A feed-in tariff system for electricity from renewable energy sources such as solar and wind power will face many difficult problems.
An expert panel of the Economy, Trade and Industry Ministry has made a proposal on prices at which electric power companies will purchase electricity generated by renewable energy under the system.
The government will officially decide on recommended rates within May, and power companies will become obliged to buy the electricity from July.
The proposed rates are 42 yen per kilowatt-hour for solar power, 23 yen for wind power and 27 yen for geothermal power.
The rates were calculated by adding appropriate profits to the usual costs of each generation method, the panel said. However, they are almost the same as the rates that were requested in advance by renewable energy producers and were higher than widely expected.
With the proposed prices, the panel apparently aims to promote the expansion of the renewable energy generation business by encouraging more companies to enter the field. However, the feed-in tariff system’s design itself is precarious.
The costs utility companies will shoulder to buy the renewable-energy electricity at high rates will be passed on through electricity rates in general.
The economy ministry estimates the resulting electricity charge hike for an ordinary household to be 70 yen to 100 yen per month in the first fiscal year, but it apparently will further increase along with the spread of power generation from renewable sources.
Special measures will exempt steel and other industries that consume huge amounts of electricity from more than 80 percent of the increased portion of electricity rates.
However, after a government subsidy to supplement the reduced portion of electricity revenues runs out, it will be passed on to other industries and ordinary households through their electricity rates.
If the costs are not shared in a balanced manner, a sense of unfairness will spread among the public.
Japan is now in an emergency situation because all but one of its nuclear power reactors have been suspended and thermal power generation requires an additional 3 trillion yen to 4 trillion yen a year for fuel costs. An increase in electricity costs must be avoided by all means.
If the feed-in tariff system causes electricity rates to rise, the government will have to flexibly reduce the recommended rates.
In fact, Germany, which is more advanced in its feed-in tariff system than Japan, last year saw the added portion of electricity rates for an ordinary household exceed 1,200 yen per month. Facing public protest, the German government this spring lowered the recommended rates by 20 percent to 30 percent. The Spanish government in January suspended applying its feed-in tariff system to new renewable energy generation projects.
The experience of other countries shows that it is difficult to maintain electricity generation from renewable sources as long as generation costs remain expensive, even if a government tries to support it with policy measures.
Many expectations are voiced for industrial promotion and job growth related to new energy businesses such as the manufacture of solar panels, but the reality is grim. In Germany, a major solar panel maker and other firms went under one after another in the face of pressure from Chinese products with smaller price tags.
Solar and wind power generation have many difficulties regarding the procurement of land for sites and the durability of generation facilities. The road to independence from nuclear power generation is not an easy one.
