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Saturday, June 30, 2012

Boon for wind power, however, will be limited by regulations, lack of political and financial support

Feed-in tariff has solar advocates sky high

Staff writer

OSAKA — Major Japanese and overseas solar energy firms are expected to reap huge profits in the coming years from the new feed-in tariff that goes into effect Sunday, but other energy forms may be slower to take off due to a host of official restrictions, technical limitations and lack of political and financial support.

The tariff will also mean that household electricity bills will rise by about ¥87 per month on average as utilities purchase more solar, wind, geothermal, mini hydro and biomass power from a variety of sources.

The introduction of the feed-in tariff caps a 12-year effort by advocates to make it easier for utilities and manufacturers to get into the renewable energy business. Germany introduced its feed-in tariff back in 2000, and a group of Japanese politicians in both the then-ruling Liberal Democratic Party and opposition parties pushed for a similar tariff in Japan around the same time.

Their efforts were thwarted by the utilities, the Ministry of Economy, Trade and Industry, and powerful business lobbies like Keidanren, all of which strongly opposed replacing fossil fuels with renewables, citing cost and supply stability issues.

While there are five renewable energy forms covered, solar, wind and geothermal are getting most of the attention. The FIT, as the feed-in tariff is known, sets a price of ¥42 per kwh for solar, over a period of 20 years, for plants that produce more than 10 kw, and 10 years for those producing less. For those in the solar industry, the advent of the tariff is welcomed and predictions are that it will lead to massive growth.

"The FIT system will immediately boost demand for solar panels, creating great opportunities for all solar battery manufacturers and related companies. It will lead to cities installing more solar panels, and the development of better energy management systems," Mikio Katayama, head of the Japan Photovoltaic Energy Association, said in late May.

The JPVA predicts that during the first year of the new tariff, solar power demand will double compared with 2011. As of the end of April, total solar capacity in Japan was about 5 gigawatts. The association predicts that by 2030, installed capacity will reach 100 gigawatts.

But if the FIT is good news for firms in the solar business — like Sharp Corp., where Katayama is also chairman — and Sanyo Electric Co., Solar Frontier K.K., Kyocera Corp., as well over solar firms looking to enter the Japanese market such as China's Suntech Power Holdings, the world's largest solar panel maker, it may not do as much for other renewable energy forms.

In a recent interview, Tetsuro Nagata, head of the Japan Windpower Association, said wind power is concentrated in Hokkaido and the Tohoku region and that unless grid connections to deliver the power from remote areas are strengthened, it will be difficult to expand, even with the new tariff, which guarantees wind power generators producing more than 20 kw will receive ¥23.1 per kwh, and those producing less than 20 kw will receive ¥57.75 per kwh, in both cases over a 20-year period.

As of March, there were 1,840 windmills producing a total of 2.52 million kw at 422 plants around the country. The July issue of a Norinchukin Research Institute publication notes that land-based wind farms remained expensive to operate, wind conditions were not always ideal, and the tariff prices, among the highest in the world, may not act as much of an incentive by themselves.

"It's difficult to see a large spread of wind power just with the introduction of the FIT. On the other hand, it's possible that small-scale wind farms, producing less than 10 kw, might take off, especially on farms and in public parks," the report says.

For geothermal, the FIT rates are ¥27.30 per kwh for plants producing more than 15 megawatts, and ¥42 per kwh for plants producing less.

Both rates are for a 15-year period. The FIT rates are designed to encourage small-scale geothermal producers, especially in the Tohoku region and Kyushu where supply is abundant.

But due to strict environmental regulations and construction standards, it can take 10 years for a geothermal plant to go into operation. That makes it difficult to enter the market with plans based on current FIT rates.

"With the introduction of the FIT, solar power is expected to expand rapidly, but other energy sources will be limited to the growth of small-scale plants because of geography, technological limitations, time required for environmental impact assessments and weak grid connections that make it difficult to alternate between sources of renewable power," the report says.

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