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Japan’s Feed-in-Tariff energy system under way

July 9, 2012


Japan has taken its first step in spreading the use of renewable energy with Sunday’s start of a feed-in tariff, a policy mechanism obliging utilities to purchase all the electricity generated by wind, solar and other renewable energy sources.

The government is aiming to reduce its dependence on nuclear plants, but the introduction of the feed-in tariff system based on the renewable energy special measures law will effectively increase utility bills paid by companies and households.
“Whether we can make this year the ‘first year of renewable energy’ [in Japan] depends on how fast we can leave the starting blocks,” Economy, Trade and Industry Minister Yukio Edano told the press Sunday when he visited the Koriyama Nunobiki Kogen wind power plant in Koriyama, Fukushima Prefecture.
Edano was referring to the efforts the government needs to make to drastically increase the use of renewable energy to realize its pledge to reduce dependence on nuclear power generation.
On the same day, SoftBank President Masayoshi Son attended a ceremony marking the start of operations of a mega solar power plant in Kyoto, which is owned by a renewable energy unit of his company.
“This will be the most economical power generation in Japan after we recoup our capital investment,” Son stressed in a speech. “This will enable mankind and the Earth to coexist.”
SoftBank is planning to use the feed-in tariff system at its 10 solar and one wind power plants.
Meanwhile, Kyocera Corp., which manufactures solar power panels, is planning to construct a mega solar power plant with a power generation capacity of 70,000 kilowatts in Kagoshima Prefecture.
Even Lawson, Inc., a convenience store operator not involved with power generation, has decided to sell electricity by installing solar power panels at 2,000 outlets by fiscal 2013.
Eurus Energy Holdings Corp., the biggest wind power generation firm in Japan, is planning to build wind power plants with a total power generation of 300,000 kilowatts in Wakayama and other prefectures.
Even liability insurance firms are taking advantage of the business opportunity.
Mitsui Sumitomo Insurance Co. began selling insurance policies for mega solar power plant operators to cover losses incurred when the lack of sunlight reduces the production of electricity. The insurance policies also cover damage caused by fire, lightning and for other reasons.
The Economy, Trade and Industry Ministry said renewable energy plants capable of generating 2.5 million kilowatts of power will qualify for the feed-in tariff mechanism in fiscal 2012.
If conditions are favorable, the maximum amount of electricity they will be able to generate will be equivalent to that generated by two or three nuclear reactors. However, the amount of electricity generated at solar power plants will vary significantly depending on the time of day and weather conditions, while wind power plants will not be able to generate any electricity without wind.
It also is uncertain whether the renewable power generation business will become profitable for corporations.
“A renewable energy power plant’s operation rate and land costs will determine whether a company will succeed or fail,” said Hidetoshi Shioda of SMBC Nikko Securities.
Renewable energy could become widely used in this country if the projects of the companies that jumped into the field first turn out to be successful.
One analyst said the government also should carry out policies that pay equal consideration to the promotion of renewable energy and the burdens it might cause.
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