Bloomberg News

Japan Recommends Preferential Rates for Renewable Energy

April 26, 2012

A worker wallks through solar panels manufactured by Kyocera Corp. at a plant in Saitama, Japan. A government panel yesterday recommended solar power providers earn 42 yen (52 U.S. cents) a kilowatt-hour of electricity they produce, three times the 13.65 yen charged to industrial and commercial user, according to the the Ministry of Economy, Trade and Industry. Photographer: Tomohiro Ohsumi/Bloomberg

A worker wallks through solar panels manufactured by Kyocera Corp. at a plant in Saitama, Japan. A government panel yesterday recommended solar power providers earn 42 yen (52 U.S. cents) a kilowatt-hour of electricity they produce, three times the 13.65 yen charged to industrial and commercial user, according to the the Ministry of Economy, Trade and Industry. Photographer: Tomohiro Ohsumi/Bloomberg

Japan’s proposed incentives for renewable energy will boost solar panel installations and help wean the nation off nuclear power, industry lobby groups and developers said.

A government panel yesterday recommended solar power providers earn 42 yen (52 U.S. cents) a kilowatt-hour for the electricity they produce, three times the 13.65 yen charged to industrial and commercial users, according to the Ministry of Economy, Trade and Industry. The preferential rate, known as a feed-in tariff, for solar power was recommended for 20 years.

“The start of the feed-in tariff program will be a major step forward to expand the solar power market,” said Tetsuo Kuba, president of Kyocera Corp. (6971), a solar panel maker. “We will expand our businesses in the mega-solar market,” Kuba said in a statement.

The panel’s recommendation, which must be approved by Industry Minister Yukio Edano, marks another step in scaling back atomic power following the disaster at the Fukushima Dai- Ichi Plant last year and reducing carbon emissions linked to fossil fuel use.

Japan currently gets about 9 percent of its electricity from renewables. The government’s feed-in tariffs will require power utilities to pay above-market rates for electricity generated from renewable energy sources such as solar and wind.

Wind and Geothermal

Wind-generated power was recommended at 23.10 yen a kilowatt hour for plants with the capacity of 20 kilowatts or more and 57.75 yen for smaller ones, both for 20 years.

For geothermal, the panel suggested 27.30 yen a kilowatt hour for plants with the capacity of 15,000 kilowatts or more and 42 yen for smaller plants, both for 15 years.

The feed-in tariffs will be introduced in July to spur investment in solar, wind, geothermal, biomass and hydroelectric power generation.

The program will replace an earlier one called “renewable portfolio standards” that require electricity retailers to buy set amounts of clean power at a price negotiated between the buyer and seller, according to Bloomberg New Energy Finance.

“I hope various players will enter the clean energy market,” Masayoshi Son, chairman and chief executive officer of Softbank Corp. (9984), Japan’s third-largest mobile-phone company, told reporters yesterday.

Atom to Sun

Son said earlier this year he plans to build solar power plants with more than 200 megawatts of capacity across Japan, according to the website of Softbank’s renewable energy unit SB Energy Corp.

Son said he may expand that target. “I want to increase our solar capacity a little more than I said earlier,” he said, adding that Softbank is also considering locations for wind power.

Similar incentive programs that have helped countries such as Spain and Germany increase solar installations prompted them to reduce tariffs as construction surged.

In France, to end what it has called a “speculative bubble,” the country imposed a three-month freeze in December on solar projects to devise rules that could include caps on development and lowering feed-in tariffs. The tariffs were cut twice in 2010.

In August, Japan’s parliament approved legislation for the feed-in tariffs to help diversify its energy mix following the disaster at the Fukushima plant in March 2011. Atomic power provided about 30 percent of the country’s electricity before the Fukushima crisis.

Japan is set to be nuclear free for the first time in more than four decades next month as the last of its 50 operating reactors is scheduled to be shut for maintenance. All the facilities are being kept offline pending safety tests and government approval for restarts.

Tax Factor

Mitsue Usami, a spokeswoman for Eurus Energy Holdings Corp., a renewable energy developer, said the solar tariff of 42 yen announced yesterday includes a 5 percent tax. If that is deducted, the rate is actually 40 yen, or below what the industry association suggested.

Yugo Nakamura, an analyst for BNEF in Tokyo, said there is still room to cut costs.

The government panel cited the cost of 325 yen per watt to build a solar plant when making their price recommendations, according to the industry ministry. The global average is 180 yen per watt, according to BNEF data.

The Japan Photovoltaic Energy Association had recommended a tariff of 42 yen for 20 years for solar, while the Japan Wind Power Association had suggested a wind tariff of up to 25 yen over 20 years for bigger producers.

Get in First

The Japan Geothermal Developers’ Council had recommended the tariff of 25.8 yen a kilowatt-hour for 15 years for bigger suppliers. Yesterday, the panel recommended hydro power between 25.20 yen and 35.70 yen a kilowatt-hour for 20 years depending on the size of a plant.

Biomass was suggested between 13.65 yen and 40.95 yen, depending on the types of fuel, for 20 years.

While the scheme initially offers guaranteed prices for 15 to 20 years, the government will review the tariffs and the time period every year, meaning developers who get in first will get the best profit opportunities as the tariffs may be lowered in subsequent years. Rates are also expected to be higher for the first three years to pump up incentives for developers to invest.

“Those rates are not high, but not low, either,” Kazuhiro Ueta, environmental economics professor of Kyoto University who heads the panel, said at a briefing yesterday. “The program is designed to give favorable rates for the first three years, so we factored that in.”

The panel will meet again tomorrow to finish their recommendations, according to Ueta.

To contact the reporter on this story: Chisaki Watanabe in Tokyo at cwatanabe5@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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