Market Status: Japan - Slow start for green growth under new regime

JAPAN: In September last year, the centrist Democratic Party of Japan (DPJ), led by Yukio Hatoyama, came to power on a platform that advocated mandatory purchases of renewable energy by power utilities.

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Although the government has taken some steps towards achieving its green energy goals, opposition from industry groups concerned about renewable energy costs and government scrutiny of the impact of large-scale wind projects on human health and the environment threaten to becalm Japan's wind power industry.

Just two months after coming to power, the government had established a project team to prepare proposals for making it mandatory for power utilities to purchase all available supplies of renewable energy. The study group, which was established under the auspices of the Ministry of Economy, Trade and Industry's Agency for Natural Resources and Energy, held hearings with industry groups during November and December 2009 and is expected to produce a list of recommendations by March this year.

Policy change concerns

Although the government has said it would like to implement mandatory purchases from April 2010, the start of the next financial year, economy minister Yosuke Kondo has expressed caution about policy changes that will increase costs for consumers, indicating that a more thorough debate may be required.

In addition to submissions from renewable energy industry groups, including the Japan Wind Power Association (JWPA), the government project team has received submissions from groups such as the Japan Foundry Society (JFS), which represents 270 companies involved in steel manufacturing and related industries. The JFS submission claims that implementation of a renewables purchasing policy like Germany's would raise costs for the steel industry by about Yen6.2bn and has asked that the system be designed to minimise the overall burden to industry, pay special attention to the needs of smalland medium-sized enterprises and include compensation and other breaks for energy-intensive industries.

Japan's electric power industry has also voiced concern about the government's policy. Shousuke Mori, president of Kansai Electric Power and chairman of the Federation of Electric Power Companies, says a system that drives up the price of electricity would be both inefficient and unfair.

Environmental assessments

In addition to the economic concerns of industry, the DPJ and its coalition partners in the Social Democratic Party are also under pressure to respond to concerns about the health and environmental impact of wind farms. This month, the Ministry of the Environment announced that wind farms would be among projects, such as dams and thermal power stations, that are legally required to perform environmental assessment studies in order to receive construction approval. An advisory body to the ministry said that only a quarter of the wind farms established in Japan, of which there are around 380 comprising 2GW, had sought the opinion of local residents before construction.

In another sign of the difficulties being faced by wind farm developers, the Ministry of the Environment will begin a four-year study in April aimed at assessing the impact of wind farms on the health of people in surrounding areas.

Although last year's electoral victory by the DPJ was cautiously welcomed by Japan's wind industry, broadly based opposition from industry to renewable energy subsidies, combined with local opposition to wind farms on health and environmental grounds seem likely to hold back the pace of wind farm expansion in Japan.

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