http://www.japanfs.org/en/news/archives/news_id032423.html

In the article "Japan's Feed-in-Tariff Scheme Kicks Off!" published in our July 2012 newsletter, we described the government's brand-new feed-in-tariff (FIT) scheme that obliges electric utilities to buy electricity generated from renewable energy sources for 10 to 20 years at a certain price. Here we report on how the renewable energy situation in Japan has been changing since the scheme was introduced on July 1, 2012.

Japan's Feed-in-Tariff Scheme Kicks Off!

According to a report from the Ministry of Economy, Trade and Industry on the introduction of renewable energy sources, as of the end of September 2012, a total generation capacity of 1,780 megawatts (MW) had already been certified for facilities to harness renewable energy sources since the FIT scheme was started in July. This amount is already more than 70 percent of the entire 2,500 MW projected for the end of this fiscal year (March 2013), indicating quite a rapid increase in use of renewable energy sources.

Among those certified, the largest amount (1,040 MW) is from non-residential solar power installations, including mega-solar facilities, followed by residential solar power (440 MW) and wind power installations (290 MW). As construction and installation of these facilities take time, not all will start selling electricity by the end of this fiscal year, but the report shows that the amount of renewable energy sources certified is already almost equivalent to two nuclear power plants' worth of output.

The Japanese government is throwing its strong support behind renewable energy power generation, not only through the FIT system but also with various new subsidies and reductions of regulatory barriers. For example, with an aim to promote biomass power generation using kitchen waste and waste wood from forest management as fuel, the Ministry of the Environment and the Ministry of Agriculture, Forestry and Fisheries will launch a new subsidy scheme in fiscal 2013 that will cover half the construction costs of biomass power generation facilities. To accelerate the introduction of small-scale hydropower, the Ministry of Land, Infrastructure and Transportation plans to ease up on regulations. Up to now, for example, when a hydroelectric power plant was constructed on an irrigation canal, the plan had to be legally approved by the national or prefectural government, but only simple notification will be required under the new system. The new regulation is intended to shorten the period from planning to installation from the present average of five months to about one month.

The government estimates that the FIT scheme will increase renewable energy-related investment by up to 38 trillion yen (about U.S.$ 493 billion) by 2030, encouraging many players to jump in, one after another, to get into this giant market!

We're already seeing signs of a brisk response by industry, such as Osaka Gas Co. buying a wind power generation plant, while a liquid natural gas (LNG) seller strengthened its photovoltaic generation business. Many corporations from different industries with few links to the power industry until now -- such as information technology companies, securities firms, and foreign companies -- are increasingly entering the mega-solar business.

The financial sector is also paying attention to renewable energy sources such as solar power. With a focus on renewable energy, an increasing number of financial institutions are taking positive action, for example, by appointing employees responsible for renewable energy business or introducing relevant companies to their clients. In addition, major trading companies are increasing their investment in renewable energy in anticipation of the future growth in worldwide energy demand.

The ways available to raise funds have also diversified. Some environmental venture businesses have launched an initiative to build a mega-solar power plant by raising funds from local residents. Other companies are planning to build solar power generation facilities by issuing private placement bonds, which means that individuals will be able to invest in mega-solar projects by purchasing bonds. The new funding mechanisms -- which will help revitalize local communities and allow individuals as energy consumers to also become energy producers -- are paving the way to the creation of a new society.

Using Ocean Energy to Generate Electricity

Japan is an island nation surrounded by ocean, and although its land area is relatively small, it has a long coastline and the seventh-largest exclusive economic zone in the world. It is obvious for the future of Japan that it must increase the use of renewable ocean energy.

Offshore wind power is a major way of harnessing ocean energy resources. In October 2012, Japan's first offshore wind turbine was completed by the New Energy and Industrial Technology Development Organization (NEDO) off the coast of Chiba Prefecture, and will come online in January 2013. This is one of the largest wind turbines in Japan, with an overall height of 126 meters (sea level to blade tip), a rotor diameter of 92 meters, and a rated capacity of 2.4 MW.

Another example of harnessing ocean energy is generating electricity using tidal and wave power. For instance, the city of Kitakyushu in Fukuoka Prefecture is conducting an experimental test to harness the energy from the strong, fast tidal currents in the Kanmon Straits. Mitsubishi Heavy Industries is working to put its wave power generation system into practical use, and Kawasaki Heavy Industries is planning to market its tidal power generation system, which harnesses the energy from the ebbing and surging of tides. Aiming for commercialization by fiscal 2016, Kawasaki will start a verification test in Okinawa Prefecture in 2015, in cooperation with Okinawa Electric Power and others. Kawasaki will also conduct a full-scale experiment in Scotland, a world leader in ocean energy development. In Japan, various players are now stepping up their efforts to lead the world in the field of ocean power generation.

City of Kitakyushu Starts Test of Tidal Power Generation in Kammon Straits
Japanese Firm Begins Development of Tidal Power Generation System

Making a Quick Shift to Renewable Energy Using a "Powerful Drug" -- the FIT Scheme

The introduction of the new FIT scheme is a good example of how much a policy change can shift the direction of business, investment, and ultimately society. The scheme's power to redirect such a large amount of money, people and businesses comes from the very attractive buyback price and period the government set as an investment destination. For that reason some have described the FIT scheme as a "powerful drug," but we have also heard criticism that the buyback price has been set too high.

In its defense, Kazuhiro Ueta, a professor of Graduate School of Economics and Faculty of Economics at Kyoto University who worked as director of the Procurement Price Calculation Committee, the body that determined the buyback price and period, weighed in on the discussion.

"The implementation of the FIT scheme was determined by the Law on Special Measures Concerning Procurement of Renewable Energy Sourced Electricity by Electric Utilities, which also stipulates that incentives be provided for the first three years in order to boost the introduction of renewable energy use.

"Since March 11, 2011, the government has been discussing the target ratio of Japan's energy portfolio in 2030 to formulate the new basic energy plan. Though the ratio of nuclear power has been a controversial issue, it plans to increase renewable energy to over 25 percent in 2030 regardless of the ratio of nuclear power. Currently, the ratio of renewable energy in Japan is only about 10 percent, even when large-scale hydropower is included. To increase this to 25 percent in less than 20 years is no easy matter. We cannot attain the goal without quickly boosting the amount through the FIT scheme. To that end, we need the present conditions of the scheme.

"The buyback conditions, however, should be continuously reviewed. We plan to review the present conditions by April 2013. With an increase in the amount of renewable energy, the advancement of technology and a decline in the price of solar cells, the buyback price will also decline. If the power generators are the only ones making big profits, then we can review the conditions to remedy situation."

So far, the "powerful drug" seems to be working well. With extra cost increasingly added onto electricity prices in the future, however, citizens and businesses may become dissatisfied. It will be important to take this situation into account and to encourage citizens' acceptance and support. Be that as it may, we are really happy that Japan finally has created the foundations to support renewable energy, which should be greatly increased to make a big leap forward, whatever the future ratio of nuclear power. A lot of articles in Japanese newspapers are reporting on the growing momentum of the new-energy economy, even as it clashes with the old-energy economy. The future of Japan is indeed looking brighter!