Japan has long supported solar and other clean energy development, but the nuclear disaster this spring has pushed it to expand its clean power supplies. That effort reached a milestone on Friday when its lawmakers approved a program that will require its utilities to buy renewable electricity at premium, government-set prices under long-term contracts.
Japan’s utilities will have to buy any electricity available for sale from sources including solar, wind, geothermal, biomass and small hydropower plants. Each power purchase agreement will last as long as 20 years.
A solar industry group official in Japan said the new law could cause the domestic use of solar panels to rise as much as 10 folds, reported Bloomberg. The country’s wind market, which hasn’t grown much in recent years, also should get a lift.
The legislation seemed to have moved quickly through the parliament. For many Japanese, the earthquake and subsequent fallout at the Fukushima nuclear plant have made renewable energy seem so much more desirable. Two business titans in the country have announced plans to build solar power plants and promote residential rooftop solar installations.
Here comes the hard part: what rates will utilities have to pay? The rate-setting has always been the contentious portion of carrying out this type of policy, called feed-in tariffs, which has made countries such as Germany and Italy the largest solar markets in the world.
Setting the rates too high could prompt a rush to install renewable energy projects and overwhelm the government’s oversight process. Spain became a poster child for what not to do when the government drastically scaled back its feed-in tariff program after the program exceeded its installation goals too quickly. Ontario, Canada, went through some growing pains after creating a feed-in tariff program in 2009 and then reducing the rates to temper growth.
Feed-in tariffs remain a popular tool for countries that want to spur renewable energy deployment. Earlier this month, China announced its feed-in tariffs for solar, a move that has given hopes to the otherwise battered global solar industry. Mike Splinter, CEO of solar factory equipment maker Applied Materials, said earlier this week that China’s new solar incentives could help bring the solar market out of the slump.
The slump began earlier this year when Italy and France took some time to decide the extent of cuts to their feed-in tariffs. Germany also lowered its own. The uncertainties and the incentive cuts slowed down the installation pace and caused a pileup of solar panels in warehouses. That in turn prompted fire sales of solar equipment for some companies. Many manufacturers have since reported big declining profits or posted greater losses.
For Japan, the decision on the tariffs won’t take place until next year, reported Reuters.
Who will benefit from the new policy? Japan’s own renewable energy equipment companies for sure. The country is home to some large solar panel makers such as Sharp, Kyocera, Sanyo (now part of Panasonic) and Solar Frontier. Non-Japanese companies that have cultivated the Japanese market should do well, too, and they include Suntech Power and SunPower. Suntech Power bought a Japanese solar panel maker, MSK, back in 2006. While discussing the company’s quarterly earnings earlier this month, SunPower’s CEO, Tom Werner, pointed to Japan and India as important markets for the company.