Wind industry gives cautious welcome to new FIT

JAPAN: The wind industry has welcomed the introduction of feed-in tariffs (FITs), but several issues remain unresolved which could cast a shadow over the future of renewable energy in the third biggest economy in the world.

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The FIT levels were announced at the end of April, when a government committee recommended that wind energy projects above 20kW will receive JPY 23.1/kWh ($0.29/kWh) for 20 years. The system is set to start from 1 July following parliamentary approval. Prices set by the committee were broadly in line with those of a previous advisory panel but are high on an international basis.

"My feeling is that there is enough leeway to make profits," said Chuichi Arakawa, a professor in the Faculty of Engineering at the University of Tokyo. "New companies might enter the market."

In particular, Arakawa highlights the possibilities for Chinese manufacturers entering the Japanese market.

Other longstanding issues remain unresolved. Access to the grid is guaranteed for the initial three-year period only, and it is unclear whether power companies must accept renewable energy beyond that period. Japan's ten electrical power companies operate monopolies over both power generation and transmission, allowing them to control not only what power is produced, but also who is allowed to supply it to the public.

Tokyo Electric Power Company (TEPCO) and the other regional giants argue that wind and solar power are unstable, and have blocked access to the grid for renewable energy sources. However, the government is now under pressure to increase use of renewable energy. Japan now has no nuclear energy generation, after the last of its 50 reactors was taken offline in May. The government has asked people to cut electricity use by 15% to limit the amount of liquid natural gas it needs to import.

Previously it has been politically difficult for the government to influence utilities, but TEPCO is facing massive compensation liabilities following the Fukushima nuclear meltdown. The government will gain a controlling stake in the company, in return for injecting one trillion yen of tax funds and sanctioning price hikes.

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