Japan approved on Monday incentives for renewable energy that could unleash billions of dollars in clean-energy investment and help the world’s third-biggest economy shift away from a reliance on nuclear power after the Fukushima disaster.
Industry Minister Yukio Edano approved the introduction of feed-in tariffs (FIT), which means higher rates will be paid for renewable energy. The move could expand revenue from renewable generation and related equipment to more than $30 billion by 2016, brokerage CLSA estimates.
The subsidies from July 1 are one of the few certainties in Japan’s energy landscape, where the government has gone back to the drawing board to write a power policy after the Fukushima radiation crisis, the world’s worst nuclear disaster since Chernobyl in 1986.
The push for renewables is aimed at cutting reliance on not only nuclear, but pricey oil and liquefied natural gas for energy needs.
The scheme requires Japanese utilities to buy electricity from renewable sources such as solar, wind and geothermal at pre-set premiums for up to 20 years. Costs will be passed on to consumers through higher bills.
Utilities will pay 42 yen (53 U.S. cents) per kilowatt hour (kwh) for solar-generated electricity, double the tariff offered in Germany and more than three times that paid in China.
Wind power will be subsidized at least 23.1 yen per kwh, compared with as low as 4.87 euro cents (6 U.S. cents) in Germany.
Subsidies have spurred explosive growth in renewable energy in countries such as Germany, which has nearly tripled its output in less than a decade.
Japan is poised to overtake Germany and Italy to become the world’s second-biggest market for solar power as incentives starting July 1 drive sales for equipment makers from Yingli Green Energy Holdings Co. to Kyocera Corp. (6971)
Industry Minister Yukio Edano set today a premium price for solar electricity that’s about triple what industrial users now pay for conventional power. That may spur at least $9.6 billion in new installations with 3.2 gigawatts of capacity, Bloomberg New Energy Finance forecast. The total is about equal to the output of three atomic reactors. Solar stocks rallied.
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Only China will exceed Japan in terms of solar capacity growth as it supplants Italy and Germany, which held the top two positions in 2010 and 2011, London-based New Energy Finance estimates.
Japanese companies such as Kyocera and Sharp Corp. (6753) that kept the photovoltaic industry alive when the U.S. scrapped investments in the 1990s are gearing up to supply their home market, as the government converts a pilot program into one aimed at large, commercial solar farms.
“We no longer have enough electricity, especially during the day, and that is when solar power can help,” said Mikio Katayama, chairman of the electronics manufacturer Sharp Corp. and the Japan Photovoltaic Energy Association. “This is a very good rate to promote investment and mega solars.”
While the rest of the world continues to self-harm by pursuing every last drop of fossil fuels, Japan, just like it did in the aftermath of Hiroshima and Nagasaki (i.e. genuine man-made nuclear disasters), is now set to steal a march on the rest of us by embracing the idea of investing in the future (rather than endangering it).
Yesterday, at the G20 Summit, UK Prime Minister Cameron said “delay is always dangerous” and – for a moment – I thought he was talking about ending fossil fuel subsidies. Then, sadly, reality intervened; and I realised he was talking about Greece. Maybe, just maybe, if the rest of the World can lift its eyes from the Eurozone crisis – and a fixation on austerity measures – it will see that investment in green technology really does create jobs (and provide a mechanism to deflect the approaching asteroid of anthropogenic climate disruption)…
A good thing, but it may well be … unsustainable (France and Germany cut sharply their solar subsidies last year). All this probably paid by more debt (a tax by any other description). Japanese debt is 236% of GDP, highest in the world, and growing fast… By the way, I do not object to that: developing new, sustainable energy income is a good use of debt.
Germany in late May generated 22 Gigawatts from solar alone, for two days (about 22 standard nuclear reactors). However, solar is only 4% of the electricity generating mix of Germany, though. Solar does not really replace nuclear, because nuclear produces continuously, night and day (much better nuclear with Thorium could be developed, by the way, with no waste problem).
That enormous solar power generation happened just because of solar subsidies, in other words, a tax on electricity. That’s the way taxes ought to be used.
Another proper role of government ought to be to fund state of the art research, because no one else will.
Anyway, good luck to Japan (which is restarting its nuclear power plants, in spite of the tsunami danger, because it imports too much oil to burn to make electricity).
Peter, please feel free to delete this comment when resolved but, I think you may have a comment stuck in your Spam from “Patrice Ayme”…?
Feed in tariffs are a great idea, but along with other repliers I think the new Japanese rate is way too high to be sustainable. It will work at much lower subsidy levels, and that would allow the government to spread the subsidy much wider.
Many more people receiving a smaller subsidy is better than a few getting big rewards and then the government scared off by the explosion in subsidy costs by a too quick ramp up.
At these rates turning off the subsidy tap is nearly certain.