Japan Approves National Feed-in Tariff

The new law is expected to bolster solar, wind and geothermal projects by mandating that utilities buy power from renewable sources at above-market rates. The law will go into effect next year, but details about the pricing structure have yet to be determined.

The legislation also prompted the resignation of Prime Minister Naoto Kan, who made passage of the bill a precondition to his departure. Kan has been under heavy pressure to resign as criticism has mounted over his handling of the Fukushima nuclear plant crisis in the aftermath of the March 11 earthquake and tsunami.

As anger grew, so has the call for the country’s leaders to move away from nuclear power and replace it with renewable energy. According to a recent poll, 74 percent were in favor of a gradual phase out of nuclear power plants, 11 percent called for an immediate end and 13 percent thought there was no need to alter policy.

Japan currently gets about 9 percent of its power from renewable sources compared to 30 percent from the nuclear industry. The country has 54 nuclear reactors, but only 15 are currently in operation. That has forced the country to cut down dramatically on consumption this summer – with a drop of about nine percent compared to 2010, according to the Federation of Electric Power Companies.

According to the Global Wind Energy Council, Japan had 2.3 gigawatts of wind power installed at the end of 2010. Japan had more in the way of solar PV with 3.6 gigawatts by the end of 2010, mostly in rooftop residential installation. Japan has a small geothermal presence as well, and supporters say that the country’s position atop a hotbed of geothermal activity makes it an ideal candidate to further tap that resource.

Industry Reaction

For Solar Frontier, the timing of the announcement is perfectly aligned with its recent growth as a major manufacturer of PV modules.

Born as a subsidiary of Japan’s oil industry, Solar Frontier may be among the companies best positioned to tap into the expected market growth. The thin-film maker opened up a 900-MW facility in southern Japan -- far from the quake epicenter -- in February, and recently reached full capacity, making it among the world’s largest solar manufacturers.

Sitting in his Solar Frontier office in Japan at 8 a.m. Friday morning, Brooks Herring, Vice President of International Business, noted the indoor temperature was 28 degrees Celsius, or 82 degrees. It was just another day in what has proved to be a long, hot summer marked by urgent calls for energy conservation. But the realization is that efficiency only goes so far. The country needs more power, and they need it soon.

“We’re optimistic that there will be a speedy implementation after it is passed,” said Herring about the new law. “We expect most of the installations at the utility scale and the residential scale would happen in 2012.”

Solar Frontier opened its biggest manufacturing facility earlier this year with a goal of selling 30 percent into the Japanese market, 40 percent into the European market and 30 percent into the United States and other global markets. Now the company is planning to adjust its strategy accordingly.

“We see the potential for our 30 percent target in Japan to go higher than that next year,” said Herring. “We built a flexible sales organization because we knew that government policies would shift from country to country. We saw that in Europe. So we built a flexible sales organization to cope with that.”

In the wind industry, the move was also seen as a strong step toward renewable sources and away from fossil fuels and nuclear power.

“Japan’s move towards a feed-in tariff is very welcome, since this would replace a portfolio standard with a very low target, which was not effective in stimulating renewable energy development,” said Steve Sawyer, Secretary General of GWEC. “The government made several announcements in recent months in support of renewable energy, but this is the strongest signal yet. Combined with the public rejection of nuclear power, strong support for renewable energy and various private sector initiatives, this opens up numerous opportunities for investors in Japan."

According to GWEC, Japan has four wind turbine manufacturers – Mitsubishi Heavy Industry, Fuji Heavy Industry, Japan Steel Works and Komai Tekko. However, the Japanese market is dominated by manufacturers such as Vestas, GE and Enercon.