[Column] Will Secondhand Solar Assets “Collapse in Price”? – Where Do Price Gaps That a DCF over the Remaining FIT Period Cannot Explain Come From?

✅ In a nutshell

• 📉 Secondhand low-voltage solar power plants are increasingly coming onto the market. Their price ought to be determined by discounting the revenue for the remaining FIT period, yet it is said that mass sales will cause prices to collapse. This article sorts out why.
• 🧮 In practice, prices are set by gross yield, which takes into account neither the remaining years nor costs. The gap from the DCF value that should apply is itself the range within which prices move.
• 🔻 A DCF calculated using the certified tariff structurally overstates value. This is because, during the 10 years before the end of the procurement period, decommissioning reserves are deducted from the purchase payments.
• 🔍 What creates price differences between plants with the same power output is defects in the business plan certification and in title to the land. For buyers, I recommend starting not from yield, but from three points: certification, title, and reserves.

Introduction

In this article, I will explain how the prices of secondhand solar power plants are determined and why a “price collapse” could occur, from the perspective of practice on the buyer’s side.

What prompted me to write this column was an article in the Nikkei dated September 30, 2026.
The article reported that, more than 10 years after the introduction of the FIT scheme, secondhand sales of small solar power plants are spreading, with sale prices of around JPY 10 million to 20 million, and it also touched on the risk of a price collapse due to future mass sales.

What first caught my attention when reading it was the following.
The price of a solar power plant should basically be calculated by discounting the revenue obtainable over the remaining FIT period. If so, the question is why prices would collapse simply because more plants are put up for sale.

To state the conclusion first, my understanding is that the concept of discounted present value is not itself wrong.
Rather, I believe the real cause of the price collapse is that this concept is not reflected in actual market prices, and that the cash flows to be discounted are themselves smaller than assumed.

Below, I divide the routes by which prices move into four, and finally set out the order in which buyers should examine a project.

Market Prices Are Set by Gross Yield

The first point to note is that the figures displayed in the low-voltage secondhand market are not the results of discounted present value calculations.
The aforementioned article introduces listing examples from trading websites, such as a property in Miyagi Prefecture at JPY 13 million with a yield of 15%, and a property in Gunma Prefecture at JPY 8 million with a yield of 13%.
The yield here is the gross yield, i.e., annual electricity sales revenue divided by the price.

Gross yield does not account for the remaining years of the FIT period.
A property with 8 years remaining and one with 15 years remaining are listed side by side at the same “15%.”
It also does not include operation and maintenance costs, fixed asset tax, insurance premiums, the cost of replacing power conditioners, or revenue losses from output curtailment.
Removal costs are not even part of the calculation in the first place.

In other words, what is being formed in this market is a sense of the going rate—”at what percentage gross yield would I buy?”
Because such a sense of the market moves with supply, demand, and sentiment, prices move even if the cash flows of the underlying asset do not change.
The very existence of a gap between the discounted present value that ought to apply and the prevailing gross yield can be considered to create the range of price movements.

The Discount Rate Is Determined by the Market, Not the Asset

Even if a discount calculation is carefully constructed, the discount rate in the denominator is the buyer’s required yield.
This is determined not by the nature of the asset but by the market.

The peculiarity of FIT projects is that, while revenue is fixed, neither interest costs, repair costs, nor inflation can be passed on to the electricity sales price.
The aforementioned article also cites the inability to pass on costs amid rising interest rates and inflation as one of the reasons behind the increase in sales.

Even with the same cash flows, if the required yield rises by one percentage point, the price of a property with 10 years remaining falls by several percent.
Merely a change in the buyer’s financing environment moves prices, even if the seller does nothing.

The Numerator Is Not Fixed Either

What the FIT guarantees is the procurement price, not the net proceeds.
I feel this is the point most likely to be misunderstood in practice.
Let me list, in order of impact, four factors that matter when estimating revenue for the remaining period.

First, the deduction of decommissioning reserves.
According to the explanation of the decommissioning cost reserve system published by the Agency for Natural Resources and Energy, for commercial solar power generation of 10 kW or more, external reserves in a manner akin to withholding at source are required in principle, implemented by deducting the amount of the decommissioning reserve from the purchase payment.
The reserve period runs from 10 years before the end of the procurement period until its end date.
For properties more than 10 years past the introduction of FIT—that is, precisely the properties now appearing on the secondhand market—all or most of the remaining period falls within this deduction period.
What the buyer actually receives is not the certified tariff itself, but the amount after deduction of the reserve. A calculation discounted using the certified tariff structurally produces an overstated figure.

Second, output curtailment.
In some areas, uncompensated curtailment has become routine, reducing the very kWh that can be sold.

Third, the replacement of power conditioners.
The timing of replacement coincides precisely with the remaining period acquired through a secondhand purchase.

Fourth, insurance.
With the increase in natural disasters, underwriting conditions have become stricter, and if insurance cannot be obtained or premiums rise significantly, this directly translates into deteriorating cash flow.
The aforementioned article also points out that the termination of insurance contracts becomes a trigger for sales.

The Value Remaining After the End of FIT Is Largely Undetermined

The greatest uncertainty in the discount calculation is the value after the 20-year procurement period ends.

According to the aforementioned article, for residential installations that have completed a 10-year FIT period, the post-FIT selling price is roughly JPY 10 per kWh, well short of the JPY 30–40 range in the early days of the scheme.
For commercial installations, the article states that purchases after FIT expiry depend on the power company, and no level is indicated.

On the other hand, restoration obligations under land lease agreements, removal costs, and relationships with landowners remain.
If the reserve is insufficient to cover removal costs, the value remaining after the end of FIT may even be negative.
As the remaining period shortens, the weight of post-FIT value in the overall value increases, so the structure is such that prices can swing significantly merely because the market’s perception of the post-FIT outlook changes.

Price Differences Arise Not from Power Output but from Certification and Title

Even properties listed at the same gross yield are not the same in substance.
The aforementioned article also introduces comments from industry participants pointing to a risk that the quality of properties brought to market may decline going forward.
None of the following items is of a nature that can be absorbed through the discount rate. If any applies, the buyer will either have to deduct substantially from the price or walk away from the deal.

Procedures for Changes to the Business Plan Certification

The Act on Special Measures Concerning Promotion of Use of Electricity from Renewable Energy Sources divides the procedures for changes to a certified business plan according to their content.

Article 10, paragraph 1 of the Act provides that a change to the content and timing of the business, the category of facilities, matters concerning connection to electric lines, the installation location, output, and management method of facilities, or the method of decommissioning requires certification of the change.
For minor changes, prior notification suffices under paragraph 2 of the same Article.
By contrast, for matters such as the applicant’s name or trade name and address and the names of officers, notification without delay suffices under paragraph 3 of the same Article.

The work lumped together as a “change of name” in secondhand transactions is legally divided into these three procedures.
If only the owner changes, post-event notification suffices, but in practice there are many cases where the management method changes and the description of the decommissioning method also needs to be reviewed.
Before entering into the sale and purchase agreement, it is necessary to confirm which procedures are required and when they will be completed.

Failure to Make Reserves Is a Ground for Revocation of Certification

Article 15, paragraph 1 of the Act lists the grounds for revocation of certification.
Item 4 thereof makes it a ground for revocation where a certified operator fails to make the prescribed reserves for facilities falling under the categories subject to reserves.

From the buyer’s perspective, this is not a matter of price, but a matter of whether the project survives.
Acquiring a project without confirming the seller’s reserve status means inheriting the risk of revocation, so I consider this an item that should be confirmed at the early stage of due diligence.

Title to Land and Related Laws

The Agency for Natural Resources and Energy’s Business Plan Formulation Guidelines (Solar Power Generation) require ownership or other title to use the land.
They also address, respectively, the procedure for exclusion from agricultural land use zones under the Act on Establishment of Agricultural Promotion Regions, obtaining permission for or giving notification of farmland conversion under the Agricultural Land Act, and obtaining forest land development permission under the Forest Act.

In the case of a lease, in addition to whether title exists, it is necessary to confirm whether perfection requirements have been satisfied, changes or succession of the lessor, expiry of the term and renewal conditions, and the scope of restoration obligations.
Because a power plant cannot be moved, there is no alternative solution for land problems.

The Guidelines require signs to be installed in positions easily visible from outside the generation facilities or the fences enclosing them, and require fences to be of a height and structure that prevents easy entry into the premises.
These may seem minor, but if not addressed, they become subject to correction and also affect relationships with neighbors.

Other Items to Confirm

In addition to the above, I believe the following points should also be cleared at an early stage.

• The status of the grid connection contract with the power company and the settlement of construction cost contributions, and the method of their succession.
• Whether the project falls under so-called split projects, and whether there has been any past guidance or collection of reports.
• The status of compliance with embankment regulations and other land-related regulations.
• The existence of local government ordinances and agreements with neighboring residents, and whether they need to be succeeded to.
• Whether as-built documents, maintenance and inspection records, and generation performance data can be handed over.

The Order in Which Buyers Should Examine a Project

In light of the above, I believe that buyers should not begin their review from gross yield.

What should be examined first is whether the content of the business plan certification matches the current state, whether change procedures are necessary, and whether reserves are being made.
If problems are found here, there is no point proceeding to discuss price. Next, confirm title to the land and the status of compliance with related laws. This, too, is an all-or-nothing risk.

Only then should the review proceed to the numbers.
Calculate on a net basis, using the net proceeds after deduction of reserves rather than the certified tariff, stating the remaining years explicitly, and deducting operation and maintenance costs, fixed asset tax, insurance premiums, replacement costs, and expected output curtailment.
The post-FIT value should be set conservatively, after confirming where the removal obligation lies and whether the reserve is sufficient.

The figures constructed in this order should almost always come out lower than the gross yields on trading websites.
However, in a phase where a price collapse is being discussed, I believe buyers who can negotiate in this order will, as a result, be able to secure more favorable terms.

Conclusion

I consider the approach of viewing secondhand solar prices through a DCF over the remaining FIT period to be correct as a matter of how pricing ought to be done.
The reported risk of a price collapse does not mean that this method is wrong.

First, actual market prices move on the crude indicator of gross yield, which reflects neither the remaining years nor costs.
Second, the required yield in the denominator moves with interest rates, and the numerator also erodes due to deduction of decommissioning reserves, output curtailment, replacement costs, and insurance premiums.
Third, post-FIT value remains undetermined, and as supply increases, variation in the quality of projects widens.

And what creates price differences between properties with the same power output is not the quality of generation, but whether there are defects in the business plan certification and title to the land.
For sellers, putting in order the certification documents, title, permits, and reserve status translates directly into price.
For buyers, I believe that starting not from yield but from the three points of certification, title, and reserves leads to negotiating power in a phase of falling prices.

For Those Considering Acquiring Secondhand Solar Assets

Borderless Business Law Office continuously handles matters relating to renewable energy and battery storage.

In acquiring secondhand solar assets, confirming three points—the business plan certification, title to the land, and reserve status—before generation performance is what determines the outcome.
I believe the terms of the sale and purchase agreement should be designed based on the results of that confirmation.

We accept consultations in situations such as the following.

• You wish to confirm, for a property under consideration, any discrepancy between the certification and the current state, and whether change procedures are necessary.
• You wish to review, from a legal perspective, title to the land and compliance with farmland conversion, forest land development, and embankment regulations.
• You wish to sort out the status of decommissioning reserves and where the removal obligation lies.
• You wish to design representations and warranties, price adjustments, and the allocation of certification revocation risk in the sale and purchase agreement.
• You wish to determine the scope and priorities of due diligence when acquiring multiple properties together.

For an initial consultation, if you can show us the business plan certification notice, the contracts relating to the land, and recent generation performance, we can sort out the issues more quickly.
Please contact us using the inquiry form below.

*This article is a general overview based on laws and regulations and materials of the Agency for Natural Resources and Energy published as of September 30, 2026.
Individual matters need to be re-examined based on the latest materials.