Just 110 MW of onshore wind capacity, which commands a FIT of JPY 23/kWh ($0.19/kWh), was deployed between 2011 and 2014, taking cumulative capacity to just 2.7 GW. This is largely due to the onerous permitting process for wind projects, for which environmental permitting alone up to two years. Overall, project lead times are between two and seven years, some of the longest in the world. In addition, Japan’s difficult topography (much of the country is mountainous and volcanic) and densely populated urban spaces, make suitable sites difficult to source.
Offshore wind, therefore, has been touted as a possible alternative to land-based wind. But, while the technology has benefitted from a new FIT tariff of JPY 36/kW ($0.29/kWh) in 2014, as well as government funding for two floating demonstration projects in Fukushima and Nagasaki, is still yet to generate a single MWh commercially in Japan. This is mostly due to engineering constraints – the ocean surrounding the archipelago is deep, which limits the opportunity for fixed-foundation turbines, as well as significantly raising the costs.
Geothermal power, which experts believe could satisfy a third of Japan’s energy needs, has stalled at 500 MW of cumulative installed capacity. The FIT level for geothermal is comparable to the solar FIT in generosity, set at JPY 27.3/kWh ($0.22/kWh) for installations above 15 MW and JPY 42/kW ($0.34/kWh) for installations below that level. Again, siting restrictions are the main barrier as 80% of Japan’s geothermal resource is located in national parks, subject to strict rules on borehole drilling. However, these rules were relaxed significantly in August, and developers are now allowed to drill in certain areas on the condition that they use diagonal drilling techniques.
Biomass, which commands FIT levels of JPY 13.65-33.60/kWh ($0.11-0.27/kWh) for wood-fired biomass and JPY 40.95/kWh ($0.33/kWh) for biogas plants, has seen cumulative installed capacity reach just 1.5 GW.
Grid problems
Overall, however, the biggest non-economic barrier for renewables of is certainly the grid, which in Japan is particularly un-suited for a sudden uptake in variable sources of renewables. While the grid stretches across the length and breadth of the archipelago, it is essentially in two sections, which operate on different frequencies, a legacy of infrastructure procurement being carried out by two separate entities in the 19th century. Eastern Japan, including Tokyo and Fukushima, operates on 50 Hz, while western Japan, including Kyoto and Osaka, operates on 60 Hz. The two grids are connected by three converter stations. However, these have a combined capacity of just 1GW, meaning that significant interconnection between the two is impossible. For grid operators with a high penetration of variable renewables, the ability to transport power over distance is essential for efficient operation.
In addition, renewable power generators face the prospect of operating in a regulatory environment which is framed for the benefit of the EPCOs, rather than independent power producers (IPPs). Under the current regime, the EPCOs own all the transmission and distribution infrastructure, and until recently their use of this power was completely unregulated. In practice this has meant that the IPPs have either had their access to the grid restricted (as solar power generators found last year), or they are encumbered with very high grid access charges which may render their projects uneconomic.
However, Japan’s government has been taking steps to loosen the grip of the EPCOs and has at last embarked on a series of market reforms which, the IEA notes in its latest industry forecast, could change the game for renewable generators in Japan. The first step, taken earlier this year, saw a transmission services regulator begin work monitoring access and charges to the grid. This will be followed in spring 2016 by full competition in the residential retail market and in spring 2020 by the unbundling of the transmission and distribution network owned by the EPCOs.
In theory, this should enable the IPPs such as wind power and solar producers better and more economic access to the grid. However, some experts are sceptical of the effect that market liberalisation will have on the business environment for the IPPs, noting that the EPCOs remain extremely powerful force in Japan.
“You’re going to have a whole bunch of new players,” says Andrew DeWit, a professor in economics at Tokyo’s Rikkyo University. “Some of them are going to have gas fired power assets, some will be thinking about wind farms or working in the wholesale market and so on and so forth, but you still have same problem. Are the vested interests [at the EPCOs] going to be able to influence decision-making on the transmission infrastructure? If so, that will effectively exclude these new entrants, who will then die.”
Hope for the future
However, this does not necessarily mean that renewables growth is about to die back. Despite on-going cuts to the FIT, the IEA rates Japan’s policy environment for renewables as “strong” and the current FIT regime as “generous”. In addition, the need for new, home-grown generation capacity is likely to remain strong, especially if the nuclear re-start does not go as planned. Indeed, a recent report by BMI suggested that Japan’s 20-22% power mix goal for nuclear is unattainable, and that even 10% by 2024 would be a stretch. Indeed, this possibility of this scenario may even be dawning on the government: industry sources tell Renewable Energy Focus that in recent months METI has been more receptive to the industry and discussions have become more productive. Furthermore, this renewed appetite for renewables can only be aided by the inevitable international pressure that will come Japan’s way in the wake of the COP21 negotiations in Paris in December.
Overall, the renewables industry may be able to afford some cautious optimism. According to IEA projections, Japan’s renewable energy capacity (including hydro) will grow to 115.5 GW by 2020, up from 77.3GW in 2014, with the majority of the growth coming from solar. The IEA estimates that solar will exceed its 2030 solar target early, reaching 59.3GW 2020 and possibly 69.3GW if Tokyo succeeds in its quest to liberalise the market in favour of the IPPs and build out the grid.
The picture is less rosy for onshore wind, which is set to remain impeded by land restrictions and permitting issues and will see growth of 1.1GW to 2020, to 3.8 GW, the IEA says. Offshore wind growth will depend on Japan’s success commercialising and rolling out floating turbine technology: the IEA estimates that around 400MW will be in operation by 2020. Bioenergy will grow slightly by 300MW to 1.8GW by 2020, while large-scale geothermal is unlikely to progress significantly. So while optimism may be the order of the day – there is some way to go yet.
ABOUT THE AUTHOR
Rachel Parkes is a freelance journalist and copywriter, with expertise in the Energy and Environment fields. She is a long-time contributor to Renewable Energy Focus magazine.