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Japan Feed Law

August 29, 2011
Paul Gipe

Japan Feed-in Tariff Policy Becomes Law


 

 

In a major breakthrough for the feed-in tariff movement worldwide, Japan's upper chamber has approved a new law implementing a feed-in tariff policy for renewable energy.

The law, which goes into effect next July, is widely reported as setting a target of 30,000 MW of new renewable development within the next decade, nearly five times the 6,500 MW of wind, solar, and geothermal power currently operating in the country. [Note: There is no target in the law itself. See Japanese Feed-in Tariff Law]

The move has global implications, as the world's third largest economy follows that of the world's second-largest economy, China, and the world's fourth-largest economy, Germany, in implementing feed-in tariffs in order to rapidly develop renewable energy.

The new law is also a clear sign that Japan plans to reduce its reliance on nuclear power, after the disaster at Tokyo Electric Power's Fukishima 1 plant.

Japan's action, after weeks of bitter debate between renewable energy advocates and Japan's old-guard nuclear industry, follows that of nearby Asian giant China, which this summer announced feed-in tariffs for large solar photovoltaic (solar PV) power plants.

China had previously implemented feed-in tariffs for wind energy that powered the country to world leadership in 2010, when it installed nearly 19,000 MW of new wind turbines--3.4 times the amount installed in the USA.

Germany, Japan's global competitor in heavy machinery, autos, and steel, has used Advanced Renewable Tariffs, a modern system of feed-in tariffs, since the year 2000. Germany's system of renewable tariffs has made the country the overall world leader in renewable energy development, producing rapid growth of wind energy, solar PV, and biogas.

Japan's bold step away from nuclear power could provide impetus to feed-in tariffs in North America, where the policy has been slow to gain traction outside of Ontario, Canada, and the state of Vermont.

Adoption of feed-in tariffs by Japan--a country with an industrial economy built around competitive exports--is a seeming endorsement at the highest international level that rapid development of renewable energy is desirable, if not essential, and that feed-in tariffs are the policy best suited for the task.

Observers say a key feature of the new law is the creation of a special parliamentary committee to determine the details of the program, including specific tariffs. In the past, this function would normally have been assigned to the powerful Ministry of Economy, Trade and Industry (METI).

However, the political fallout from the nuclear disaster at Fukishima has led to a dramatic loss of trust in METI, which has opposed both the rapid expansion of renewables, and also the use of feed-in tariffs to do so. Taking program design and pricing away from METI is a major victory for renewable energy advocates in Japan.

While details remain sketchy, the program contains the following features.

  • Contract term: will be set by special committee
  • Technologies: wind, solar, biomass, geothermal, small hydro
  • Tariffs: cost-based
  • Target: reported as 30,000 MW within 10 years, though not contained in the law
  • Cost recovery: utility ratepayers with reduction for heavy industrial users
  • Program review: every 3 years with more frequent tariff reviews

As in Germany, heavy industry can apply for a reduction in the surcharge on electricity to support the program. Similarly, those affected by the Great East Japan Earthquake will not have to pay the surcharge for the program through the end of March 2013, according to the Japan Electric Association.

Reuters reports that a ruling party lawmaker said he expects the tariff for solar PV to start at 40 Yen per kilowatt-hour ($0.50 USD/kWh), and the tariff for wind energy to start at 20 Yen per kilowatt-hour ($0.25 USD/kWh).

If implemented as suggested, the wind energy tariff would be among the highest in the world.

Mitsubishi Heavy Industries--a Japanese company and one of the world's leading manufacturers of wind turbines--has installed few wind turbines in its home market. This could change quickly.

The widely expected passage of the new law has unleashed a burst of entrepreneurial activity not seen in Japan for some time.

Japanese firms are already lining up projects to take advantage of the new policy, says Rikkyo University's Andrew Dewitt. He cites as an example Mitsui and Toshiba's plans to build a 50 MW solar PV power plant in Aichi Prefecture by 2013.

It remains to be seen if Japan will open its domestic market to foreign manufacturers of renewable technologies, especially solar PV.

Long the world's leader in solar PV technology, Japanese industry has watched its dominant position quickly eroded by upstarts in Germany and, subsequently, China. Japanese companies are now furiously trying to catch up. The new law will create a dynamic solar market on their home turf, possibly giving Japanese solar companies a new volume edge on the global scene.

Nevertheless, any practices that appear to discriminate against imports in favor of domestic manufacturers will be closely watched, especially by firms in Ontario, Canada. Japan has filed a trade complaint against Ontario's feed-in tariff program for its domestic content provisions.

 

Until the new feed-in tariff policy is implemented, Japan will remain a laggard in renewable energy development in comparison to leaders such as Germany.

Japan installed about 1,000 MW of solar PV in 2010. Germany installed more than seven times as much, and Italy--the so-called poor man of Europe--installed more than twice as much. And Japan's population is 1.6 times greater than that of Germany and more than twice as large as that of Italy.

In wind energy, Japan's performance has been equally as poor. Based on its population, Japan has installed only 9% of the wind energy capacity installed in Germany.

Nevertheless, with the new feed-in tariff policy out of METI's hands, and with careful implementation of the new policy, Japan could quickly become a leader in domestic renewable energy development and could join Germany in the rapid phase-out of nuclear power.


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