July 29, 2014 / 9:35 PM / 5 years ago

Future grows darker for solar energy growth in Japan

TOKYO (Reuters) - On the second anniversary of a scheme aimed at boosting Japan’s renewable energy after the Fukushima crisis, its powerful industry ministry is taking steps critics say will choke off solar investment and pave the way for a return to nuclear power.

Workers set up a solar panel at a solar power field in Kawasaki, near Tokyo in this June 27, 2011 file photograph. REUTERS/Toru Hanai/Files

Japan’s ambitious plans for solar in the past two years — if they were to come on stream — could allow the country to surpass Germany as the world’s biggest consumer of solar power.

But the Ministry of Economy, Trade and Industry (METI) has cut tariffs for solar power by a fifth in the two years and has imposed time limits on installations, arguing solar costs have fallen and projects are running late, with only 13 percent of approved projects actually installed and operating.

Solar industry participants say METI’s actions mean it does not make commercial sense to invest in the renewables sector.

“I really can’t understand what METI is up to. It certainly appears they are trying to kill or at least severely curtail solar development,” said Seth Sulkin, President & CEO of Pacifica Capital K.K., a Tokyo-based solar power and commercial real estate developer.

Prime Minister Shinzo Abe has abandoned the previous ruling party’s nuclear free policy and is now at the forefront of calls to restart the country’s 48 nuclear power plants shut after the 2011 Fukushima nuclear crisis.

METI officials say the solar sector needs reforming, and industry participants accept mistakes have been made since 2012.

“The new measures were not implemented to discourage solar, rather they were implemented to make the system fairer,” said a METI official.

“There have been declines in costs of building solar projects since the FIT (feed-in-tariff) system started, and the cost declines have been reflected in the price, while the internal rate of return has not been changed,” the official added. Feed in tariffs are guaranteed prices paid for the electricity supplied by solar to attract investment.


Japan has registered almost 66 gigawatts of planned solar power under the renewable energy program, nominally equal to about 66 nuclear reactors. But only 8.7 gigawatts of solar power has been connected to the grid, according to the latest figures to March 31 provided by METI.

If Japan succeeds in bringing on stream its total approved solar capacity it would be almost double that of Germany, the world’s biggest user of solar power with installed capacity of 35.7 gigawatts at the end of 2013.

“Japanese policymakers didn’t expect this kind of explosive introduction of PVs (photovoltaics or solar panels) and that combined with a lack of knowledge of cost, structures and how PVs work, led to mistakes being made,” said Mika Ohbayashi, a director at the Japan Renewable Energy Foundation.

Solar projects have been hampered by a lack of qualified technicians, delays in approvals, land titles issues and some operators have sat on approved projects waiting for equipment costs to fall and sell off projects, say industry participants.

“The prices for solar were set too high, then since there was no breakdown by size, nearly everything has been mega solar,” said Hisahi Kajiyama, of the Fujitsu Research Institute, who advised former prime minister Naoto Kan on renewable energy.

“The initial set up of the system was naive.”

When Japan introduced its new renewable energy policy in July 2012, under which utilities must buy electricity generated from renewable sources such as wind, solar or geothermal, its feed-in-tariff rates were among the highest in the world.

METI has since cut its feed-in price to 32 yen per kilowatt-hour (kwh) in the fiscal year starting April for projects 10 kwh or more, down from 36 yen in the year ending in March and lower from the 40 yen in the first year of the incentive program.

And a panel of outside experts appointed by METI to evaluate the system are planning to recommend capping the amount of payouts for electricity bought, local media have reported.

“I don’t know of any developers that can make the numbers work at 32 yen,” said Sulkin, arguing that installation costs were not falling, as stated by METI, with solar panel prices actually rising due to a weaker yen.

If the total amount of approved renewable energy capacity, 68.6 gigawatts, was all brought online it would lead to an annual increase in costs of 1.9 trillion yen ($18.66 billion), says the Central Research Institute of the Electric Power Industry, which is run by Japan’s regional power monopolies.

A worker walks among solar panels at a solar power field in Kawasaki, near Tokyo in this June 27, 2011 file photograph. REUTERS/Toru Hanai/Files

Some in the solar sector dismiss the cost estimate, saying Japan will never build all 68.6 gigawatts of renewable energy.

“METI is working to regain the power and credibility it lost after March 11 with polices like these that marginalize renewables in order to emphasize industry-friendly energy sources, like nuclear,” said Tetsunari Iida, executive director of Japan’s Institute for Sustainable Energy Policies.

($1 = 101.8000 Japanese Yen)

Editing by Michael Perry

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