May 24, 2013

Japan's Feed-In-Tariff System for Clean Energy Mired in Regulations

The nuclear disaster in Japan two years ago ignited a push to develop a new and clean energy industry, but those efforts are being stymied by a raft of regulations.

As part of its policy goal to diversify supply, the government introduced a feed-in-tariff system last July to kick-start the market for renewable energy.

The shift was due to the reactor meltdowns that triggered the release of vast amounts of radioactive materials at the Fukushima No. 1 nuclear power plant following the March 2011 Great East Japan Earthquake and tsunami.

Electric utilities are obliged to purchase renewable energy generated by developers at fixed rates to power homes and businesses through their networks. This encompasses solar, wind and geothermal energy as well as small- and medium-scale hydraulic power and energy generated by biomass.

The price is set at a level that covers the cost of production, plus a premium.

The incentive program spans 10 to 20 years, depending on the type of energy produced and the output. The utilities are permitted to pass on the purchase cost through electricity rates.

Despite the objective of diversifying energy sources, solar power accounted for 95 percent of all purchases made in the initial stages.

Wind power, which is cheap and plentiful, is a leading source of clean power around the world, but not in Japan. One of the main hurdles facing wind power developers is a requirement that they first carry out a lengthy and complex environmental impact assessment. Without one, they cannot gain permission to erect wind turbines.

Developers of solar power are exempt from the process.

Toshio Hori, president of Green Power Investment Corp., was perplexed at the murky prospects for a company project in Tsugaru, Aomori Prefecture, on the northern tip of Japan's main Honshu island.

He said he was increasingly unsure how much longer it will take to finish up the environmental impact assessment for his proposed Wind Farm Tsugaru.

The Tokyo-based company plans to install 55 wind turbines in the city's Kizukuri district, where constant buffeting by winds has caused a forest of pine trees to stand diagonally.

Plans call for the wind farm to generate a total of 120 megawatts, which would make it the largest such facility in Japan.

But the project came to a standstill after the Aomori prefectural government and the Environment Ministry ordered dozens more environmental studies late last year and early this year.

Authorities pointed out that rare species of water fowl and butterfly may inhabit the site. Green Power Investment said it had never observed the creatures during its surveys carried out in previous months.

"We are merely following a procedure based on legal and expert opinions," an official of the prefectural government explained.

Sachihiko Harashina, a professor at Chiba University of Commerce who researches environmental impact assessments, stressed the need for starting with a streamlined process prior to carrying out a full-fledged study.

"After the initial assessment, a developer should fully discuss the project with local residents and make a short list of points that require further study," he said. "That way, a developer can make a sensible decision without having to go through the full process of detailed assessment. It is also far more efficient and cheaper."

Wind power projects with a combined capacity of 2 gigawatts across Japan are still waiting for the results of environmental impact assessments.

The ministry also told Green Power Investment it would have to relocate more than 10 wind turbines that were to be built in the southern part of the site, citing the "impact on rare species of birds and scenery."

The only viable site for relocation was rice paddies to the north.

But the company has no access to the area because of the agricultural land law, which basically prohibits the development of farmland.

A single wind turbine occupies a plot of land that is less than 20 meters square, according to Green Power Investment.

The land needed to relocate the wind turbine would take up only 1 percent of the rice paddies in question.

In the past, permission has been granted to divert agricultural land when the plots involved were small.

But doing so now is no easy matter because the Ministry of Agriculture, Forestry and Fisheries has begun to strictly enforce the law to maintain the nation's food self-sufficiency rate.

Despite Wind Farm Tsugaru's stalled environmental assessment, local residents support the project, saying it will create jobs and reinvigorate the local economy.

"I believe that wind turbines and agriculture can co-exist," said Akihiko Osanai, who heads the association of local residents.

"The central government can be more flexible," Osanai, 52, said.

Another bottleneck that is thwarting efforts to make widespread use of wind power is the limited access that generators have to regional utilities' transmission networks.

Regional utilities invite applications from wind power operators for links through a quota system.

A lottery is held to select winners. But competition is so fierce that only a handful get linkups.

When Hokkaido Electric Power Co. offered access to 200 megawatts in February last year, there were nine times more applicants than the utility accepted.

The situation is similar with other utilities.

Other alternative energy sources are also mired in an array of obstacles.

The Kiso town hall in Nagano Prefecture is keen to construct a small-scale hydraulic power station in an agricultural waterway that is 60 centimeters wide and 60 cm deep.

The town is obliged to monitor the volume of flow in the waterway for one year under a provision of the river law before it applies for permission for the power facility.

An entity commissioned by the town government now measures the flow on a daily basis.

But Katsumi Tanaka, the town mayor, questions the merit of the requirement.

"The volume cannot vary because water (drawn from the agricultural waterway for the hydraulic operation) will be later returned to the waterway," he said.

Geothermal power is also no exception in terms of having to overcome mounting hurdles despite Japan's great potential for this sort of clean energy.

Developers face a set of complex procedures to obtain a permit when plans are made to build a geothermal power plant in a natural park or hot spring resort.

As a result, there was no private investment in geothermal power in Japan during fiscal 2012.

Noting the growing momentum for renewable energy, the farm ministry established a task force in September 2011 to find a way to "strike a balance between the promotion of renewables and the conservation of farmland."

But the policy does not appear to be sufficiently flexible to meet the needs of renewable energy developers.

"Even if they are abandoned, rice fields are still categorized as farmland," said Takashi Nozu, deputy director of the Renewable Energy Policy Division at the ministry's Food Industry Affairs Bureau. "We will not approve the installation of solar panels across vast tracts of farmland."

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