Frenzy in post-Fukushima energy policies

© Kim Kyung-Hoon

For a long while, the Japanese government had based its prosperity on its nuclear industry. As one can imagine, the catastrophes of March 2011 compelled it to rethink its energy sources in terms of sustainability. The progress in that field has been such that today the country is on its way to shutting down its last (54th) nuclear power plant, thus achieving a complete nuclear phase-out and a “zero output”.

This is a 180° turn in the civil and political stance from when Japan relied upon nuclear energy to bear one third of the country’s electricity load

One would assume that in a country with a “nuclear mentality” such as Japan’s, the towns generating income from the sector would show resistance or discontent to the sudden changes. On the contrary: the Fukushima nuclear disaster, having confirmed the dangers inherent to such energy, has lead to mounting objections over the usage of nuclear energy by provincial governors and local communities.

However, the consequences of the phase-out seem somewhat incompatible and highlight the government’s unclear positioning with regards to sustainable energy.

As expected, the fall of the nuclear sector has created a serious energy shortfall, with shortages of fuel for generating electricity. An immediate reaction has been to drastically increase the import of natural gas, crude oil and other types of energy.

This in turn is now impeding Japan’s economic recovery which is still at a very fragile state. In March, the country reported its biggest annual trade deficit due to the surge in energy imports. The increase in energy imports carries a high risk of affecting its economy, not only by making it dependent on high-priced imported alternatives to nuclear energy – which will still not satisfy its full energy demand – but also by decreasing export, due to insufficient amount of energy available for all sectors.

At this point it is relevant to question the reasons behind the decision of a complete nuclear phase-out. Since the country is still importing fossil fuel in large quantities, it is safe to say that it is not due to environmental preoccupations. Could the fear of another meltdown have been the only incentive behind this drastic shift on the policy level and the rash measures? Perhaps, but whatever the case is, the fact remains that the country needs sustainable alternative energy to respond to its high demand in electricity.

To that end, alongside the intensified import in energy, the Japanese government has also decided to take strong measures in the green energy sector. Indeed, Japanese authorities are circulating proposed feed-in tariffs (FiT) to be implemented in July 2012. What distinguish their new FiT policy from others around the world are their unexpectedly high tariffs which, according to Paul Gipe are “among the highest in the world and for some technologies, such as for small wind, are the highest in the world”. In normal conditions, due to the attractiveness of the tariffs, the RE sector may experience an unprecedented development, mainly in the form of an installation boom in green technology.

Nevertheless, there are a few setbacks in the Japanese FiT policy: the programme will not guarantee a grid connection, thus making the generators bear all costs on their own.

In addition, in the short term, it does not look like the implementation of the new policies will go smoothly or show the expected positive results – the planning barriers will undoubtedly delay the deployment of new technologies and increase the development cost which may, again, act as a disincentive for investors.

One of the main success factors of FiT policies are the guaranteed access to the grid. This places renewable energy (RE) as a sound long-term investment – for companies, industries, and for individuals – thereby creating a strong economic incentive for investments in renewables.

The reason we at the World Future Council act upon policies and target policy-makers directly is because we believe that the only way for a country or a region to change towards a more future just and sustainable way of living in the long-term is by building a stable and credible policy environment which should act as an enabler by setting out clear legislative frameworks.

In this case, the policies are there indeed but seem very vulnerable to change due to the vacillating and undetermined minds of policy-makers and the lack of an overall consensus on the subject.

Based on the current situation the decision to shut down the nuclear plants – hence putting the utilities out of business overnight – will soon lead to an intense lobbying from the nuclear power providers to protect their interests. This will be coupled with the fact that oil prices and other energy imports will prove to be economically unsustainable.

There are two possible outcomes of this situation. Either the government will stand firm on its zero nuclear output decision and promote sustainable green industry with more intelligible and stable policies over time, or it will give in to industrial and economic pressure and restart nuclear reactors.

However, we believe that certain elements of the current policy-making are not pro-sustainability, for the following reasons: 1) the decisions regarding FiT and the increase in import have been made in a very hasty manner and without appropriate planning, and 2) the position of the government regarding RE is unclear and unstructured – the direct consequences are investor uncertainty in an industry that is very volatile and not based on clear and stable values. An energy transition certainly, but with a hazy future.

With regards to the FiT policy more specifically, Japan should opt for lower tariffs but a guaranteed grid connection. As seen in Germany, tariffs do not necessarily have to be high in order to allow the RE market to take off. We can therefore say that one of the key aspects of investment in RE technologies is market stability in the form of concrete laws corroborating long-term investment security, which has to stem from determined political will.

We commend the fact that the Japanese government has attempted to bring about such drastic changes in such a short period of time, but this dynamism in the political sphere must be channelled towards a more sustainable direction and indicate a clear stance regarding the political will.

As pointed out by our Climate and Energy Director, Stefan Schurig, who attended the Japanese Government briefing in October 2011, Japan is without a doubt at a historical crossroad but we are still to see the direction it chooses to take.

 

For Japan’s green energy options: http://www.cbsnews.com/8301-505245_162-57426744/japans-renewable-energy-options/

 

Monday, May 14th, 2012

4 comments

1 Karl-Friedrich Lenz { 05.17.12 at 11:54 }

I have done a partial English translation of the 2011 feed-in tariff law. That will turn out on the first page of any search for “translation Japanese feed-in law”. Article 4 Paragraph 1 of the law has this to say about the guarantee:

“(1) When a supplier of renewable energy extends an offer regarding renewable energy to an electric utility at the feed-in tariff and for the period specified in the Ordinance of the Minister of Economy, Trade and Industry, the utility must accept it. However, when the content of the offer would be damaging to important interests of the utility or other valid reasons as specified in the Ordinance of the Minister of Economy, Trade and Industry apply, the utility may refuse the offer.”

That means that there is a guarantee to sell in principle and the utility can only refuse connection if they give a reason to do so, which should be very difficult to do right now in Japan, since electricity is in short supply.

That of course means that your call for a “guaranteed grid connection” is already current law.

2 Sarah Ahmad { 05.19.12 at 15:51 }

Thank you very much for your comment; that was the information we had received before a direct translation was available. Your clarification is duly noted.

3 Anna Leidreiter { 05.25.12 at 10:22 }

Japan shows us that its not only about climate change what we need to switch to renewable energy. This is a really shocking article and video that people should see to understand the dimension of the danger coming from nuclear energy: http://edition.cnn.com/2012/05/24/world/asia/japan-nuclear-disaster/index.html

4 Japan gives green light for feed-in tariffs as well as nuclear reactors — World Future Council { 06.22.12 at 15:20 }

[…] month we blogged about Japan’s energy policies in the wake of the Fukushima nuclear disaster. These included new feed-in tariff (FiT) proposals […]