Power play: the debate over renewable energy

Two years after a new feed-in tariff system for alternative energy went into effect, we discover that the promised power revolution looks more like an evolution

by Eric Johnston

Staff Writer

On Aug. 26, 2011, the same day that Prime Minister Naoto Kan resigned after widespread criticism of his handling of the meltdowns at the Fukushima No. 1 nuclear power plant that followed the Great East Japan Earthquake and tsunami in March 2011, the Diet passed legislation that created a new feed-in tariff system for renewable energy.

It was a major victory for renewable advocates, who had spent more than a decade pushing for a feed-in tariff system that would kick-start the country’s power revolution. However, the system was only approved after weeks of political wrangling between Kan, who wanted it, and the pro-nuclear power village comprised of Ministry of Economy, Trade and Industry bureaucrats, business lobbies such as Keidanren, local and national politicians in the Liberal Democratic Party — who were (and remain) in the pockets of the nuclear industry — and the utilities themselves.

The feed-in tariff system went into effect in July 2012 amid much expectation of new energy revolution. Two years later, though, it might be more accurate to say “evolution” than “revolution.”

There is no doubt private investment continues and public support, if anything, is now stronger for renewable energy than it was in 2011. Even though electricity prices have risen between 6 percent and nearly 10 percent for households, and up to 17 percent for industrial users due to a rise in imported fuel costs, media polls earlier this year by Asahi and Kyodo showed that 60 percent of respondents remain opposed to restarting the nation’s idled 48 reactors as a way of reducing those costs.

At same time, however, a host of logistical and engineering issues need to be overcome if the country’s supply of electricity from renewable sources is to rise significantly. If large-scale hydroelectric power is excluded, renewable energy is the source of around 2 percent of the nation’s electricity consumption at present, according to the most recent calculations.

Data from the Agency for Natural Resources and Energy shows that total renewable energy capacity was just over 30 gigawatts as of the end of April. Of that amount, over 9.7 gigawatts has been added to the grid in the past two years since July 2012. Of the more than 9.7 gigawatts of power created under the feed-in tariff system, roughly 9.5 gigawatts comes from solar power. And of this amount, about 7.4 gigawatts comes from solar facilities that generate more than 10 kilowatts of power.

But the 9.7 gigawatts that has been added to the grid represents less than one-seventh the 71 gigawatts that has actually been certified in the form of new facilities under the feed-in tariff system. The government has certified 1.2 million renewable energy-related projects, large and small, since July 2012. However, only about 644,000 were actually generating electricity as of April.

By the end of 2013, more than 90 percent of the solar power projects generating less than 10 kilowatts were up and running in Hokkaido, Chugoku, Chubu and and Kyushu. Nationwide, though, only about 10 percent, on average, of solar facilities generating more than 1,000 kilowatts were online, with the percentages for Hokkaido and Tohoku under 5 percent.

In a speech last year in Austria, Ritsumeikan University sociology professor Asami Takehama touched on some of the fundamental challenges facing the spread of renewable-generated electricity in Japan. First, she said, inter-zone transmission grids are weak, which means that even if you can produce a lot of renewable energy in, say, Hokkaido, where the grid is largely controlled by Hokkaido Electric Power Co., you can only send a limited amount of electricity to the grids in Tohoku or Tokyo Electric Power Co.

In addition, Takehama said, the utilities do not have to give priority access to using electricity generated by renewables under the new feed-in tariff system. The law states that utilities can refuse such electricity if it “unreasonably” harms their profits.

Finally, the utilities are still not legally obligated to expand their current grids to connect to renewables, moves that, given that current nationwide grid system, would involve huge expenditures.

“Tepco and the monopolies can refuse connection to the grid for whatever reason they choose,” says Andrew DeWit, a professor in the School of Policy Studies at Rikkyo University and an expert on the country’s renewable energy policy.

These barriers help explain the huge gap between the 9.7 gigawatts of renewable electricity capacity since July 2012 and the 71 gigawatts worth of renewable energy that has actually received official approval since then.

“The (feed-in tariff) system was not designed properly. The government didn’t expect such an explosive growth of solar power. They just introduced a very simple registration process and put the burden of checking the details on the utilities,” says Mika Ohbayashi, director at Japan Renewable Energy Foundation.

“The utilities check all necessary documents for starting grid connection operations, but the registration process is handled by each district METI branch,” she added. “Only a few people at each branch are tackling the enormous number of submissions, and we can imagine they are just automatically giving permission to all applicants and passing them along to the utilities.”

The current feed-in tariff system is set up so that applicants are guaranteed the fixed rate for their project once it has been accepted. Those who want a higher tariff rush to register before the end of the fiscal year before a new, lower tariff goes into effect the following year.

The latest figures show virtually all investors are still going into solar power, where, initially, the feed-in tariff was ¥42 per kilowatt-hour before being reduced to between ¥32 and ¥37 per kilowatt-hour earlier this year, for either 10 or 20 years depending on the type of project. As many solar power projects are able to generate electricity well below that rate, prospective candidates have expressed an interest to invest knowing they’d be paid ¥42 or even ¥32 per kilowatt-hour over an either 10- or 20-year period by the purchaser (depending on the size of the project).

The other renewables covered by the feed-in tariff system — wind, geothermal, mini-hydro and biomass — lag behind solar in terms of new investment but some are attracting more attention among certain players. In an attempt to garner more offshore wind investment, the government this year created a feed-in tariff of ¥36 per kilowatt-hour over 20 years for that category. The feed-in tariff for onshore wind facilities is ¥22 per kilowatt-hour over 20 years.

Companies such as Toshiba, Hitachi and Sumitomo Electric are investing big in offshore wind power. A 2011 Environment Ministry estimated its potential at 1,600 gigawatts and onshore potential at 280 gigawatts. At the moment, onshore facilities have a cumulative capacity of about 2.7 gigawatts nationwide.

However, offshore wind farms still face massive costs and technical challenges.

“Wind development should have focused onshore,” DeWit said. “Offshore wind in Japan confronts a few technical challenges such as a steeply sloping subsea (no continental shelf), although it has enormous potential.”

It remains unclear, however, whether such potential can be realized at a cost-competitive rate. The jury’s also still out on the exact role regional governments and Tokyo should take in providing incentives for fostering new projects and providing financial incentives. Such issues are of particular interest to those parts of Japan that are seen as having particularly good prospects for renewable energy development and where, increasingly, local politicians see renewable energy investment as a way to revive local economies, regardless of what the central government decides.

In the central government’s long-term strategic energy plan, released in April, much of the media focus was on the role nuclear power would play in the coming years. In the end, the pro-nuclear power administration of Prime Minister Shinzo Abe — backed by influential lobby groups such as Keidanren, the power utilities and local governments hosting nuclear power plants that are deeply reliant on associated central government subsidies — announced that “nuclear power is an important base-load power source as a low carbon and quasi-domestic energy source.”

The report neither called for the phasing out of nuclear power, as many antinuclear advocates hoped, nor said it would remain a critical part of the nation’s energy mix, as many pronuclear advocates wanted. Thus, there is some confusion on both sides as to what the government plans to do with nuclear power in the coming years.

In the long-term plan, Abe and his government also categorize nuclear power as a quasi-domestic energy source, even though the fuel for the country’s reactors is all imported from abroad (most of Japan’s oil, coal and natural gas is also imported).

The energy plan did include a section on fully domestic renewable energy sources but the outlook, at least for the next few years, was cautious at best.

“Renewable energy has various challenges in terms of stable supply and cost at this moment, but it is a promising, multi-characteristic and important energy source that can contribute to energy security as it can be domestically produced free of greenhouse gas emissions,” the English translation of the report said.

If Tokyo appears somewhat hesitant to fully embrace renewable energy, localities from Hokkaido to Kyushu appear to remain willing to move forward. A survey conducted last month by Hitotsubashi University and the Asahi Shimbun of 1,700 local governments showed that 80 percent were keen to support local renewable energy projects in the hope that sales from the electricity generated could be used to cover things such as local education costs and social welfare services for the elderly, as well as provide new employment opportunities.

A large part of what is driving the hope is the potential for certain regions. By some calculations, Hokkaido has enough wind power to generate the equivalent of 150 nuclear power plants. Local towns in the farming area of Obihiro have also begun projects to convert agricultural waste into biogas and biomass fuel.

In Tohoku, there is a particularly strong effort at the community level to create local renewable energy projects. As of April, more than 32,000 small- and large-scale renewable energy facilities had been certified in Fukushima Prefecture alone under the feed-in tariff system, although only about 13,000 had actually started up.

And while, nationally, renewable energy sources account for less than 2 percent of the mix, the picture looks very different at a local level. Japan Status Report 2014 notes that eight prefectures, mostly in Kyushu and Tohoku, as well as Nagano and Toyama, supply at least 10 percent of their electric power and heat from renewable sources. Oita, Toyama and Akita prefectures lead the nation, with more than 15 percent of their electricity coming from renewables, mostly geothermal and mini-hydro.

In the end, however, it will be a combination of local and regional initiatives, political leadership and a national strategy that is more proactive toward renewable energy development that will determine how quickly, and to what extent, Japan shifts out of other fuel sources and into renewables.

Ohbayashi says the national government, at the very least, needs to make the feed-in tariff system more profitable. The government should not only earmark subsidies for large, established firms but also for individuals and small groups, she said. It should offer assurances of grid connections, low-interest loans and more transparent procedures.

DeWit says that funding allotted for renewables also needs to be spent more effectively. “The central government has thrown a lot of money at renewables and energy efficiency since 3/11, but the funds are often not used as effectively as they might be,” he says. “That indicates the ‘bottom up’ local governments need to do more, linking local and regional initiatives with civil society and hungry private-sector players.”

Over the coming years, the electricity market is scheduled to be liberalized further, with legislation to end regional monopolies and give consumers more choice. By 2020, the last stage of liberalization, in which utilities will have to separate their power generation and transmission operations, is expected to take place.

While such moves are likely to create more renewable energy opportunities — especially at the local level in places where there is already abundant energy and local political will to tap it — the guiding principles of Japan’s national energy policy have always been a “best” energy mix that is “safe, stable and secure” and renewable energy is still viewed with suspicion in that regard.

Thus two years after the creation of the feed-in tariff system, it’s clear that Japan’s renewable energy industry — growing in importance and moving forward in many parts of the country — is still, at the national policy level at least, seen as risky and costly in terms of overcoming various economic and logistic problems. Everyone agrees that the potential remains great, and that technologies are improving, making solar, wind and other alternatives more cost-efficient. Virtually all predications, even among staunch pro-nuclear advocates, suggest that renewable energy will play a more important role for Japan in the years to come.

However, entrenched political interests and public concerns, especially in large urban centers, about the lights going off and electricity bills increasing if renewable energy is ramped up too quickly remain. Any combination of national policy measures, private technological innovation and local government incentives that leads to greater renewable energy use overall will have to overcome this mentality first.