Japan

Japan

Feed-in tariffs not yet fit to play

JAPAN: Wind-power operators may not be able to commission new wind farms for the next five years, even though the Japanese parliament passed a renewable-energy law with provisions for a feed-in tariff in August, industry sources have warned.

The wind industry had hoped the incentive scheme - designed to guarantee renewable-energy generators above-market rates for all energy produced - would pay wind-power producers Yen20/kWh ($0.26/kWh). However, decisions on pricing have been delegated to a committee whose members have yet to be named by the Ministry of Economy, Trade and Industry (METI).

Potential members require parliamentary approval, but the ruling coalition of the Democratic Party of Japan and the People's New Party does not control both houses of parliament. There are fears the committee may be stacked with members inclined to favour lower tariffs.

Chuichi Arakawa, a professor in the department of mechanical engineering at the University of Tokyo who served on a METI sub-committee that proposed the Yen20/kWh figure, said he was unsure that this higher level can be realised.

"I expect influential figures from the industrial arena and electrical power industry will be chosen as members," Arakawa said. "Hence, it will be probably difficult for the committee to proceed in a provocative manner."

The METI sub-committee also proposed an initial purchase period of 15 years, but a longer commitment is necessary if there is to be any acceleration in the adoption of wind power in Japan, developers say.

"Japanese wind-power developers will find it very difficult to make a profit if power companies do not buy with a tariff of at least Yen20/kWh for 20 years," said Tetsuro Nagata, CEO of Eurus Energy Holdings Corporation, and president of the Japan Wind Power Association (JWPA).

Eurus is Japan's major developer and operator of wind farms but has no immediate plans to develop new farms once it completes a project in Hokkaido at the end of this year. That project was started last year under the now-defunct renewable portfolio standard system.

While offering renewable-energy sources priority access to regional grids for a period of three years, the new law also includes a loophole allowing power companies the right to refuse grid connection to energy sources deemed detrimental to the stable supply of power. This means Japanese power companies maintain an effective veto on the uptake of energy, a stance that infuriates industry figures.

"This attitude of 'we shall provide you with a connection' is arrogant," said Yukinobu Uchida, Tokyo-based managing director of renewable-energy consultancy GL Garrad Hassan. "We need to make this an imperative, saying it is your obligation to connect the generator. The government should order the power companies to adopt renewable energy."

Further delays

To make matters worse, from October 2012 the Japanese government will require wind facilities with generation potential over 10MW to undergo environmental assessments, possibly extending the time needed to bring wind-power facilities online by up to three years, according to Yoshinori Ueda, leader of the JWPA's international committee."The timing of legalised environmental assessments is extremely bad," Ueda said. "Once assessments start, not a single wind farm will be built in Japan until the process is complete."

The greater uncertainty will make it harder to secure project funding. Tariffs might not be decided until early next year, according to Ueda, hampering fresh bank lending until mid-2012 at the earliest.

As wind projects typically take five to ten years to come to fruition, Japan may see no new wind farms until 2015 at the earliest.

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