WSJ: Outlook for Solar in Japan
TOKYO--Fresh incentives to provide renewable energy for Japan are drawing private companies into the sector--but experts say the new measures will do little to lift electricity production.
A number of high-profile events marked the first day of a new "feed-in" tariff law Sunday, with mobile-phone baron Masayoshi Son of Softbank Corp. (9984.TO) and Energy and Industry Minister Yukio Edano among those getting in on the act.
Mr. Son declared at a ceremony to launch a Kyoto solar project that the law would herald construction of large-scale solar projects nationwide. "From this point on, we are going to spread natural energy throughout Japan ," he said. Answering criticism that renewable energy is too expensive, he added, " Ultimately, if you take the long view, renewable energy will have the cheapest power-generation costs."
Like programs in countries such as Germany , the feed-in tariff is meant to help raise the portion of electricity produced by renewable sources by requiring utilities to pay relatively generous and fixed prices for that power. The law comes as Japan scrambles for electricity supplies, with all the country's nuclear reactors having been shut down since the nuclear accident following the March 2011 earthquake and tsunami.
(This story and related background material will be available on The Wall Street Journal website, WSJ.com.)
The first of the idled plants came back on line Sunday, but with opposition strong in many areas, nuclear power is unlikely to again represent the 30% of total electricity output that it did previously. Renewable energy currently constitutes just 8% to 9% of Japan's total power supply, with the lion's share of that coming from traditional hydroelectric plants. Wind and solar power together account for less than 1%.
Though the new law is meant to help raise that figure, an uncertain framework for long-term pricing and limitations to the current electricity power grid are expected to hamper the building of new projects. Under the law, all 10 regional power utilities must buy electricity produced by externally operated solar and wind projects. The price they pay for electricity from solar plants with capacities of at least 10 kilowatts will be 42 yen (about 53 U.S. cents) per kilowatt-hour; the price for wind-generated electricity (from projects with capacities of at least 20 kilowatts) will Y23.10 per kilowatt-hour. Both prices are guaranteed for 20 years.
For the renewable-energy industry, the rates and guarantee period are considered suitable to make projects profitable. But the guarantees apply only to projects that win necessary approvals by June 2016 , which leaves too little time for any major plants not already in the planning stage.
"It takes three to four years to conduct an environmental assessment for a project. What if the rate is significantly cut during the time?" said Mitsue Usami , a spokeswoman of the biggest wind-power producer by capacity, Eurus Energy Group .
Though Japan is blessed with more windy coasts than sun-drenched days, the tilt has been toward solar instead of wind. In March, the renewable-energy unit of Toyota Tsusho Corp. (8015.TO) announced two large solar farms, one on Japan's northernmost island of Hokkaido and the other in Hyogo prefecture near Osaka in western Japan . The Ministry of Economy, Trade and Industry said Friday it had so far found 44 projects eligible to sell electricity to local utilities under the new law--43 solar and one wind.
"The problem is, wind blows in remote places," said Toshio Hori , president of Green Power Investment Corp. , a developer of wind-power projects and funds. The best wind-power locations are typically far from the existing electricity grid, in the northern areas of the country or atop mountains. The government estimates that building out the power grid just in the north will take five years and cost more than Y1 trillion ( $12.5 billion ).
Japan's cash-rich but conservative banks are another hurdle.
Green Power Investment, which has top-flight investors including Softbank Corp. and Mitsubishi Corp. (MSBHY, 8058.TO), says it has a 48-megawatt wind- power project ready to proceed in Shimane, western Japan , but is struggling for financing. "Banks want to see cash flow," Mr. Hori said. "But to show cash flow, you have to have the money to build the wind farm."
Write to Mari Iwata at mari.iwata@dowjones.com
(END) Dow Jones Newswires
07-01-12 1929ET
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