Renewable Energy Policy Outside the United States
Part 6: Japan—The World's Most Efficient Economy |
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With no oil or natural gas, and very little coal, Japan has historically depended on imported fuels to sustain its economy. After the oil shocks of the 1970s and 1980s, the nation embarked on focused and intensive programs to increase the security and diversity of its energy supplies. One component of these efforts was to increase the efficiency with which energy is used. Another element of Japan's efforts to reduce energy dependence was the development of new and alternative sources of energy, such as solar and wind power, first under Project Sunshine. Although this program funded a wide array of R&D both inside and outside Japan, the government made relatively little effort to deploy the resulting technologies. Indeed, until 1997—98, Japan had virtually no policies aimed explicitly at encouraging the adoption of renewable energy. Instead, the government focused on what it termed "promotion," which was effectively mere encouragement, if that. Of all the world's industrial nations, Japan's task in meeting targets set in the Kyoto Protocol in 1997 are perhaps the most formidable. Its economy is stagnant while its carbon emissions per unit of industrial output are already the world's lowest, yet the government has committed to a 6% reduction in greenhouse gases, which is only a 1% smaller reduction than that proposed for the United States.27 Utility companies, the nuclear industry, and MITI backed the inclusion of nuclear power as a climate change mitigation option in the recent Global Warming Prevention Law.28 Perhaps because of the challenge of the climate change situation, Japan is still quite serious about maintaining and expanding the nuclear option, both to alleviate energy dependence and to reduce greenhouse gas emissions. The Japanese government's budget for nuclear power in fiscal year 1999 is 477 billion yen ($4.03 billion), while the budget for renewables is 87.5 billion yen ($739 million).29 The Global Warming Prevention Law, passed in October of 1998, sets the stabilization of greenhouse gas emissions at 1990 levels as a goal, and promotes the addition of twenty new nuclear power plants in Japan as one way to achieve the goal. Clearly, nuclear power is a major component of Japan's climate change strategy. However, signs of increased citizen activism in energy siting decisionmaking in Japan may result in fewer nuclear plants than the Japanese government is hoping for. Plebiscites such as one in the town of Maki, whose citizens voted against a 825-MW nuclear plant in 1996, portend greater popular focus on nuclear safety and waste issues, and greater awareness of other energy options that offer energy independence—such as renewables.30 The Roles of MITI and NEDO To understand Japan's current policy and its likely future direction, it is helpful to know something of the government's organization and its relationship to domestic industries. The administrative agency charged with implementing national energy policy is the Ministry of International Trade and Industry (MITI), easily the most influential of Japan's government units. MITI implements its energy-related responsibilities in large part through the New Energy and Industrial Technology Development Organization (NEDO). This quasi-governmental agency receives its funding from the government. Its staff, however, consists of government and private-sector employees on secondment who rotate through for two- to three-year tours. Thus a NEDO project might fall under the supervision of a MITI executive in one year and an executive of the Tokyo Electric Power Company the next. This has fostered an informal collaborative network throughout government and industry. Indeed, the interrelationship between different manufacturers, users, and the government is the typical way of promoting Japanese learning projects, according to R. Anahara, a retired senior executive of Fuji Electric. NEDO is responsible for developing renewable energy technologies under Project Sunshine. Most of Japan's efforts have focused on solar power, especially photovoltaics. In its 1997 budget, for example, MITI allocated 11.1 billion yen (about $94 million) for the promotion of PVs, compared with 460 million yen (about $3.9 million) for development of wind power. Ten Thousand Roofs: An Early Deployment Program Until September 1997, the primary affirmative action taken to encourage the actual adoption of renewable energy technology had been the Ten Thousand Roofs Program.31 Under this, the government paid one-third of the installation cost for household roof—mounted PV panels; funds for the program were collected through an electricity surcharge. Although electricity generated by PVs currently costs about 65—80 yen (55¢-68¢) per kilowatt-hour, compared with about 20—30 yen (17¢-25¢) for grid-provided electricity, the roof program provided no compensation for this difference. But local electric utilities had to purchase excess power generated by the PV systems at the retail price of electricity. In addition, businesses that installed new technologies (such as wind turbines) could apply to NEDO for a grant to subsidize the project under a program funded at 1.12 billion yen ($9.5 million). These programs have since been overtaken by new measures, but the changes—and the policy that has caused their creation—must be considered in the context of the government-industry collaboration in such matters that is uniquely Japanese. One noteworthy example of this unusual collaboration is the Rokko Island Test Center, located on an artificial island near Kobe, which currently focuses on potential safety and reliability issues raised by dispersed generating systems and the quality of the power that such systems generate. The center was designed by the Kansai Electric Power Company (KEPCO), Japan's second largest utility, at the request of NEDO. NEDO has now assumed funding responsibility for Rokko Island; while KEPCO owns the island itself, the government owns the buildings and equipment there. New Policies to Encourage Renewable Energy Using the same public-private collaborative approach that typifies NEDO and MITI, Japan is now beginning to deploy renewable technologies under the Law on Special Measures to Promote Use of New Energies, sometimes called the New Energy Law. Enacted in September 1997, the law and its underlying rules establish a mix of subsidies and other policies designed to promote adoption of wind, solar, ocean, hydro, geothermal, and waste energy in Japan. The goal is to provide 3.1% of Japan's primary energy supply from renewable resources by 2010 versus 2.1% in 1996 (See Table 2).
The law does not require the nation's electricity suppliers to purchase a minimum amount of renewably generated electricity, nor does it establish a single fixed price. The government "requests" that suppliers buy solar, wind, and other renewables-based electricity. They "have an obligation to make efforts to develop the environment for promoting the use of new energy by other energy users," according to one official. Thus, in response to an April 1998 "general request" from MITI, electricity suppliers have voluntarily committed themselves to purchase renewably derived electricity when it is offered. Depending on the actual growth rate of renewables, this component of Japanese renewables policy may need to be revised in the future: suppliers are paying considerably higher prices than their in-house generating costs for outside power, and their voluntary cooperation may reach limits as the amount of renewables-based electricity increases.32 When suppliers do buy renewably generated electricity, they must pay the contract, or retail, price applicable to that class of users that is the source of the renewables-based electricity. This varies according to the quantity of electricity purchased, so larger consumers—factories, for example—pay a lower price per kilowatt-hour purchased, and therefore receive this same lower price when they sell. In the case of PVs, which are typically installed on residential rooftops, the buy/sell price is about 24 yen (20¢) per kilowatt-hour. Contracts for wind-derived electricity can be either long-term or short-term, at the option of the generator. Suppliers are required to enter into a contract for at least 15 years if the generator requests, in which case the price is 11—12 yen (about 9.7¢) per kilowatt-hour. Starting in April 1998, private electricity companies were asked by MITI to enter into contracts for the purchase of wind-derived electricity. However, the generator can opt for a one-year agreement at a price of 16 yen (14¢). Electricity suppliers are not required to renew these contracts. Although the long-term purchase prices are established separately by each of the 12 electricity suppliers, they all are within the range of 11—12 yen (9.7¢) per kWh. In response to these incentives, new wind capacity is already being constructed, principally using Danish wind turbines. The official target for 2010 is 150 MW. This figure is somewhat lower than the goals that some other nations are setting (and reaching), but Japan's wind potential is limited because areas with wind potential are isolated from population and industrial centers, and land prices near such centers are expensive. At least one author in Japan, however, has called for substantially higher wind energy targets: Minoru Nagai has proposed to the Japanese government that the goal for wind could feasibly be 3000 MW by 2010, based on a wind survey conducted by NEDO.33 Building on the success of the Ten Thousand Roofs program, Japan's most ambitious new goal is to install 5,000 megawatts of solar PV capacity by 2010, roughly 80% of which would be from residential rooftop systems. MITI began its support for residential PV systems in fiscal 1994, when subsidies covered 50% of the cost of PV modules, peripheral equipment, distribution lines, and installation work. The 1994 budget was 2 billion yen ($20.3 million); by 1998 it had reached 14.7 billion yen (about $124 million). Japan has a long way to go to reach the 5,000 MW of PV goal (Japan's PV production was 49.2 MW in 1998) but the market certainly is growing: production was only 21.2 MW in 1996. It is important that the government has boldly set a high target as part of its subsidy program-this gives the PV industry a clear signal about what the government seeks to achieve, and it is also a strong statement of political will. This goal may or may not be reached, but along with the increasing budget for PVs, it reflects the level of commitment Japan has to the technology. By 1997, the subsidy program for a large number of PV installations was aimed at reducing costs by achieving mass production of PV systems. Subsidies are available for private residential housing, apartment buildings, and municipalities. Homeowners seeking the subsidy apply to the New Energy Foundation, a government-supported agency. Applicants qualify for the grant "semi-automatically"—that is, if they satisfy certain requirements (such as approved grid connection), they receive one-third of the costs of purchase and installation. The current program budget will pay for roughly 10,000 residential installations. The subsidies for wind power, cogeneration, waste power, and other "new energies" are also semi-automatic, although the funds are dispensed by NEDO, not the New Energy Foundation. The maximum subsidy is one-third of the total installation cost, excluding land costs. Local governments are eligible for comparable subsidies under a parallel program also administered by NEDO. |
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Renewable Energy Policy Outside the United States |
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