Solar shambles

EIGHTY miles north-west of Fukushima’s hulking nuclear corpse, Yauemon Sato, a small businessman, has charged into the solar-power business. Mr Sato has rented land, hired a workforce and lined up ¥80m ($6.8m) in capital from local investors and banks. His company says it can produce electricity for about 700 households. But the local power utility is refusing to buy more than a quarter of it.

Japan set one of the world’s highest tariffs for renewable energy in 2012, as part of a bid to live without atomic power following the Fukushima disaster. Electricity companies were ordered to pay ¥42 a kilowatt-hour (kWh) to novice producers like Mr Sato. The promise of such a high guaranteed price triggered more than 1.2m applications, mostly for solar-power installations. Japan’s power utilities say they are overwhelmed and have revolted. Most have begun blocking access to the transmission grid.

Kyushu Electric, which supplies electricity to 9m customers in Japan’s sunny south, was the first to balk, in September, after 72,000 solar-power producers rushed to beat the deadline for a cut in the guaranteed tariff to ¥32 a kWh. The company says it will accept no new applications to join the grid until it has settled concerns about the reliability of supply from the new producers. The Ministry of Economy, Trade and Industry (METI) is backing the utilities, and mulling a further tariff cut.

The utilities’ objections have added to doubts about Japan’s plan to increase renewables’ share of electricity output to 20% by 2030, almost double its pre-Fukushima share. If all the projects for which METI has had applications went ahead, Japan could leave most of its nuclear stations switched off, notes Mika Ohbayashi of the Japan Renewable Energy Foundation, a think-tank. But so far just 12% of them have been installed, and much of the rest may prove uneconomic, she says, given that in less-sunny parts, solar panels’ output will be more sporadic.

The utilities say they want to avoid blackouts. Their critics say they should invest more in storage and backup technologies, so they can cope at times when solar plants are not producing enough power to meet demand. Japan’s problems with its grid are real, says Mycle Schneider, an energy consultant in Paris, but this is not enough to justify blocking all new renewable plants. The utilities are “scared to death” that the rise of so many independent producers will wreck their business models, he says. “And rightly so.”

First Solar, America’s largest maker of solar panels, has installed a big plant in Kyushu and intends to keep investing in the country. However, Jack Curtis, an executive at the firm, predicts a shake-out, and says METI should be stricter in screening out unviable projects.

Japan’s government should have anticipated the problems it is having with its drive for renewables. Germany triggered a similar stampede of small producers in 2009-12, by offering them guaranteed prices for 20 years and priority access to the grid. That has helped push clean energy’s share to nearly a quarter of Germany’s power consumption, but driven up electricity bills: subsidies cost consumers €16 billion ($21 billion) last year. And some power utilities are suing the government, saying their business has been damaged by the subsidies.

METI should have learned from Germany’s mistakes by being less generous with its guaranteed tariffs for renewables producers and by ensuring that the transmission grid was modernised to prepare for their arrival. Ideally the ministry should have created a separate grid operator, independent of the big power utilities, says Tom O’Sullivan, a consultant in Tokyo. At present the utilities own everything and have little incentive to let independents on to the system.

Japan may have to spend $60 billion over the next two decades subsidising the preferential tariffs for renewables producers, predicts Yasuyo Yamazaki, a former investment banker who heads the country’s largest solar-energy project. But he thinks this will be money well spent: since Japan switched off its nuclear plants, the cost of importing fossil fuels has soared, to $250 billion a year. Instead of tapping taxpayers for yet more money to upgrade the grid, Mr Yamazaki thinks the government has scope to mobilise Japan’s vast pool of private savings, now tied up in pension funds and low-yielding accounts, by putting the right incentives in place.

In the meantime, Mr Sato is still fuming in Fukushima. A ninth-generation sake brewer, his family business was damaged by fears about radiation after the nuclear disaster of 2011. He hopes that projects like his will help to revive the prefecture’s stricken economy. But until the dispute with the utility companies is resolved, this will not happen.