Supercharging Green Energy in Japan
With most of Japan’s nuclear reactors sitting idle, foreign and domestic developers are working to give renewable energy a boost.
The countryside in and around Mito City, around 100 kilometers northeast of Tokyo, is dotted with remnants of Japan’s economic boom—and eventual bust—of the late 1980s: underused golf courses. But a number of these symbols of Japan’s bubble years now represent the country’s shift to renewable sources of energy.
Located off a road lined by rice paddies and small construction companies in Mito’s Yatsucho area is the 36-megawatt (MW) Mito Solar Power Plant. An ornate gate, built in a traditional Japanese style with a tiled roof, sits at the entrance.
Inside the barbed-wire fencing, the rolling, 87-hectare site, where duffers once teed off, is now covered with more than 138,000 solar modules in roughly a dozen irregularly shaped clusters. Even in winter, heat shimmers over the panels—tilted at 10 degrees to best catch the sunlight—that stretch into the distance like the plates of a giant metallic armadillo.
The electricity produced here, which feeds into Tokyo Electric Power (TEPCO)-owned overhead power lines, is enough to power more than 8,700 households. That represents an annual savings of at least 25,000 tons of carbon dioxide emissions from burning fossil fuels.
“The Japanese don’t want solar or wind farms to replace traditional industries like agriculture in order to produce energy, but local communities are benefitting from taxes and construction associated with renewable energy projects,” says Member Adam Ballin, representative director of Nippon Renewable Energy, which built the Mito solar farm. “Getting that community support is by far and away the most important thing you can do in this business.”
Set up in 2013, Nippon Renewable Energy has 32 solar farms in nine prefectures in Japan and plans to eventually generate 630MW of power. One reason for the startup’s rapid growth is its capital pool of about $1 billion and backing from a Singapore-based investment fund.
“In Japan, everything takes longer than you generally expect. In the Philippines, we’ll build a 120-megawatt project in the space of seven months, whereas a 38-megawatt project here would take two years,” says Ballin, a founding partner of the Singapore fund. “It takes more time to get your permits here, but you know what you have to do, and there’s no corruption at all.”
Japan’s burgeoning solar industry was born from crisis. The 9.0-magnitude earthquake that struck Japan six years ago did far more than devastate the land and its people. The subsequent meltdowns at the Fukushima Daiichi nuclear power plant prompted a suspension of operations at all nuclear plants across the country, which once met about 30 percent of Japan’s energy needs.
Due to public opposition, legal actions and increased government scrutiny, only three of Japan’s 42 commercial nuclear reactors are in operation. Without nuclear power, Japan’s energy self-sufficiency rate dropped to just 6 percent, according to the Ministry of Economy, Trade and Industry (METI). Japan has had to import more fossil fuels, while its CO2 emissions in fiscal 2013 totaled nearly 1.4 billion tons, the largest amount since comparable data was first compiled in 1990.
Meanwhile, electricity costs remain high. In fiscal 2015, prices for LNG (liquefied natural gas) and coal fell 37 percent and 19 percent, respectively, yet the cost of retail electricity in Japan declined only 2 percent, according to the US Energy Information Administration.
The Fukushima disaster and the low energy self-sufficiency rate proved to be catalysts for government discussions on renewable energy. Under a long-term strategy, nuclear power will supply up to 22 percent of Japan’s electricity needs by fiscal 2030, while renewables, consisting of hydroelectric, solar, biomass, wind and geothermal power, will account for around 22 percent. The remainder of the energy “pie” will be made up of natural gas, oil and coal.
“Solar energy has the biggest potential of all the renewables,” says Takeo Kikkawa, a Tokyo University of Science professor and a member of the advisory panel when the energy mix was decided. “The biggest challenge to solar and wind power is inadequate grid connections, but I see three possible solutions: renewables using grids from decommissioned nuclear plants; eliminating grids through smart communities or ones based on hydrogen; or utilities building the required grids.”
In 2012, the government introduced a feed-in tariff system that compels utilities like TEPCO to buy electricity at above-market rates from solar, wind, biomass and certain hydropower stations. The added costs are picked up by the consumer. With more than 500 solar projects of at least 2MW either in operation or under construction, the renewable share of the nation’s energy mix has been pushed up to about 15 percent.
But there are significant challenges to meeting the government goal of more than 20 percent: the feed-in tariff rate has been falling, the number of approved applications for solar projects over 1 megawatt peaked in 2014, and solar installations appear to be decreasing, according to Bloomberg New Energy Finance.
“I think METI has done a great job in initiating the renewable energy market, but there have been issues, such as the finance sector not maturing quickly enough to provide liquidity,” says Member Roland Thompson, founder and CEO of Austvent, an adviser in the renewable energy sector. “I think there’s such a titanic shift going on in the Japanese electricity market—which has the market size of $150 billion—including the legal unbundling of generation, transmission and distribution, and the retail electricity liberalization, that the next five years here are going to be fascinating.”
Many players in the industry share Thompson’s view. One is Pacifico Energy, a Tokyo-based startup with heavyweight backers in the United States. It is building what will become the largest solar farm in Japan. Located in Okayama, the plant will have a capacity of 257 megawatts.
“Development is a very risky business. You can invest a lot of money and have zero to show for it,” says Nate Franklin, Pacifico’s representative director. “We were very well funded to start and we could make some bets on projects, like acquiring land before we got the rights to develop it.”
Pacifico has 500 megawatts of projects in development, including three solar farms in operation in Okayama and Miyagi prefectures and one being built in Miyazaki. Although hardware costs have dropped by almost a third over the past three years, the main obstacles for the sector are land scarcity and ownership issues.
“If you look at a land ownership map in Japan, there are so many owners that it usually looks like a fractured windshield,” says Franklin, a Club Member. “We only do big projects, so we search for one piece of land owned by few people to speed up negotiations for acquisitions.”
In addition, Japan’s traditional utilities are struggling to cope with these new sources of renewable power that feed into their grids. Experts say there needs to be more investment in transmission lines to prevent problems like curtailments, clauses that allow utilities to suspend purchases of renewable power under certain conditions.
“The feed-in tariff program was great to kick-start renewable energy, but what it didn’t do was deal with the fact that independent power production, whether renewable or not, presents challenges to incumbent utilities,” says Member Mark Anderson, executive vice president of Tokyo-based wind power developer Green Power Investment. “In the US, independent power generation is 30 to 40 years old.”
Partnered with the American independent power company Pattern Energy, Green Power is set to launch a 33MW wind station in Kochi Prefecture next year, as part of a 20-year power purchase deal with Shikoku Electric Power.
“Although things are slower in Japan, there’s no question in my mind about where renewables are going,” Anderson says. “It just makes so much sense, particularly for an island country like Japan that has no fossil resources. On a personal level, it also feels good to be doing something that can help the world.”
Words: Tim Hornyak
