Japan announces incentives for RE sector

A year after earthquake-tsunami triggered one of the worst nuclear radiation, Japan has announced incentives for the renewable energy sector, in an aim to cut dependence on nuclear, oil and liquefied natural gas for energy needs.

The move may help world’s third-biggest economy in attracting billions of dollars in clean-energy investment and increase revenue. The Industry Minister Yukio Edano introduced feed-in tariffs (FIT), effectively meaning higher rates will be paid for renewable energy – revenue from energy generation and related equipment may touch more than $30 billion by 2016, brokerage CLSA estimates.

The subsidies will benefit solar panel makers such as Panasonic Corp and Sharp Corp and solar project installer Sekisui Chemicals, along with wind farm developers such as Toyota Tsusho and Japan Wind Development. However, foreign makers of solar panels – including Chinese equipment maker Suntech Power Holdings, Trina Solar and Canadian Solar – are also targeting Japan’s market.

The subsidies will be in effect from July 1. It also directs Japanese utilities to buy electricity from renewable sources such as solar, wind and geothermal at pre-set premiums for up to 20 years and costs will be passed on to consumers through higher bills. Residents who want to install panels on their homes will also get subsidies.

Japan will pay 42 yen (53 U.S. cents) per kilowatt hour (kwh) for solar-generated electricity – double the tariff offered in Germany and more than three times that paid in China. Wind power will be subsidized at least 23.1 yen per kwh, against 4.87 euro cents (6 U.S. cents) in Germany. The government estimates renewable energy capacity will increase to 22,000 megawatts by the end of March 2013, up from 19,500 MW now, of which 2,000 MW of that from solar panels.

However, Japan’s aim to accelerate investment in safer and cleaner energy is in its nascence, renewable sources apart from large hydro-electric dams account for only 1 per cent of power supply in Japan while nuclear power accounted for almost 30 per cent of Japan’s electricity supply before the earthquake and tsunami. Besides, about 60 per cent came from oil, coal and gas, currently at almost 90 per cent as safety concerns led to all of Japan’s 50 reactors being shut. The rest of electricity comes mostly from hydro.