Tokyo’s new solar panel mandate: ‘Can Japan avoid Germany’s solar pitfalls?’

Japanese

To encourage the generation of renewable energy, the Tokyo Metropolitan Government introduced a regulation mandating the installation of solar panels on the roofs of new detached buildings starting in April 2025. The new regulation will require large house builders—those undertaking projects exceeding 20,000 m² annually—to install solar panels on new houses and other buildings with a floor area of less than 2,000 m². Given the limited space available in urban areas for large-scale renewable energy projects, the initiative aims to significantly boost the utilisation rate of residential PV systems. This effort supports Tokyo’s ambitious goals of achieving net-zero carbon emissions by 2050 and increasing the share of renewable energy to 40-50% by 2040. ^*1 Apart from potential effects on house prices, the initiative is expected to have broader implications on the stability of the power grid.

Technical and market challenges

In Germany, most residential systems, unlike large solar farms or wind installations, cannot typically be controlled or curtailed. This creates challenges for grid stability, especially when high energy supply coincides with low demand. The two leading PV developers (Enpal and 1Komma5) have even warned of regional blackouts during national holidays in spring 2025 if regulation of PV assets is not implemented soon.^*3

Short-term consequences include frequent periods of negative electricity prices on spot markets. In 2024, Germany recorded 457 hours of negative prices—around 5% of the total hours in a year—a trend that continues to rise (see Figure 2). ^*4 During hours of extreme negative prices (<-100€/MWh) in 2023/24, the majority of producing capacity came from PV assets (34 GW) compared to renewable (15 GW) and conventional power plants (8 GW) ^*5, illustrating the inelastic generation of PV in the market.

Figure 2 : Hourly contracts with negative prices at German EPEX spot market

While some market participants, such as industrial consumers, battery owners or households with dynamically priced contracts, may benefit from these conditions, periods of very low or negative prices significantly increase the overall cost of energy supply in the current market design. Grid operators are often forced to sell surplus production on sunny days regardless of market prices and are compensated by the state for these losses. In 2024, the German government provided €18.5bn to transmission system operators to cover the gap between the guaranteed feed-in tariffs for renewable energy and actual market revenues, with the majority of the payments going to owners of PV assets. ^*6

Lessons for Japan’s energy policy

While Germany’s experience demonstrates the success of capacity expansion, it also highlights pitfalls that Japan should avoid as its PV capacity grows and wholesale markets become more volatile.

Key lessons from Germany include the importance of:

• Ensuring solar systems are controllable and can be curtailed during production peaks
• Incorporating market signals into remuneration policies, even for small systems
• Promoting the integration of PV systems with home batteries
• Implementing smart battery management systems that respond to dynamic pricing—for example, charging when electricity prices are low and feeding into the grid during high-demand periods
• On a system level, investments into large-scale battery storage and the shift of peak system demand to solar production periods should be promoted in the long term

The next publication will cover the increasing liquidity in the power wholesale market in Japan.