Japan gives green light for feed-in tariffs as well as nuclear reactors
Last month we wrote about Japan’s energy policy in the wake of the Fukushima nuclear disaster. This included new feed-in tariff (FiT) proposals for wind, geothermal, hydro, solar photovoltaics, biogas, and biomass technologies. On Monday, it was announced that the FiT proposals have been approved by Japan’s Minister of Industry Yukio Edano and will come into effect on 1 July, 2012.
The law cites a stable, adequate energy supply as one of the main reasons for adopting FiTs.
Japan’s FiT scheme requires utilities companies to purchase electricity from renewable energy (RE) sources at a certain price for at least 20 years. The rates set for the FiTs are some of the highest in the world, in a bid to attract investment in RE. The tariff for solar PV, at US $ 0.53 per kWh, is twice that of Germany’s and the tariff for wind power, at US $ 0.29 per kWh, is five times the German rate. While a high tariff may attract investment to allow RE technologies to develop, FiT success depends on the right rate rather than a necessarily high one: since the cost is spread out over end users, too high a tariff will result in large price increases for consumers.
At the moment, renewable sources constitute only a tiny fraction of Japan’s energy production despite good conditions for solar, wind and geothermal; how long it takes for renewables to get off the ground remains to be seen. FiTs will help the Japanese economy not only by reducing the country’s trade deficit but also by decreasing domestic industry’s reliance on expensive fuel imports as well as boosting the domestic (as well as global) RE production sector.
Fossil fuels imports
All 54 of Japan’s nuclear reactors were taken offline after the Fukushima catastrophe in March 2011. This has led to a shortage in energy as the country experienced rolling blackouts and fears that the energy shortfall – and the high cost of fossil fuel imports to make up said shortfall – is hurting the already weak economy. Oil, coal and gas now account for 90 per cent of electricity compared to 70 per cent before Fukushima. Oil and coal imports have risen seven and 21 per cent respectively in May from a year ago. This drastic increase in energy imports have led to a large trade deficit.
Japan is also under some pressure to comply with a US and EU embargo on Iran’s oil exports, which made up nine percent of Japan’s crude imports in 2011. Reuters reports that “Japan has reduced the flow already[…] but wants to avoid more drastic reductions that may drive up energy import costs and hurt the economy.”
Nuclear power no panacea
On 16 June 2012 Prime Minister Yoshihiko Noda announced that two nuclear reactors on the west coast will come back online at the beginning of July in order to meet summer electricity demand. According to a recent poll, 46 per cent of the Japanese public oppose any reversion back to nuclear power. The reason given for the prime minister’s decision is the stabilisation of industry and livelihoods.
In the discussion surrounding Japan’s obligation to carbon emissions reductions, one common argument for restarting the nuclear reactors is to help Japan reach its emissions targets by decreasing the fossil fuel energies used. As Fukushima so tragically demonstrated, however, there is nothing clean or sustainable about nuclear as a source of energy; evidence of this is literally drifting around the world in the form of debris that started reaching the western shores of North America in the past few months.
Neither is nuclear power cheap: despite being heavily subsidised by governments and the fact that external costs are still not internalised into its market price, nuclear energy is not commercially competitive compared to advanced renewable energies that receive similar financial support.
The World Future Council emphasises that a rapid uptake of renewable energy requires an enabling legal framework. A stable and secure policy environment in which investors can predict their long-term returns is also instrumental to the success of a FiT policy. Japan stands to gain tremendously from its feed-in tariff legislation: it is estimated that the new FiTs will bring nearly US $ 10 billion to the solar market alone and that Japan will pass Germany as the world’s second largest solar market. In order to reduce investment volatility – due, for example, to expectations of degression rate changes – the Japanese government must couple its FiT policy with a strong statement of commitment to renewable energy as a sustainable, long-term strategy. This means recognising that for environmental, economic and security reasons, nuclear power is not a viable alternative.
Friday, June 22nd, 2012