A year has passed since the introduction on 1 July 2012 of the Feed-in Tariff (FIT) system, whereby electric utility companies buy electricity generated using renewable energy sources for a fixed period at a constant fixed price. This month we talked to Professor Kazuhiro Ueta of Professor and Dean of the Graduate School of Economics, Kyoto University about how Japan’s energy situation has changed since the FIT System was introduced.
Introduction of the Feed-inTariff (FIT) system
--- What changes have occurred since the FIT System was introduced in Japan last year?
July 2012 saw the launch of the total-volume FIT System—whereby electric utilities purchase from producers the total volume (as opposed to just the unused surplus) of electricity generated using renewables—and its effects have been extremely significant. About one year has passed since the system’s introduction, but in that time large-scale investment in renewables-based generation has increased.
Renewables-based energy generation is expected to grow into a primary source of power. While each individual power supply may be small, they can be linked, combined and pooled to create a large primary power supply. And what is more, that power supply will not only be large in quantitative terms, it will also provide society with a new system in a qualitative sense. Based on a decentralised network, such a system promises to make it easier to locate power supplies closer to consumers while enabling consumers to use IT to manage the system and their lifestyle more autonomously. The system will become a source of green innovation if it is linked to information and communication control technologies, and in particular those that can support a decentralised network. Smart grids are already offering a platform for the development of initiatives to build smart houses, smart communities, smart towns and smart cities.
Advantages of Introducing the FIT System
--- What implications does the introduction of FIT have for development in Asia?
The overriding advantage of renewables-based energy generation is the fact that it is free of disposal-related constraints. As the emissions of CO2 and radioactive waste during the processes of thermal and nuclear power generation demonstrate, it is often impossible to deal adequately with waste products, and increasingly this is hindering progress in power generation. That is what I mean by disposal-related constraints. Renewables-based energy generation, on the other hand, emits neither CO2 nor radioactive waste. It is worth noting in this regard that the FIT System relating to renewables-based generation was originally positioned not so much as a policy to address energy-supply issues, but more as a means to address climate change. FIT offers an institutional foundation to support low-carbon development and the creation of low-carbon societies, and this will contribute to resolving one of the key challenges in the history of human development. That challenge is how to provide the technologies to support development that emits no waste products in the Asia region, which is set to grow exponentially from now on. At the same time, markets will be created offering great new potential for Japanese businesses.
That is why the promotion of renewables-based energy generation should not only be about contributing to technologies to support an international framework for preventing global warming. Japan should also include it among its industrial policies for opening up new markets using Japan’s technological advantages.
Renewables-based energy generation also attracts attention because it changes the relationship between energy-related facilities and local communities. Traditional power generation facilities were considered necessary, but the attitude towards them was always “not in my back yard”. In the case of renewables-based generation, on the other hand, the renewable energy sources used are local natural resources. In other words, renewables-based generation and use of the power thus generated are in part about developing local natural resources so, potentially at least, these activities have a high level of compatibility with the communities in which they are located. Renewable energy is compatible with a community’s other resources and its agriculture, forestry and fisheries industries, and power generation using such energy sources can trigger new flows of resources within the local economy. In Japan’s case, if the sustainability of communities could be enhanced by generating employment and income in this way, it could contribute to resolving the troubling problems of declining local economies and deprived communities.
Outlook for Renewable Energy
--- How do you view the prospects for growth in renewable energy?
The future development of renewables-based generation is dependent on our understanding the diverse implications I have just described. The original purpose of the legislation instituting the FIT System(*1)was to encourage the use of renewable energy sources, but it also aims to use that as a means to bolster Japan’s international competitiveness, promote its industries, revitalise its local communities and contribute to the sound development of the national economy.
As I mentioned at the beginning, the system started in July 2012 has been very effective in terms of its original purposes. However, some issues of concern do remain. One is the rapid increase in solar PV power generation facilities in Hokkaido. Since grid capacity is insufficient in the area covered by the Hokkaido Electric Power Co., an unexpectedly large number of solar PV power generation facilities have been installed. We need to take care that this does not inhibit the introduction of other forms of renewables-based generation such as wind-power or geothermal. It will therefore be essential to optimise the infrastructure, primarily by strengthening the electric power network. One way to achieve this would be to enhance regional grids to support expansion in renewables-based energy generation.
Another concern with regard to FIT is the increasing burden on the Japanese public due to the surcharge that accompanies the purchase of electricity generated from renewable sources. The public burden due to the surcharge is a necessary expense in order to encourage renewables-based power generation, but we need to ensure that the amounts do not become excessive for electricity consumers. This can probably best be gauged according to the amount of renewables-based generation resulting from different surcharge levels. If relative costs and benefits are considered from a medium- to long-term perspective, technological innovation is likely to be of overriding importance.
The FIT System, in conjunction with efforts to increase tie line capacity and reform the relevant regulations, plays a central role in encouraging renewables-based generation. The system’s progress has gone largely to plan since it took effect in July 2012, but it does have its issues, as mentioned earlier. Looking ahead, we will need to maintain consistent control over the system’s development—including analysis of costs versus benefits—if we are to achieve the aims of the legislation on which FIT is based.
--- Thank you very much.
Professor Kazuhiro Ueta will give a presentation during the fifth International Forum for Sustainable Asia and the Pacific (ISAP2013) in Yokohama. He will present at the parallel session entitled “Creating New Financial Flows: Extensive Diffusion of Renewable Energy through Green Gifts” on 24 July. For further details, please refer to: //www.iges.or.jp/isap/2013/en/
*1: The Act on Special Measures Concerning the Procurement of Renewable Electric Energy by Operators of Electric Utilities: This law establishes special measures regarding the prices and periods for procurement by electrical utility companies of electricity generated using renewable sources. It reflects the fact that the use of renewable energy sources is important both to ensure a stable and appropriate supply of energy that meets economic and social needs inside and outside Japan, and to reduce environmental impact due to energy supply. Thus it is intended to encourage the use of renewable energy sources for electricity, thereby bolstering Japan’s international competitiveness, promoting its industries, revitalizing its local communities and otherwise contributing to the sound development of the national economy
About "Monthly Asian Focus: Observations on Sustainability"
Until 2010, IGES released "Top News on the Environment in Asia" on a yearly basis. For over 12 years since its establishment of IGES in 1998, "Top News" collected and organised information about environmental issues and policy trends in the region.
In January 2011, IGES launched the new web-based series "Monthly Asian Focus: Observations on Sustainability" in which leading environmental experts deliver their take on latest trends of sustainable Asia.