Japan Recommends Preferential Price Rates for Renewable Energy

Japan will require power utilities to pay above market rates for electricity generated from renewable energy sources such as solar and wind, based on recommendations announced today by a government panel.

The preferential rate, known as a feed-in tariff, for solar power was recommended at 42 yen (52 U.S. cents) a kilowatt-hour for 20 years, compared with the current rate of 13.65 yen a kilowatt-hour for industry and commercial users, according to the Ministry of Economy, Trade and Industry.

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 recommended 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. Japan currently gets about 9 percent of its electricity from renewable energy.

Pending approval by the Ministry of Economy, Trade and Industry, the feed-in tariffs will be introduced in July to spur investment in solar, wind geothermal, biomass and hydroelectric power generation as Japan plans a shift away from atomic power after the Fukushima disaster.

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

Nuclear Free

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 reactors are being kept offline pending safety tests and government approval for restarts.

The price recommendation for solar is in line with that earlier proposed by the Japan Photovoltaic Energy Association. The Japan Wind Power Association had suggested a wind tariff of up to 25 yen over 20 years for bigger producers.

The Japan Geothermal Developers’ Council had recommended 25.8 yen a kilowatt-hour for 15 years for bigger suppliers.

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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