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Promote renewable energy without overburdening customers

December 24, 2014

EDITORIAL: Rules for renewable energy suppliers should not overburden consumers

http://ajw.asahi.com/article/views/editorial/AJ201412240023

With the nation’s major electric power companies suspending the signing of new purchase contracts with suppliers of solar energy and other renewables under the feed-in tariff program, the government has come up with a set of countermeasures.

The utilities suspended accepting suppliers’ applications for contracts because the potential supply amounts exceeded the utilities’ handling capacities.

The government’s countermeasures aim to change the existing rules of sustainable energy supply to render it easier for utilities to control the volumes they purchase from suppliers. In exchange, more suppliers will be able to access the grid. The new rules apply only to suppliers that are newcomers to the business and have no standing contracts yet with the utilities.

Since these are only stopgap measures, they are inevitably imperfect. For one, suppliers that are already generating energy or have signed contracts with the utilities are excluded from the new rules.

The date of the conclusion of the contract is the key element under the new rules. Even if a new supplier were to run its business more efficiently than an established supplier, the latter would be given priority for supplying electricity. One can hardly expect fair competition if the winner is decided by when it started its business, not by its efficiency. The government definitely needs to rework its measures to ensure the survival of competent operators.

We are also concerned that the new rules may overburden consumers.

Since energy purchase costs are calculated by adding a set amount of profit to the supplier’s costs and are reflected in electricity charges paid by users, the consumers ultimately bear the additional costs.

According to calculations based on various materials, nearly half the projects have profit rates exceeding the system’s initial projections.

The feed-in tariff system guarantees profit to sustainable energy suppliers to encourage newcomers and reduce purchase costs once raw materials come down in price along with wider use of renewable energy. The goal is to enable the renewable energy industry to become self-reliant. But if even all this still places an excessive burden on consumers, the system would have to be improved.

Under the current system, renewable energy suppliers are under no obligation to disclose management information. This prevents consumers from knowing the costs and profits of each operator or power plant.

The government needs to introduce a mechanism that requires operators to disclose business data to consumers. If the government ascertains the financial conditions of established operators and applies the same purchase rules to them and new operators, the feed-in tariff system would be more equitable and should enable additional newcomers to join the club.

If changes are made to the established rules too frequently, operators would be unable to make business projections, and the system itself would lose credibility. However, the renewable energy industry is a new, growing industry where regulations and competition go hand in hand. Certain trials and errors are unavoidable. Germany has implemented a policy of retroactively applying new rules to established operators.

We hope our government will keep trying to improve the system for the bigger goal of promoting renewable energy while minimizing the burden on consumers.

--The Asahi Shimbun, Dec. 24

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