Japan Spurs Solar, Wind Energy With Subsidies for Renewables

Japan approved a bill today to subsidize electricity from renewable sources, joining European nations in shifting away from nuclear power after the Fukushima reactor meltdowns in March.

The renewable-energy bill was passed by the upper house following approval by the lower chamber on Aug. 23 and was one of the last acts of Prime Minister Naoto Kan, whose support sagged over his handling of Japan’s worst postwar disaster. He said today he’s resigning after parliament passed the legislation.

The bill allows for incentives that guarantee above-market rates for wind, solar and geothermal energy. The so-called feed- in tariff created a race to install solar panels when implemented in Germany and Spain. In Japan, it may help Chinese companies such as Suntech Power Holdings Co. and Canadian Solar Inc. (CSIQ) to gain a foothold.

Japan gets about 9 percent of its electricity from low- carbon sources. Kan has called for that level to increase and for the country to phase out atomic energy after the March 11 earthquake and tsunami crippled Tokyo Electric Power Co.’s Fukushima nuclear complex. Before the crisis, atomic plants supplied about 30 percent of the country’s electricity.

Solar panels had capacity to produce about 3.68 gigawatts of power at the end of last year in Japan, and the government is targeting 28 gigawatts by 2020. Installations may total 1.4 gigawatts to 1.6 gigawatts this year, according to London-based researcher Bloomberg New Energy Finance. A new nuclear plant can typically generate more than 1 gigawatt.

Business Lobby Objects

The legislation will become effective on July 1, 2012, and require utilities to buy electricity generated by renewable sources including solar, wind and geothermal at above-market rates. The trade and industry minister will decide rates and periods after consulting with experts and other ministers.

“As an intensive measure to expand the use of renewable energy, the minister will give special consideration to the profit power suppliers receive,” according to the clean-energy law’s supplementary provisions.

Critics of the measures included Keidanren, Japan’s largest business lobby, which counts power utilities among its members. Lawmakers agreed to revise the legislation to grant a discount of at least 80 percent on the feed-in tariffs that are passed on in electricity bills to heavy power users.

Power Rates

Rates for renewable energy except solar will be as much as 20 yen (26 cents) a kilowatt-hour for about 15 years, Trade and Industry Minister Banri Kaieda said in parliament on July 14.

The rate for solar may be higher, in light of a plan introduced in 2009 to buy excess solar power. Currently the tariff for surplus solar power generated by homes is 42 yen a kilowatt-hour, while electricity produced by businesses and schools is 40 yen.

That compares with the grid electricity price of 13.77 yen a kilowatt-hour for commercial users, according to data from Japan’s Agency for Natural Resources and Energy.

“The rate needs to be high enough to stimulate investment,” Mikio Katayama, chairman of the Japan Photovoltaic Energy Association, told reporters in Tokyo today.

“For the continuous growth of the industry, there should not be any sudden change to the scheme such as lowering the tariffs and halting it,” said Katayama, who is also president of Sharp, Japan’s largest maker of solar cells.

An average household may pay a surcharge of 180 yen a month because of the new rules, said Nobumori Otani, a Democratic Party of Japan lawmaker who leads the ruling party’s renewables team.

Hydroelectric and biomass power will also benefit from the subsidies.

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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