Japan hikes price of solar energy

With the closing down of all of Japan's nuclear reactors - the last, Reactor 3 at the Tomari plant in Hokkaido, went offline on May 5 - the pressure is on the Government to roll out a new energy strategy which will placate the nation's post-Fukushima anxiety.

The long-awaited feed-in tariff system for renewables, which will become active in July, is likely to put solar energy at the top of the list.

This month, a proposal drafted by Japan's Economy, Trade and Industry Ministry earmarked 42 yen (67c) per kWh as the rate utilities will have to pay to buy solar-generated power - a rate twice as high as consumers currently pay for electricity.

The tariff scheme is the legacy of former Prime Minister Naoto Kan, who led the country during the March 11 crisis last year, and pushing the bill through Parliament was one of his final acts before resigning in August.

Feed-in tariff polices - which have been enacted in more than 50 countries - are a way for governments to push clean energy by forcing electrical utilities to buy it at higher than market rates.

Assuming Japan's rate gets the final seal of government approval, the country is looking to become one of the leading markets for solar energy. According to Milo Sjardin, head of Asia at Bloomberg New Energy Finance, the feed-in tariff scheme has the potential to "significantly alter Japan's energy future".

"The country may build enough distributed solar capacity over the next three years to equal the electricity output from almost three nuclear power stations, and do so in a fraction of the development time."

Sjardin says solar projects in Japan at the proposed tariff levels could generate equity returns as high as 44 per cent, which could make the country a potential for investors in the renewables sector.

The situation has caused an influx of Japanese energy companies racing to build gigantic solar plants in order to be the biggest name in an emerging market. It was reported last month that Softbank, Japan's huge telco conglomerate, was planning to build a 200MW "mega solar plant" in Tomakomai, in Hokkaido, slated to be the largest in the country.

Yet a company spokesperson said the reports were just speculation.

Softbank says firm plans are in place to build four solar farms elsewhere in Japan - Kyoto, Gunma, Tokushima and Tochigi - which will begin operation from July.

The company's interest in solar harks back to the summer of 2011, when fears of power shortages were high after the Fukushima nuclear crisis. At that time, chief executive Masayoshi Son, Japan's richest man with a net worth of US$8.1 billion ($10.3 billion), announced with much fanfare that he would spend close to US$1 billion to build 10 20MW solar plants across the nation.

He also said he would he would chip in US$100 million of his own personal fortune to stimulate investment in the sector.

The largest plant Softbank is set to build is a 5.6MW one in Tokushima prefecture on the island of Shikoku.

Last month, solar technology conglomerate Kyocera unveiled a proposal for a new 70MW "mega solar plant" in Kagoshima City, in Kyushu, which would see it lead the race to build Japan's biggest solar plant.

Despite these positive signs, real barriers exist which could make the growth of solar energy in the country problematic. Japan is a small country with a high population density - 336 people per square kilometre - and land prices are high. It is also very urbanised with huge populations clustered around the major economic centres, such as Tokyo and Osaka.

Solar expert and research professor Yoshiaki Nakano, from Tokyo University's Advanced Science and Research Centre, believes that although there is not enough open space to provide electricity for big cities with the current level of solar technology, there is an opportunity right now for small, rural towns to be self-sufficient.

He adds that this situation will change in the future as solar-cell technology improves.

The average conversion efficiency - the amount of sunlight turned into energy - of solar cells worldwide is only about 20 per cent. But, at the research and development level, the record efficiency level is 43 per cent and new-generation cells are targeting 50 per cent.