December 17, 2013


Renewable Energy in Japan -- Current Trends Show Promise and Opportunities

Keywords: Newsletter Renewable Energy 

JFS Newsletter No.135 (November 2013)

A demonstration floating offshore wind power facility started operations on November 11, 2013, off the coast of Fukushima Prefecture. The development and construction of the 2-megawatt (MW) floating offshore wind turbine and floating substation has proven to be a technically challenging project, but its full-scale operation was finally commenced thanks to the efforts of a consortium of ten companies and one university. They cooperated on technical development, facility construction, and coordination in the area for two years since the project was launched.

Since Fukushima is one of the areas most seriously damaged by the March 2011 Great East Japan Earthquake, the project stands as a symbol of the recovery and reconstruction of Fukushima, with the introduction of renewable energy being regarded as a pillar of regional recovery. The project also has great significance for the introduction and promotion of renewable energy in Japan, even though the potential for constructing onshore wind power facilities is limited.

Besides this significant milestone, two of the world's largest floating offshore wind turbines (each with 7-MW outputs) are also scheduled at the facility for installation in fiscal year (FY) 2014. As the world's first floating wind farm pilot project, its security, reliability, and economic feasibility will be evaluated, and other issues, including collaboration with the fishery industry and evaluation methods for environmental impact, will be established after studies are completed.

The launch of this demonstrated operation of a floating offshore wind turbine brings significant hope to Japan, where the outlook on energy policy is still unstable after the Great East Japan Earthquake, with nuclear power plant generation mostly suspended. In this issue of the JFS newsletter, we introduce the current condition and trend of renewables in Japan.

The energy self-sufficiency rate in Japan is about 4 percent currently, so the nation is vulnerable to external factors, such as political uncertainty in the Middle East. After the earthquake, nuclear power generation, which used to constitute more than 30 percent of the power supply, was gradually stopped. To cover this shortage from nuclear, the importing cost of fuels for thermal power generation increased by 3.8 trillion yen (about U.S.$38.7 billion) annually, leading to increases in electricity bills, which directly affects people in their daily lives, as well as the operation of industry and the economy nationwide. Although it is controversial whether or not to continue with nuclear power generation, promoting renewable energy is both a government policy and a wish shared by the majority of the public, from the viewpoint of global warming prevention as well as the creation and development of industry and overseas expansion.

In Japan, a feed-in tariff (FIT) scheme for renewables was launched in July 2012. The total power capacity of newly operating renewable energy generation facilities reached 3.666 million kilowatts (kW) at the end of the first year of operation, the equivalent of three large-scale nuclear power plants, and generation capacity increased by more than 15 percent in one year.

Photovoltaic systems account for about 95 percent of newly introduced renewable energy systems. The use of solar panels is very accessible for the following reasons: any place where there's sunlight is a potential installation site; the size of installation is highly flexible and systems are easy to install; and consensus building in the community is not required, particularly for household use.

In addition, certain government support systems helped accelerate the installation of solar power systems in Japan. For example, the Excess Electricity Purchasing Scheme for Photovoltaic (PV) Electricity, which began in November 2009, started with a relatively high buy-back price of 42 yen (equivalent to about 42 US cents) per kilowatt-hour (kWh), which was set after shifting to the FIT scheme (the rates was reduced to about 38 yen after a year), and many local governments have subsidy systems in place for the purchase of solar panels.

According to a news release by the Yano Research Institute, Japan will rank first in the world in terms of installed PV power generation by the end of FY2013. The institute's report, "Solar Photovoltaic System Market in Japan: Key Research Findings 2013," says that the market size of domestic PV systems in FY2012 exceeded one trillion yen for the first time, at 1.3198 trillion yen (about $13.5 billion), which was an increase of 80 percent compared to the previous year.

In Japan, the share of PV systems for residential use accounted for about 80 percent of the total amount of PV systems installed in the past. Looking at newly installed PV systems one year after the introduction of the FIT scheme in 2012, the generation capacity is 1.379 million kW for residential use and 2.12 million kW for non-residential use. This shows that there has been a significant increase in both public and industrial use, combined with the installation of mega-solar power plants with an output of more than 1 MW.

This is a faster pace than initially expected by the Ministry of Economy, Trade and Industry (METI), which had installed PV systems with a total generation capacity of 2 million kW by March 2013. However, solar power generation has its drawbacks: a higher cost of about 30 to 45 yen per kWh (about 30 to 46 U.S. cents) and a lower facility utilization rate compared to other power sources. Even from an international viewpoint, solar power generation still has high costs of equipment and installation; therefore, further technical developments are hoped for.Though Japanese manufacturers' global market share for PV systems is only about 9 percent, they hold an 80-percent share for residential PV systems, which accounts for 80 percent of the domestic PV market.

How about wind power generation? In the world as a whole, wind power generation is cost-competitive, having a relatively low cost compared to other renewable energy options. As its cost advantage facilitates large-scale introduction, it is expected to be key to the expansion of renewable energy use.

As for Japan, the number of installed wind turbines reached 1,870 in FY2011, with an output of 2.55 million kW. However, in contrast to solar power, which has shown rapid growth after the introduction of the FIT scheme, the growth of wind power generation is slower, with an expected output of 2.63 million kW in January 2014.

Wind power generation has not been included in supply capacity during the peak demand for electricity, because its actual output is low and dependent on the weather. This forces power companies to secure their supply capacity by using power sources other than wind power, even if they introduce wind turbines.

Under such circumstances, METI has decided to acknowledge the role of wind power generation to promote the use of renewable energy, and include wind generation capacity in its supply outlook for the winter of 2013 for the first time. Regarding wind power as available supply capacity, even at a moderate estimate, METI's Electricity Supply-Demand Verification Subcommittee estimates that, out of the 2.63 million kW of installed wind power capacity as of January 2014, about 90,000 kW will be added to the supply forecast. This is a step forward for further development of wind power generation in Japan.

One of the reasons why wind power generation is not increasing faster in Japan is that it is difficult to construct many wind turbines at sites due to the limited availability of flat land, which leads to high costs compared to overseas. In Japan, suitable areas for large-scale wind power generation are limited to Hokkaido and part of Tohoku, both located in northern Japan; therefore, it is necessary to develop the power grid connecting such remote areas to urban areas that consume a lot of electricity. Moreover, regulations are expected to be streamlined for further promotion of renewable energy.

As Japan is surrounded by ocean, the expansion of offshore wind power generation is highly expected. The government plans to raise the buy-back price for fixed-bottom offshore wind power between 1.5 to two times higher than for onshore under the FIT scheme in FY2014.

The current buy-back price for wind power is 22 yen (about 22 U.S. cents) per kWh, excluding tax. As this price is anticipating onshore wind power, it is not economically feasible for offshore wind power, especially taking high construction costs into account. By setting a higher buy-back price for offshore than onshore, the government expects to boost private investment to diversify renewable energy sources, which are now inclined to solar power.

Regarding the diversification of renewable energy sources, geothermal has finally started to show some progress. This source has remained under-utilized in Japan, in spite of it being the world's third richest country in terms of geothermal resources.

The current geothermal capacity stands at 17 facilities, which generate 520,000 kW in total. Geothermal developments have been stagnant, because most of the areas with abundant resources are located in natural parks, which have development restrictions, and in areas with geothermal resources overlapping existing, scattered hot spring facilities, making it difficult to reach an agreement with hot springs proprietors.

Owing to the buy-back price of 42 yen (about 42 US cents) under the FIT scheme for geothermal installations less than 15,000 kW, the economic feasibility has improved and government restrictions on their development in natural parks have eased; therefore, geothermal development is finally taking off. A new geothermal plant will start operation in Kumamoto Prefecture in the spring of 2014, after stalling for 15 years in Japan. In addition, research for geothermal developments has started in some other places.

Japan's renewable energy situation is now showing some exciting developments, but it still represents a small portion in the whole energy mix across the country. The amount of power generation from renewables (excluding hydropower) still remains at just 1.6 percent of total electricity generation.

Renewable energy started to grow at an annual rate of 8 percent after the enactment of the Renewable Portfolio Standard (RPS) law in 2003, and it grew faster, at an annual rate of 13 percent, after the introduction of the Excess Electricity Purchasing Scheme for Photovoltaic (PV) Electricity. The introduction of the FIT scheme in the summer of 2012 helped further accelerate its growth.

Looking at the energy mix (not including hydropower) in other countries as of 2010, renewable energy accounts for 14.7 percent in Germany, 18.5 percent in Spain, 6.2 percent in the United Kingdom, and 4.4 percent in the United States. This shows that renewable energy's share of the total in Japan remains low compared to other countries.

If renewable energy continues to grow at the current pace, it is said the potential exists for it to grow to 15 percent of Japan's energy mix, including hydropower, by 2020 and even over 20 percent by 2030. Is it possible to increase the ratio of renewables use even further? To achieve this, what combination of economic incentives, deregulation, expansion of power grids, and technological developments is needed?

Stay tuned for future reports on progress with renewable energy in Japan!

Written by Junko Edahiro