The government has started a review of the feed-in-tariff (FIT) system under which the nation’s major power companies in principle have to buy electricity generated by solar, wind, geothermal and medium- to small-scale hydro power and biomass at fixed prices.

According to the trade and industry ministry, from July 1, 2012, when the system was started, to the end of this past October, 5.852 million kW of electricity from green energy sources were introduced — equivalent to electricity produced by five large nuclear power plants. The figure compares with 20.6 million kW of electricity from renewable energy sources prior to the start of the FIT system.

Although the FIT system has achieved some accomplishment, the weight of renewable energy sources in total electricity production is small compared with foreign countries. According to the Japan Renewable Energy Foundation, in one year since the start of the FIT system, the weight of electricity produced by green energy sources except hydro power increased from 1.4 percent to 2.4 percent. The review of the FIT system should not be perfunctory. Instead, the government should make serious efforts to remove obstacles to the expansion of renewable energy sources. Such efforts should include the separation of power transmission and distribution from power generation to help increase the entry of operators of renewable energy sources into the power market.

Although the FIT system has helped solar power generation expand to some extent, the expansion of wind power generation in Japan is stagnant at a time when it is expanding rapidly in other countries. According to the Wind Power Association, only 23 wind power generation facilities were installed in 2013 with a capacity reaching 470,000 kW — only one-fifth the total capacity of 2.52 million kW from wind power facilities introduced in 2010.

There are several reasons for the stagnation of wind power generation: the abolition of subsidies when the FIT system was started; the fact that wind power generation facilities became a target of the Environment Impact Assessment Law in October 2012; and most importantly, the reluctance of major power companies in Hokkaido and Tohoku, which have an abundance of wind, to provide access to power grids for operators of wind power generation facilities.

Major power companies often reject grid access with the excuse that connecting wind power generation facilities, which often suffer fluctuations in power generation, can make the total power generation unstable, or they ask operators of wind power facilities to connect with a remote transmission network or reduce their electricity output.

As long as major power companies remain intent on restarting their nuclear power plants and expanding low-cost coal-burning power generation, and at the same time continue to monopolize both power generation and power transmission and distribution, they will not have strong incentives to provide grid access to operators of renewable energy sources.

The government should allow entities besides major power companies to engage in the business of power transmission and distribution, and build a system in which priority will be given to connecting renewable energy sources to transmission grids. But until such reform takes place, the government should adopt a policy that will prevent major power companies from arbitrarily rejecting access to power grids to operators of renewable energy facilities. It also should extend various supports to financial companies, including loan guarantees, so that they will increase loans to operators of green energy sources. More importantly, the government should set a specific long-term goal for the expansion of renewable energy and take necessary measures to achieve it.

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