decrease of 11.11%, a slightly bigger cut than the expected drop of around 10%, but a smaller drop than the reduction of 14% predicted by some analysts.

Residential tariffs have been cut by just 2.63%, falling from ¥38/kWh (US$0.37) to ¥37/kWh (US$0.36).

EnergyTrend claims that ROI for large power stations could fall in Japan this year by 3% to 5%. EnergyTrend research manager Arthur Hsu said ROI could be between 8% and 12%. The firm said Hsu came to this conclusion after analysis showed that while module prices and cell prices have fallen, construction, land and funding costs have not. The country has also increased consumption tax and spot prices are higher, which Hsu’s team took into account, along with solar irradiance data and the locations of new power stations.

According to EnergyTrend, low ROI may impact power plant sales, with system manufacturers looking to lower costs to improve competitiveness. EnergyTrend argues that at present production capacities, scope for further cost reduction is limited in Japan.

However, Hsu argues that capacity expansions by manufacturers could see module prices fall in the second half of 2014, followed by a commensurate drop in system prices and a rebound in ROI levels for power plants.