The Japan Wind Power Association (JWPA) expects the mandate to maintain 2003's level of activity over the next few years. By the end of this month, it says, the country's wind generation will have reached around 740 MW. A further 200 MW is expected in the fiscal year up to March 2005. The national goal is for 3000 MW by 2010.
Developers Eurus Energy Japan, Electric Power & Development Corp (EPDC) and Eco Power are expected to continue as market leaders. Together they are behind 56% of the country's projects (22%, 17% and 17%, respectively). The country's other main developers, Japan Wind Development, Marubeni Corp, and Toyota Tsusyo, follow with 13%, 9% and 8% of the market. Denmark's Vestas dominates turbine sales, with 36% of the market in 2003, followed by GE Wind with 21% (table).
Most development activity is expected to continue in the northern areas, notably the island of Hokkaido, and in Tohoku, which have the best winds. Some 650 MW of proposals for these areas are reported to be in planning. Projects can only move forward, however, if the local utilities sign power purchase contracts. Under the green power mandate, utilities can meet the obligation through their own production or by buying green power from independent power producers. They prove compliance by acquiring the appropriate number of green power credits.
Already meeting their mandates, the Hokkaido and Tohoku utilities appear to have backed away from buying more wind. The prospects for development in the Southern Kyushu area, also with good winds -- look better. The local utility is seeking wind developers to help it meet its mandate, using a combination of tendering and a lottery system, where its invites price bids for a specified capacity.
Even at the present rate of development, Japan will be hard pushed to meet its 2010 target, note industry players. Poor interconnection of grid networks means utilities in low wind areas have limited access to wind power to meet their mandates. This is especially true of the country's biggest utility, TEPCO. A stronger grid network would allow more utilities to benefit from the wind resource in Hokkaido. Its grid is not connected to any other network. Government support is needed for grid expansion, argues the Japan Wind Energy Association (JWEA), a group of enthusiasts separate from industry association, JWPA.
Income from sale of credits has become essential for the financial viability of projects. Hokkaido Electric Power Co was offering just JPY 3.3/kWh ($0.031/kWh) for wind power last year, while prices for tradable credits have typically been in the range of JPY 7-11/kWh ($0.065-0.10/kWh). Projects are only just viable at these rates, argue developers, especially since capital subsidies available to private companies installing wind plant were cut from 33% to 26%. JWEA suggests the government could help by subsidising utility purchases of wind energy.
Another way Japan may be able to ensure it meets its 2010 target is by moving offshore. JWEA says the potential for offshore wind farms up to three kilometres from land is 14 times larger than onshore. So far offshore wind in Japan has not moved beyond initial research.