Japanese solar feed-in tariffs take shape
It has been known for some time now that Japan will be rolling out FITs for solar this summer, and now Reuters reports a specific figure for the first time: 42 yen, equivalent to roughly 0.39 euros or 0.51 US dollars – roughly twice what is currently paid in Europe. Will Japan be the next boom and bust market?
A decade ago, Japan was an international leader in photovoltaics, and its Ota Solar City was quite a showcase. But as Europe ramped up solar with feed-in tariffs, Japan chose to stand by and watch.
The nuclear accident at Fukushima changed all that, and the country is now looking for ways to ramp up renewables to fill the tremendous gap left behind by nuclear plants shut down for inspections. Now, Reuters says that a feed-in tariff of 42 yen will be paid for solar power starting this summer, roughly the level requested by the solar sector. The proposal for solar will be presented to Trade Minister Yukio Edano along with proposed rates for other types of renewables. The final rates are expected to take effect on July 1.
Reuters does not indicate differentiated rates for solar, so the question is whether a single rate will be offered for all types of systems. In most parts of the world, systems are divided up into separate cost categories according to size and installation type, with specific rates being offered for each category to prevent windfall profits.
The rates currently being discussed seems quite high compared to rates offered in Europe; on the other hand, the province of Ontario plans to pay the equivalent of 0.55 US dollars for small rooftop arrays, which is roughly 8 percent more than will be paid in Japan. Reuters compares the feed-in tariffs to the retail electricity rate, but that comparison misses the point – feed-in tariffs are designed to provide a return (generally of around 5-7 percent) on investments in renewables, so the retail rate has never been a part of the calculation.
Nor is the retail rate necessarily a way to determine the impact that this feed-in tariff will have on power prices. Schemes vary from one country to another; in Spain, there was a limit on the surcharge passed on to ratepayers, with the remainder having to be covered by taxpayers – and that mixup famously led the government to pull out support for solar in 2008. In Germany, the surcharge to cover feed-in tariffs is based partly on power prices on the electricity exchange, and the retail rate again plays no role.
Nonetheless, with Japan potentially offering twice as much for a kilowatt-hour of solar power than is offered in places like Germany and France, with roughly similar solar conditions, the question is whether the Japanese market will be the next one to overheat and come to a sudden end. But there may be a reason for the high price. As Renewables International recently reported, the wind power sector also hopes to get roughly twice the price offered for onshore power in Europe. But as Anette Bossler of Main(e) International Consulting explains in that article, the rate is actually justified given the much higher cost of infrastructure in Japan than, say, in the United States. The question is therefore whether other external costs justify such a high rate for solar as well. (Craig Morris)
Fully agree with your concerns. Higher costs may to some extent exist for wind power and hydro stations. If the administration likes to pop up their manucacturing industry, there would be more efficient ways for it. Is it the very intention to create a boom and bust, in order to avoid a larger share of lower-cost solar power replacing more conventional power?