Recently, Japan’s Parliament passed an aggressive national feed-in-tariff (FiT) for renewable energy, positioning itself as the next large growth market for renewable energy. The new energy law calls for 30,000 megawatts of renewable energy to be deployed over the next ten years.
Feed-in-tariffs have been remarkably effective in accelerating renewable energy deployment, because they enable long term planning and financial models that more easily attract investment. China’s national wind feed-in-tariff powered the country to world leadership in wind energy production. Likewise, Germany – Japan’s global competitor in heavy machinery, autos, and steel – has used a system of feed-in-tariffs since 2000, making the country the world leader in renewable energy deployment.
Although all the details of the Japanese feed-in-tariffs aren’t fixed, the law forces power companies to buy all power produced by large-scale renewable projects under a 20 year contract (10 years for residential). The tariffs will go into effect in July 2012. One key feature of the law is that program details, like the rate utilities will have to pay for renewables, will be set by a special parliamentary committee. In the past, this responsibility would have fallen to the powerful Ministry of Economy, Trade and Industry (METI), which is deeply entrenched with electric utilities and which has fallen out of favor in the wake of the nuclear disaster at Fukishima.
In the initial days following the nuclear crisis, most observers believed that Japan would stay the course with nuclear generation, which accounts for 30% of Japan’s electricity generation. However, a surge of public anger has built as the crisis worsened and details were revealed about the uncomfortably close relationship existing between the nuclear industry and its government regulators. In a recent Nikkei poll, 85% of the public expressed support for either immediately or gradually weaning Japan off nuclear energy. Prime Minister Kan tapped into this public sentiment to convince lawmakers to pass the feed-in-tariff legislation before submitting his resignation.
The legislation is expected to unleash a burst of entrepreneurial activity as companies line-up projects to take advantage of the new policy. Solar panel makers Sharp, Kyocera and Solar Frontier are poised to benefit from this new legislation as Japan’s major corporations like Softbank, West Holdings, Tokio Marine, Mitsui and Showa Shell forge ahead on major plans for photovoltaic power plants.
Following this bold move by Japan, three of the world’s four largest economies now have national feed-in-tariffs for renewables – China, Japan and Germany. Guess who’s missing this historic opportunity to create a robust renewables economy? The U.S.
