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Japan Recommends Preferential Rates for Renewable Energy

April 25 (Bloomberg) -- 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 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. Japan currently gets about 9 percent of its electricity from renewables.

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.

‘Major Step’

“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., a Japanese solar panel maker. “We will expand our businesses in the mega-solar market that is set to grow further,” Kuba said in a statement.

“I hope various players will enter the clean energy market,” Masayoshi Son, chairman of Softbank Corp., told reporters today. Japan’s third-largest mobile-phone company plans to build solar power plants worth more than 200 megawatts of capacity across Japan. “I want to increase our solar capacity a little more than I said earlier,” he said, adding that Softbank is also considering several locations for wind power.

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.

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.

Taxed Rates

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

The Japan Photovoltaic Energy Association had recommended 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.

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

Today, the government panel recommended for hydro 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 sources for the same period.

“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 today. “The program is designed to give favorable rates for the first three years, so we factored that in.”

The panel will meet again on April 27 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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