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Japan

Japan

Utility accused of unfair practice -- 50 MW project

Japanese utility Kyushu Electric Power Company (KEPCO) has announced plans to construct a 50.4 MW wind project in Izumi County, Kagoshima Prefecture. The project will be owned and managed by a joint venture company, Nagashima Wind Field Company. KEPCO's partner in the joint venture is its own subsidiary, Kyudenko KK.

The wind farm will consist of 21, 2.4 MW machines. While the turbine supplier is yet to be confirmed, Mitsubishi Heavy Industries is widely tipped to be the firm favourite. Construction work is due to start in October with the plant scheduled to go online in 2008.

The project has, however, raised eyebrows within the Japan Fair Trade Commission (JFTC) in Tokyo. KEPCO limits the number of privately owned wind projects in its area by putting a cap on the amount of wind energy it will buy from developers. The utility justifies this cap on the basis of wind power's intermittency, arguing its grid system cannot cope with the high levels of fluctuation that would arise with increased supply from wind turbines.

In recent years this limit has been set at 50 MW and a lottery style bidding system has been used to select which companies it will buy power from and thus which projects proceed. With a limit of just 50 MW, many proposed projects remain on the sideline -- in 2003 projects totalling 670 MW were submitted by private companies to the lottery luck of the draw, increasing to 700 MW last year. Winners for the 2004 draw are due to be announced in March.

Having placed a limit on wind power development, some in the industry are angered by the utility's decision to proceed with a project on its own. "It is highly unfair of Kyushu Electric Power to exclude private wind developers from bidding on the last 50.4 MW project," explains Tetsunari Iida of non profit organisation Green Energy Network Japan (GEN). Furthermore, as well as excluding private companies from participating in the project, KEPCO is accused by GEN of using public funds set aside specifically for subsidising private wind projects. By investing in a joint venture with its partly owned subsidiary, Kyudenko, it has created what is called a "third sector company."

Such companies are entitled to a public subsidy worth around 24% of the wind farm's total cost. According to Iida, JFTC is concerned about the case, but cannot investigate further unless an official complaint is made. GEN is now considering doing exactly that, says Iida.

KEPCO defends its action, saying it will fail to meet its renewable energy target if it were to rely on privately developed wind projects alone. By running its own wind farm, the utility will be in a better position to manage and cope with the fluctuations in its grid network, it adds. Iida is, not surprisingly, quick to point out the irony of a company limiting what it will buy from private developers and in doing so stalling development but then using the lack of available power as justification for its own development.

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