The Economist: "Japan to be heaven for renewable energy"
TWO years have passed since an earthquake and tsunami destroyed the huge Fukushima Dai-ichi nuclear plant owned by Tokyo Electric Power (TEPCO), on the Japanese north-east coast—and precipitated a phased shutdown of the country’s 54 nuclear plants for stress testing, maintenance and further seismic analysis. With the last reactor turned off in May 2012, the past summer was when Japan started to live without nuclear power for the first time since 1970.
Before the disaster struck, nuclear power accounted for 29% of the country’s electricity supply, with plans for boosting it to 50% by 2030. Such intentions are now out of the question. To compensate for the loss of such a large chunk of electrical capacity, households and businesses across Japan were threatened with black-outs and to make reductions of up to 15% in consumption or face stiff penalties. In the immediate aftermath of the disaster, the electricity was switched off in some parts of the country for up to four hours a day.
Two nuclear plants in the Kansai region have since been restarted, following maintenance and extensive discussions with the public and local authorities. But the rest are months, possibly as long as two or three years, away from being powered up again. Before giving approval, the Nuclear Regulation Authority wants more rigorous stress-testing of reactors around the country. With industry hit hard by electricity shortages, business leaders are demanding that “clean, stable nuclear power” be turned back on without delay. A battle royal is shaping up between an invigorated nuclear regulator, various civil groups and new business leaders, on one side, and the Keidanren, a lobby group for traditional big business, on the other.
Despite official claims to the contrary, Japan's political economy is still driven largely by what producers (manufacturers, farmers and financial institutions) want rather than by what consumers would like. The natural instinct of the Liberal Democratic Party, which was swept back into office following a landslide victory last December, is to side with captains of big business. However, mindful of the anger among voters over the nuclear disaster and the government’s poor response to it, the ruling party is waiting for this summer’s upper-house election to be out of the way before taking decisive action. Polls continue to show that the majority of Japanese favour either an outright ban on nuclear power, or only a small percentage of the safer plants being allowed to restart.
In the meantime, Japan has been paying dearly—in terms of foreign exchange as well as personal hardship—for managing without nuclear power. Making up for the idled nuclear capacity has cost the country $50m a day in imports of additional liquefied natural gas from Qatar and, increasingly, Australia. After running an unbroken series of trade surpluses since 1963, Japan’s energy woes in 2011 tipped its trade balance sharply into the red, where it has since remained. All of which should not have happened, even with a disaster on the scale of Fukushima Dai-ichi. The Japanese are among the most frugal energy users in the industrial world. On average, households in Japan consume a modest 8,400 kilowatt-hours of electricity a year—despite most buildings having surprisingly poor thermal insulation. By contrast, American homes burn an average of 13,400 kilowatt-hours annually in order to maintain a shirt-sleeve environment year round.
The difference in consumption is simply a matter of price. Your correspondent pays a (more or less) flat 13 cents a kilowatt-hour for his electricity in southern California, which is not the cheapest place in America by far. But that is dirt cheap compared with Japan. His family there has to cough up 24.5 yen (26 cents) per kilowatt-hour for the lowest of the three domestic rates they have to pay. The highest is a scandalous 49 yen.
For that, blame the country’s ten regional electricity monopolies and their preoccupation with nuclear power. Independent of any rational argument or serious discussion, or examples from other countries, renewable ‘new’ energy was kept below 1% of electrical power output] as an untouchable rule.
With TEPCO humbled, the 1% rule has begun to crumble since the Fukushima disaster. The government now plans to increase the share of renewables in Japan’s energy mix to 15-25%. In principle, that ought to be relatively easy to accomplish. In practice, however, it will require sweeping institutional changes governing how power and influence are wielded by vested interests at every level of society in Japan. Such changes will not come easily. Nor will the investment needed to turn Japan's dual electricity supply (with one half of the country receiving power at 50 hertz and the other at 60 hertz) into a modern smart grid.
The irony is that Japan ought to be a haven for renewable energy. It has the industrial skills and natural resources to be a world leader. For instance, the abundance of sunshine suggests that, instead of a smattering of solar installations, there ought to be photovoltaic panels on practically every rooftop in the land, as well as numerous solar-generating arrays selling power to the utilities. Instead, solar power contributed a minuscule 0.01% to Japanese electricity production last year.
Meanwhile, the country’s steady ocean breezes could feed dozens of offshore wind-farms (the first, for completion in 2020, has just been announced). And in a country bordering the Pacific’s geologically active Ring of Fire, geothermal power could be plumbed far more extensively. Meanwhile, the numerous locations around the country’s coastline with adequate tidal range and flow could be generating serious amounts of tidal power.
Then there are the mountains, which comprise 70% of the archipelago’s land mass. Covered with snow in the winter and drenched by monsoons in the summer, their fast-moving rivers offer plenty of scope for hydro-electricity. So far, only 1,900 locations for dams and pumped storage facilities have been exploited. A further 2,700 sites wait to be tapped. In short, Japan has a profusion of renewable energy sources awaiting development. However, at every turn, there is a law or regulation, some vested interest or a monopoly supplier poised to trip up any would-be developer.
Geothermal power alone, for instance, could account for 10% (up from today’s 0.3%) of Japan’s electricity needs. It is unlikely ever to do so. That is because many hot springs reside in national parks, which are protected by laws preventing such use. Others are protected for local vested interests in the onsen (natural spa) trade. The one recent development that gives hope for deregulation and reform is the government’s introduction last July of feed-in tariffs for various forms of renewable energy. Japan’s dismal record on renewables was not just the result of intransigence by regional monopolies like TEPCO. There were no incentives, let alone a market, for entrepreneurs to invest own money in solar-generating plant and the like.
Now there are generous ones, backed by laws requiring TEPCO and the other utility monopolies to purchase spare electricity produced by outsiders. Feed-in tariffs, guaranteed for up to 20 years, range from 38 yen per kilowatt-hour for solar arrays to 57 yen for small wind-farms. Japanese utilities will be allowed to pass the extra cost of purchasing renewable energy at such prices on to customers as surcharges. The feed-in tariffs are expected to raise household electricity bills by at least 1%.
The reforms seem to be working—though, once again, Japanese consumers are left footing the bill. According to the Ministry of Economy, Trade and Industry, solar capacity (including residential as well as commercial) rose by 29% in Japan last year, albeit from a relatively small base.
Even after the feed-in tariff for solar was recently reduced by 10% -- to take account of last year’s 20% fall in the price of solar panels -- Japan’s incentives remain three times those offered in Germany and China, two of the world’s biggest markets for solar power. That implies the Japanese market for renewable energy could one day be even bigger, as the country learns to live with limited nuclear power. Or, quite possibly, none at all.
Feed-in tariffs to make Japan world No. 2 solar market after China
Japan will probably become the largest solar market in the world after China this year, boosted by an incentive program that offers above-market rates for energy from renewable sources. Commercial and utility-scale projects will boost solar installations to a range of 6.1 gigawatts to 9.4 gigawatts in 2013, exceeding an earlier forecast of 3.2 gigawatts to 4 gigawatts, Bloomberg New Energy Finance said in a research note. “The upward revision was done because of the rapid increase in shipments seen last quarter as well as the fact that the pipeline of projects is even stronger than previously expected,” BNEF said in the report released March 29.
The forecast reflects the push by Japan to find alternative sources of energy due to the Fukushima nuclear crisis, which prompted the closure of all but two of the nation’s nuclear reactors. The government began offering incentives last July through feed-in tariffs to encourage investments in energy sources such as wind and solar. Lawson Inc. installed solar panels on the roofs of 1,000 of its convenience stores by the end of February and plans to set up systems for another 1,000 outlets, company spokesman Yuuki Takemoto said. Lawson uses panels by Solar Frontier K.K. and Panasonic Corp.
Lawson sells electricity generated from solar panels to utilities and plans to use the income for mroe energy-saving equipment, the spokesman said. Other companies that stand to benefit include Kyocera Corp., Sharp Corp. and Suntech Power Japan Corp., all of which make and sell solar panels for residential and industrial use. “The feed-in tariff has been successful in sparking interest and potential for unprecedented growth in solar,” Travis Woodward, a Tokyo-based solar analyst at BNEF, said in an emailed message. “This large introduction of solar is significant enough to compliment other strategies to alleviate power demand issues from idling almost all nuclear plants in Japan. Solar system prices will need to come down closer to global average, however, to make a sustainable market.”
The commercial segment — projects of 10 kw to 1,000 kw on industrial rooftops and idle land — is primarily behind the increase in the forecast, according to London-based BNEF. The revision puts Japan ahead of the U.S. and possibly ahead of China, the group’s report said. China is forecast to add between 6.2 gigawatts and 10.5 gigawatts, while additions in the U.S. may total 3.3 gigawatts to 3.9 gigawatts. The most installations in any one year was in Italy in 2011, when that country added 7.9 gigawatts, according to BNEF.
Potential barriers include system costs in Japan that remain high by international standards, and a lack of trained workers to install systems, according to the report. Japan’s domestic shipments of solar cells and modules more than doubled to 1,003 megawatts in the three months to Dec. 31 compared with the same quarter the previous year, the Japan Photovoltaic Energy Association said Feb 26. (Main Sources: JapanTimes, The Economist)
Free Japan Report >
Our core competences >
1. Market Analysis & Industry Research
2. Marketing Strategy & Branding Concept
3. Distributor Search & Deal-Closure
4. Sales Channel Optimisation
5. E-commerce & Website & Translations
6. Market Tours & Industry Investigations
7. Branch & Store Set-up Managment
8. Direct Sales
• HR Recruiting & Executive Search
• interim/ turn-around management
• firm representation & PR management
< post images
60+ companies have used
Japan-Distributor.com services already