Japan could turn to CfD scheme next year as solar becomes political issue

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Japan’s renewable energy policy could see a drastic overhaul next year, with a possibility the Asian country could choose a scheme similar to the UK’s contracts for difference (CfDs), according to one advocacy group.

Japan Renewable Energy Foundation (JREF) director Mika Ohbayashi told PV Tech that a recently announced review of the feed-in tariff (FiT) scheme could be influenced by reported shortages of available grid connection and consumer electricity price rises. Meanwhile Japan continues to face international targets on climate change and the debate regarding the restart of the country’s nuclear power plants is ongoing.

The combination of these factors will mean the nation must come up with a clear energy policy, with the government expected to come up with targets and a breakdown of the desired energy mix by the end of this calendar year, Ohbayashi said. On the other hand, any more substantial energy policy review likely to result in revisions to the law will not take place until the aforementioned targets have been set and will therefore be timed to be completed by the end of the current Japanese financial year, which will be at the end of March 2015.

It is possible, Ohbayashi said, that in these discussions over next year’s targets, depending on how the energy mix will be balanced in future, the government could see CfDs – where energy generators must compete on price with each other to access funding from a central pool – as the answer. In the UK, reaction to the forthcoming CfD regime has been mixed, with larger companies such as First Solar and Trina Solar tending to favour it while a large number of industry players have blasted it for what they see as a lack of clarity on how the scheme will work.

Ohbayashi said the Japanese government was already considering CfDs, which it could use to bolster its pro-nuclear arguments.

“They [the Japanese government] are considering CfDs, but the UK is using CfDs to allow it to build new nuclear power plants while Japan is looking to use it to justify restarting existing ones. It’s a crazy system I think.”

PV Tech asked the UK Department of Energy and Climate Change (DECC) whether it had been in contact with its Japanese counterpart on the UK scheme. A spokeswoman confirmed that a DECC official met with a Japanese academic at an unspecified time “to talk about some details of Electricity Market Reform,” which included the CfD allocation and budget as well as a discussion of the capacity market.

With regards to the widely reported grid connection issues, a working group set up to calculate how much capacity is available for renewable energy projects to be added to the Japanese electrical grid system has already met twice and will meet one more final time, before the end of the year. Several of Japan’s electrical utility companies stopped approving solar power projects, beginning with Kyushu Electric Company, in late September, citing lack of available grid connection.

However, as PV Tech reported last month, Ohbayashi and JREF were critical of the utility approach, while in conversation last week, Ohbayashi was also sceptical of the working group itself. She said the government wanted to make the group as low-key as possible, but circumstances forced its hand.

“Some of the working group are very sceptical about renewables. It seems like METI doesn't think the working group is very important and it was set up very hastily. It's a very small working group within the subcommittee of the renewable energy office. I think METI wanted the problem resolved as quickly as possible, but it became a kind of ‘social problem’ in Japan. It was initially set up as a minor working group, but the Japanese public and politicians became very interested so METI had to organise it very carefully in the end.”

Although this attention from the wider community led to the working group being convened publicly, with its meetings webcasted, Ohbayashi is not pleased with the remit or method of the working group either.

“It's a kind of calculation, not even a technical assessment, it's just a calculation on a desk, whether or not the utilities are right or correct. So it's a very minor group and minor approach. I do not expect much capacity will be added from that working group.”

Japan is still uncertain on whether or not its nuclear reactors, shuttered since the Fukushima crisis, will restart soon, while a number of those same reactors will reach the expected end of their 40-year lifespan within five years. Ohbayashi said that it is possible the government will not take a decision on any plants until local elections have taken place next year, although nothing could be ruled out.

“Support for the cabinet is gradually decreasing and next year they have general local elections. Local authorities, mayors, governors do not have that much influence in Japan at present, but the majority of Japanese people still oppose the restart and there is a school of thought that considers the government might wait on taking any decisions about the restart until after the local elections. We think it is unlikely there will be any decisions until then, but then again, it is almost impossible to rule out any early actions.”

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