Japan Approves Solar Power Tariff Cut, Sets Offshore Wind

Mar 25, 2014 8:42 am ET

(Updates with analyst comment in third paragraph.)

March 25 (Bloomberg) -- Japan approved a cut in tariffs for solar power as a building boom meant the technology made up 97 percent of new renewable capacity since it offered incentives.

The country gave final approval for the 11 percent cut to 32 yen (31 cents) a kilowatt-hour for the 20 years from the fiscal year starting April and offered 36 yen for offshore wind, the Ministry of Economy, Trade and Industry said in a statement.

“We expect the solar boom to continue for at least the next two years” after the cut, Takehiro Kawahara, an analyst at Bloomberg New Energy Finance, said by e-mail. Some projects approved under the prior rates haven’t yet started up, he said.

The ministry plans a six-month deadline for developers to secure land and equipment after gaining approvals in the wake of a probe that found hundreds without machinery or sites, said Keisuke Murakami, a ministry official in charge of clean energy. The government plans to introduce those changes next month after a public consultation, Murakami told reporters today.

Among other tariffs, small hydropower plants will get 14 yen to 34 yen a kilowatt-hour under the plans, depending on size and whether they use current waterways. Such rates may help cut Japan’s bias in renewables toward solar. The feed-in tariffs, first introduced in July 2012, are 22 yen for onshore wind.

Clean Energy

“Other types of clean energy have not increased,” said Mika Ohbayashi, a director at the Japan Renewable Energy Foundation. “That means feed-in tariffs are not enough.” Measures like better grid links are also needed, she said.

The new tariffs will be applied for projects approved in fiscal 2014 and passed onto consumers as surcharges. The new surcharge, applied from May, will rise to 0.75 yen a kilowatt- hour from 0.35 yen now as renewable capacity expands.

Tariffs for geothermal power will be unchanged from fiscal 2013 at 26 yen a kilowatt-hour for 15 years at plants with at least capacity of 15,000 kilowatts. Smaller plants get 40 yen.

Biomass rates will be also be kept at 13 yen to 39 yen a kilowatt-hour for 20 years, depending on their fuel types. Feed- in rates were based on recommendations by a panel this month.

Sales tax, which will be increased in Japan by 3 percentage points to 8 percent on April 1, will be added to each rate.