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How to promote renewables?

October 18, 2014

Editorial: System to facilitate promotion of renewable energy needed


An advisory council to the Economy, Trade and Industry Ministry has begun reviewing the so-called "feed-in-tariff" (FIT) scheme for renewable energy, where power companies buy electricity generated from renewable energy sources such as solar light, amid rising fears that the balance between power demand and supply could be disturbed due to utilities being flooded with offers in this regard.

Five power suppliers including Kyushu Electric Power Co. have stopped signing new contracts to buy electricity generated from renewable energy sources. However, since such sources account for only about 2 percent of total power used in the country (excluding hydroelectric power), the introduction of renewable energy should not be systematically hindered even if the FIT scheme needs to be reviewed.

Renewable energy sources play a key role in stepping up countermeasures against global warming, while decreasing the country's reliance on nuclear power. From a long-term perspective, therefore, the government should set a high target for introducing renewable energy while achieving a balance between the spread of such energy sources and the burden on consumers.

The FIT scheme was introduced in July 2012. By this past June, the total output of power generation facilities that operated using renewable energy had reached 11 million kilowatts. This was roughly 50 percent more than the amount before the introduction of the system -- thereby highlighting the FIT's effect in promoting the introduction of renewable energy sources.

The problem is that solar light constitutes an overwhelming majority of renewable energy used for power generation. Unlike wind power, solar power generators are easy to introduce insofar as such facilities do not require an environmental assessment by the national government. Power generation facilities using renewable energy sources, with a total output of some 60 million kilowatts, are not in operation even though they have been approved by the government. A vast majority of these facilities are solar power generators.

The price at which utilities buy electric power generated from renewable energy sources under the FIT scheme is reviewed every April. Since the price charged is that which is in place when the national government approves such facilities, however, power suppliers were flooded with applications for contracts at the end of last fiscal year shortly before the price was lowered this past April.

Under the ministry's plan to revise the scheme, excessive emphasis on solar power would be reconsidered -- and the price to be charged would be that which was in place at the time of the start of operations at such power generators, rather than at the time of government approval. The ministry will also consider setting an upper limit to the burden on consumers, and introducing a market mechanism for the operators of power generation facilities.

A review of the timing for determining the purchase price and promotion of renewable energy sources other than solar lights is appropriate. However, the introduction of the market mechanism needs to be carefully and thoroughly discussed. An extra burden is placed upon consumers since the price of electric power generated from renewable energy sources is added to power charges. On the other hand, renewable energy has drawn attention as a way to revitalize local economies. Certain consideration should be given to such efforts.

If all of the approved power generation facilities using renewable energy are to be in operation, the cost of buying such electricity would amount to 2.7 trillion yen a year, according to an estimate by the Economy, Trade and Industry Ministry. This would increase the extra financial burden on consumers from the current 225 yen to 935 yen per month on average. However, money paid for such electricity will eventually be passed on to regions that host power generators using renewable energy. Therefore, the promotion of renewable energy should be considered from the viewpoint of investing in Japan's future.

The Economy, Trade and Industry Ministry has also begun reviewing each utility's capacity to accept power generated from renewable energy. Power grids need to be reinforced across power companies' service areas to significantly increase the amount of electricity generated from renewable energy. Still, utilities can increase their capacity to accept such power by effectively and efficiently using lines that connect different utilities' power grids.

Pumped-storage power generation facilities, which are often built along with nuclear power stations, should be proactively utilized as power storage batteries to adjust the output of power generated from renewable energy sources.

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