No. 75: Special measures law for renewable energy will be approved (August 13, 2011)

The special measures law for renewable energy is scheduled to gain approval in the Diet within this month. It is good for companies involved in the renewable energy business because it asks electric power companies to purchase all power generated by such energy as solar energy and wind at fixed prices. The purchases prices are subject to discussions. Power generated by energy sources other than solar energy will supposedly be 15-20 yen per kW, and power by photovoltaic generation will be higher. On behalf of the Ministry of Economy, Trade and Industry, an independent organization will be established to finalize the prices to make the decision process as transparent as possible.

The purchase prices will be added to electricity charges that companies and households pay. It is estimated that Japan as a country will need to bear 490 billion yen (0.5 yen per kW) in 2020 to cover the purchase prices. Manufacturing companies in such industrial fields as steel and chemical are concerned about the increasing power cost because increased power costs will accelerate overseas transfer. Responding to this voice, the special measures law contains the clause to mitigate the burden of industries that consumes lots of power. It will be the subject for future discussion which industries and which companies are subject to mitigation.

The special measures law will surely expand the mega solar market, and it is expected that domestic shipments of photovoltaic cells for non-residence will grow more than three times in 2012 over the level in 2010. Renewable energy was 14.7 million kW in 2009, and it is estimated that another 32-35 million kW will be created after the special measures law is introduced. However, the fact still remains that renewable energy except large scale hydraulic generation accounts only for less than 1% of Japan’s power generation as of 2009 and that it cannot be a powerful card to make up for the serious power shortage created by the Fukushima disaster. In addition, it is estimated that investments of 4,000-7,000 billion yen will be required to build infrastructure for the increasing renewable energy generation.