Will Land in Nonmetropolitan Areas Be Financialized?: Case Study of Mega-Solar Developments in the Tsuyama Urban Area

<p>In recent years, the number of solar power generation facilities has increased remarkably in Japan. In particular, since the introduction of the feed-in tariff (FIT) system in 2012, mega-solar developments with power outputs exceeding 1 MW have been increasing. These developments are undertaken by existing power and energy-related companies and often implemented as a form of real estate investment. They are funded by co-investment schemes such as infrastructure funds in which investors worldwide financialize local land through international financial markets. In this study, we first clarified the regional characteristics of mega-solar developments in Japan. Subsequently, we examined the interface between land and financial markets in peripheral areas by clarifying the relationships among actors involved in mega-solar developments.</p><p>We then analyzed the development of mega-solar power plants throughout Japan, focusing on the Tsuyama urban area of Okayama prefecture. The results demonstrated that mega-solar power plants are generally developed on existing underutilized land and have yet to significantly change the structure of local land ownership. However, co-investment schemes involving the capital of several owners often contribute to the development of a small number of large-scale mega-solar power plants, which account for the majority of mega-solar sites in the region, and are therefore owned by them. Large amounts of capital and technical know-how are essential for large-scale mega-solar developments. Major operators with technical know-how and networks accumulate the capital of investors worldwide seeking attractive investment opportunities. Mega-solar power plants therefore function to integrate peripheral land areas into a complex financial network.</p><p>From the investors’ point of view, such plants are attractive financial instruments because of the long-term stable income expected from FIT. Therefore, many investors worldwide own mega-solar power plants in specific regions without any direct connection to those regions and, in some cases, without being aware of the location of the plants. These developments can be seen as typical financialization of real estate in the sense that by linking local land to the financial market, massive development funds are introduced into a region, thus rapidly changing regional land use.</p><p>On the other hand, in most mega-solar developments, the involvement of local actors is limited. However, it was suggested that even in highly financialized projects, local actors could participate in the projects if local governments become involved. Therefore, it is necessary for local governments to play an active role in establishing development zones and granting development permits, and for an institutional framework to be established at the national level to make this possible.</p>