Overview of Renewable Energy Business

In 2012, Japan’s energy policy reached a turning point. In the wake of the Great East Japan Earthquake in 2011, Japan’s energy policy went through a comprehensive review, with the revised policy being shaped through a previously unprecedented high level of public consultation. With the aim of realizing innovation in green energy, the Innovative Strategies for Energy and the Environment, issued by the Energy and Environmental Council of the Government of Japan on September 14, 2012, gave the highest priority to the promotion of renewable energy, alongside energy saving. A target has been set that the level of renewable energy by 2030 should be three times 2010 levels, with emphasis placed on new renewable energy, such as solar, wind, hydro, biomass, and geothermal.

As one of the government schemes to realize these policies, the full amount purchase system named “Act on Special Measures concerning the Procurement of Renewable Energy by Operators of Electric Utilities (“the Act”)” was enforced as of July 1, 2012. One of the outcomes of the introduction of this legislation is an expected acceleration in the introduction of renewable energy e.g. solar power. Other government schemes under consideration include relaxing regulations impacting solar power generation contained in the “Industrial Location Law”, regulations regarding the installation of renewable energy on farmland, and safety regulations of the “Electric Utility Law”.

Following enforcement of the Act, the “feed-in tariff policy for renewable energy (“feed-in tariff policy”)” became effective. This introduced a scheme under which electric utilities are mandated to purchase energy generated by solar, wind and geothermal plants, at prices set by the government, for a fixed period of time.

Purchase prices and timeframes are reviewed annually by the government, with variations depending on energy source and scale. Many firms have already launched renewable energy projects, especially solar generation as these can be deployed relatively quickly and allow access to the favorable prices available to power generators in the first three years following enforcement of the Act. However, many of the projects are being delayed for a wide range of reasons including negotiating grid connection agreements with electric utilities, cable installation, and regulatory compliance and financing issues. Resolving some of these issues requires a high level of technical knowledge.

For the details of feed-in tariff policy, see the website of Agency for Natural Resources and Energy[Japanese].

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