Japan’s renewables subsidies spur $2 billion investment

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Japan's subsidies for renewable power suppliers has led to over $2 billion of investment since they were launched two months ago, it has been claimed.

According to Reuters, the increased investment is a result of companies and homeowners trying to profit from an anti-nuclear energy policy following last year's Fukushima crisis.

The report said the Japanese government believes the extra investment is only a fraction of what could be a $640 billion spending boom by 2030 as Japan tries to phase out nuclear energy.

In March 2011a tsunami knocked out power to the Fukushima Dai-ichi nuclear plant, leading to a meltdown which forced massive evacuations.

Before Fukushima, nuclear reactors supplied about 30% of the country’s electricity. However, a public backlash is expected to persuade the Japanese government to announce an overall energy policy which could 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 such asTokyo 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/kWh (Us$0.54) to owners of solar, wind or other renewable energy capacity in this business year, compared with generation cost of about ¥10/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.

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/kWh to utilities to cover the subsidies for this business year.

Teiko Kudo, a banker involved in financing solar projects at Sumitomo Mitsui Banking Corp, said: “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.”

 

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