Japan sun subsidy fires electric spending rush

Wed Sep 12, 2012 10:53am IST

Related Topics

Stocks

   

* Government expects up to $640 billion investment by 2030

* More than 30,000 households, companies sign up for subsidies

* Japan phasing out nuclear after Fukushima disaster

By Risa Maeda

TOKYO, Sept 12 (Reuters) - Japan's subsidies for renewable power suppliers have sparked more than $2 billion of investment since they were launched two months ago, as companies and homeowners try to profit from an anti-nuclear energy policy after last year's Fukushima crisis.

That money, the government believes, is only a tiny fraction of what could be a $640 billion spending boom by 2030 as Japan tries to phase out nuclear energy.

Nuclear reactors supplied about 30 percent of its electricity before Fukushima, but in response to a public backlash, Japan is set to soon announce an overall energy policy which may ultimately mean a total shutdown of atomic capacity.

Renewables - solar, wind, geothermal, biomass and water power - will be called upon to make up part of that shortfall.

A renewable energy law that came into effect on July 1 requires utilities like Tokyo Electric Power Co and Kyushu Electric Power Co to buy electricity from renewable sources at pre-set premiums for up to 20 years.

Taking advantage of those premiums are families installing solar panels on their homes to sell power to utility grids, and businesses across the economy buying into the market.

To encourage capacity-building, utilities must pay subsidies as much as 42 yen ($0.54) per kilowatt hour (kWh) to owners of solar, wind or other renewable energy capacity in this business year, compared with generation cost of about 10 yen per kWh for conventional gas or coal power plants.

That is double the tariff offered in world number one solar market Germany, which this year said it would cut subsidies as it tries to limit the impact of energy prices on consumers.

In the first month of the Japanese scheme's operation, 33,695 companies and individuals registered to sell renewable energy, data from Japan's Ministry of Economy, Trade and Industry (METI) shows. More than three-quarters of the registered capacity is solar.

"People are in a hurry to wrap up solar projects to avoid the uncertainty of whether the current high price level is maintained next business year," said Teiko Kudo, a banker involved in financing solar projects at Sumitomo Mitsui Banking Corp. Japan's business year runs from April to March.

Utilities which pay the extra money to suppliers then pass it on to consumers under a "feed-in tariff" (FIT) system.

When FIT began in July, consumers started paying an extra 0.22 yen per kWh to utilities to cover the subsidies for this business year.

SOFTBANK'S SOLAR FARMS

Many companies outside the traditional energy industry are keen to break into renewables. Mobile phone supplier Softbank plans to install 10 solar farms with total capacity of 182.2 megawatts (MW), and a 48 MW wind farm by March 2015. Two of its solar farms started commercial operation in July.

"We are hearing the voice of the public calling for a future without nuclear power and may respond by adding more capacity than planned," Masayoshi Son, president of Softbank, said at a Tokyo seminar last week.

"We now expect total installed solar capacity to be near 10,000 MW by the end of this business year, up from about 5,000 MW before the scheme's launch," said Hiroshi Komiyama, chairman of Mitsubishi Research Institute.

That would generate enough electricity for 2.7 million households a year, or around 5 percent of the country's homes, according to Reuters calculations.

Altogether, individuals and companies in July registered 567 MW of capacity that meets government requirements for selling electricity to utilities, according to METI.

That adds up to 170 billion yen ($2.17 billion), assuming capital investment of 300 million yen per MW, an industry standard.

Solar Frontier, a unit of oil refiner Showa Shell Sekiyu KK , forecasts this year it will sell more of its photovoltaic panels in Japan than overseas for the first time since it began commercial production in 2007.

"The passage of FIT really did increase interest," Executive Officer Brooks Herring said. "The interest is coming from a very broad spectrum."

Kyushu Electric Power, the regional monopoly on the southern island of Kyushu, says it has received more applications to sell it renewable power than it can process.

By Aug. 31, households and companies had applied to sell it electricity from 830 MW of projects, almost the same capacity as a reactor at its idled Sendai nuclear plant.

Kyushu has only been able to complete power supply agreements for 5 MW of capacity, a spokeswoman said.

Altogether, renewable energy excluding large hydro-electric dams currently supplies only 1 percent of Japan's electricity, a figure which rises to 10 percent with hydro power. This may have to hit 35 percent if Japan decides to fully phase out nuclear energy by 2030, a government estimate shows. Despite the initial burst of investment, some are sceptical.

"I don't think the share of renewable energy sources, including hydro, in electricity will exceed 20 percent because, for example, it requires some 3,000 times more area to put solar panels on than a combined cycle gas power plant," said Akira Ishii, senior visiting researcher in oil and gas business at state-backed Japan Oil, Gas and Metals National Corp.

FILED UNDER:
  • Most Popular
  • Most Shared

Pending Reform

REUTERS SHOWCASE

Power Theft

Power Theft

India to invest $4 billion to tackle power theft  Full Article 

Debt Funds

Debt Funds

India monitors foreign flows into debt funds, may tighten rules  Full Article 

Bulgari Back in India

Bulgari Back in India

CEO: we shouldn’t have left India so we’re back  Full Article 

 Hindu "Modi-fication"

Hindu "Modi-fication"

Fears grow about Hindu "Modi-fication" of education  Full Article 

Weak Credit

Weak Credit

Hard to hit tax revenue target, credit weak - Jaitley  Full Article 

China Rate Cut

China Rate Cut

China surprises with interest rate cut to spur growth  Full Article 

Gold Imports

Gold Imports

RBI cautious on response to gold import surge  Full Article 

Economic Corridor

Economic Corridor

China commits $45.6 billion for economic corridor with Pakistan  Full Article 

Overseas Funds

Overseas Funds

RBI says overseas borrowed funds can be parked with banks in India  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage