Solar energy boom in Japan

Industry Minister Yukio Edano may set a premium price for solar electricity that’s about triple what industrial users now pay for conventional power, a ministry official said.

That may spur at least US$9.6 billion ($12.1 billion) in new installations with 3.2 gigawatts of capacity, Bloomberg New Energy Finance forecast.

The total is about equal to the output of three atomic reactors.

"The tariff is very attractive," said Mina Sekiguchi, associate partner and head of energy and infrastructure at KPMG in Japan.

"The rate reflects the Government’s intention to set up many solar power stations very quickly."

Prime Minister Yoshihiko Noda’s effort to cut dependence on atomic energy that provided about 30 per cent of Japan’s power before the Fukushima nuclear meltdown in 2011 is a bright spot for the solar industry suffering incentive cuts across Europe.

It’s also raising concern among Japanese business groups that clean power aid will raise bills and slow Japan’s economic recovery.

"This is a mechanism with a high degree of market intervention by setting tariffs artificially high and making users shoulder the cost," said Masami Hasegawa, senior manager of the environmental policy bureau of Keidanren, Japan’s most powerful business lobby. "We question the effectiveness of such a scheme."

Utilities should pay 42 (67c) a kilowatt-hour for 20 years to solar power producers, almost twice the rate in Germany, the world’s biggest market by installations, under a proposal by a panel set up by the Ministry of Economy, Trade and Industry.

Edano planned to announce new clean-power tariffs yesterday, and the pricing will be as suggested by the panel, Masato Yasuda, an official in charge of the feed-in tariff programme of the industry ministry, said.

Developers are counting on the subsidies and have accelerated construction.

Japan ranked sixth worldwide by new installations last year, when it added 1.3 gigawatts of solar to bring its installed base to 5 gigawatts. Next year builders will erect roughly triple that level New Energy Finance forecasts. A gigawatt is enough to supply about 243,000 homes in Japan.

Only China will exceed Japan in terms of capacity growth as it supplants Italy and Germany, the researcher estimates.