Pricing Set for Japan's Feed-In Tariff, Goes Into Force July 1

This weekend, Japan approved re-starting two nuclear reactors despite mass public opposition at the same time as announcing pricing for the country’s landmark renewable energy feed-in tariff (FiT).

Solar stocks rallied on the premium price that will be paid for solar, which many think will boost Japan to the world’s largest solar market.

The FiT could spur at least $9.6 billion in new solar installations with 3.2 gigawatts (GW) of capacity, around the output of three nuclear plants, forecasts Bloomberg New Energy Finance.

Japan’s FiT will no doubt shore up the world’s solar manufacturing industry, but Japanese business groups worry it will raise utility bills and slow economic recovery.

The FiT requires utilities to pay $0.53 cents per kilowatt-hour for 20 years for solar, triple that of China’s and almost double that of Germany. 

When Germany’s latest subsidy cut comes into force, it will be reduced to $0.17-$0.26, depending on size.

Many solar and wind projects have been on hold waiting for this announcement, which is completely in line with prices projected months ago. 

"The very attractive rate reflects the government’s intention to set up many solar power stations very quickly," Mina Sekiguchi, associate partner and head of energy and infrastructure at KPMG in Japan, told Bloomberg.

"We hear every day a new announcement of a megawatt-scale project," Izumi Kaizuka, a solar industry analyst at RTS Corp., told Bloomberg.

Last year, Japan ranked sixth worldwide for solar installations, adding 1.3 GW for a total capacity of 5 GW, providing about 1.6% of its electricity. That’s expected to triple next year, with additions in the range of 3.2-4.7 GW, says says Bloomberg New Energy Finance. One gigawatt supplies about 243,000 homes in Japan.

CLSA Asia-Pacific predicts solar capacity will jump to 19 GW by 2016 and wind capacity to 7.6 GW.

Solar systems costs are much higher in Japan that elsewhere. Chinese firms plan to bring their lower cost solar panels to Japan and compete with domestic companies like Sharp and Kyocera. A residential solar system, for example, costs more than double that in Germany, $6.28 a watt compared to $2.70 a watt.

Japan’s FiT also covers geothermal, wind, biomass and hydro, and could expand revenue from renewable energy generation and related equipment to more than $30 billion by 2016, according to investment firm CLSA, reports Reuters.

Wind energy will be subsidized at about half that of solar, still much higher that Germany, where it receives as little as $.06. 

Not only is Japan gearing up renewable energy to replace nuclear capacity, but also to avoid the inevitable high costs of oil and liquified natural gas in the future. Nuclear provided 30% of Japan’s electricity, and fossil fuels 60% before the meltdown; since then fossil fuels have been supplying almost 90%, the rest from hydro.

The re-starting of two reactors is expected to be followed by more. Viewed as a victory for the still-powerful nuclear industry, the government says it’s concerned about having enough electricity for the "summer crunch" and in preventing companies from moving offshore.

Activists have collected over 7.5 million signatures for a petition to end nuclear power altogether, and there have been daily protests for the past week.

Last Friday, Japan’s lower house passed legislation to build a new nuclear plant and set up an independent nuclear regulatory agency, probably in September. The Energy Minister says the government’s medium- to long-term policy to reduce dependence on nuclear energy is unchanged. 

Japan’s goal is to boost renewable generation by more than 30 GW over the next decade to 12% of Japan’s total generation. 

More details on Japan’s FiT:

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Comments on “Pricing Set for Japan's Feed-In Tariff, Goes Into Force July 1”

  1. Fiona - World Future Council

    Japan’s enthusiastic adoption of feed-in tariffs for renewable energy sources is due first and foremost to a need to meet energy demands after shutting down its 54 nuclear reactors, and only secondly to a commitment to switching to sustainable, carbon-free energy sources. This is made clear by the increase in fossil fuel imports during the past year as well as the recent announcement to bring two nuclear reactors back online.

    The position of the Japanese government regarding RE is unclear and unstructured – the direct consequences are investor uncertainty in an industry that is very volatile and not based on clear and stable values. An energy transition certainly, but with a hazy future.

    Japan’s FiTs are among the highest in the world. As seen in Germany, tariffs do not necessarily have to be high in order to allow the RE market to take off. One of the key aspects of investment in RE technologies is market stability in the form of concrete laws corroborating long-term investment security, which has to stem from determined political will. The World Future Council commends the fact that the Japanese government has attempted to bring about such drastic changes in such a short period of time, but this dynamism in the political sphere must be channelled towards a more sustainable direction and indicate a clear stance regarding the political will.

    Japan stands to gain tremendously from its FiT legislation. But in order to reduce investment volatility – due, for example, to expectations of degression rate changes – the Japanese government must couple its FiT policy with a strong statement of commitment to renewable energy as a sustainable, long-term strategy. This means recognising that for environmental, economic and security reasons, nuclear power is not a viable alternative.


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