Japanese business heavyweights urge solar support

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Japan’s electricity system is in the throes of a major transformation. As renewable penetration surges past 20%, government leaders appear to be turning to coal. The shift of the solar PV support regime from FIT to tender is likely to cause pain to developers, insiders advise, however business leaders have urged the government to continue to back renewable deployment.

Masayoshi Son, chief executive officer of Japanese telecoms giant SoftBank and the founder of the Tokyo-based Renewable Energy Institute (REI), noted how the Fukushima nuclear accident in 2011 spurred him to promote the development of renewable energy.

“I was frightened,” he said at a symposium to mark the fifth anniversary of the founding of REI (formerly known as the Japan Renewable Energy Foundation). “If that had affected Tokyo, how many people would have lost their lives?”

Since the 2011 disaster, SoftBank’s renewables unit, SB Energy, has become one of the country’s most active developers of solar projects.

“Many people in Japan say that renewables are too expensive and unreliable,” he lamented.

Japanese policymakers need to prioritize the continued development of renewables — a point driven home by Michael Liebreich, chairman of the advisory board and founder of Bloomberg New Energy Finance (BNEF).

“In energy, policy is destiny. How you structure your markets matters, because it drives how you can finance things and drives the cost of capital,” Liebreich said.

Earlier this year, the Japanese government announced plans to potentially drop its current feed-in tariff (FIT) to support solar development in favor of an auction system, likely to be introduced from the start of the next fiscal year in April 2017.

“The impact of moving from a FIT to reverse auctions — what we see is that immediately, when you do that, it’s very painful for developers of solar projects,” Liebreich said.

“It drives down the cost immediately by about 30% and within a year or two, by 50% or 60%, because the market starts to compete on price. And we know what happens when the market starts to compete on price, they drive the prices down.”

However, Tokyo has recently doubled down on its plans to continue to promote the development of coal-fired generating plants in the years to come, despite growing momentum in the wake of the climate-change agreement in Paris last autumn to phase out the use of fossil fuels.

“If you look at what Japan has been doing — you have a solar boom, it’s coming to an end, and the plans now rely on coal,” said Liebreich. “Think about the future, think about the mix — that miracle that is required to shift onto a 2-degree path — Japan is one of the countries that has the most thinking to do.”

Calls for increased ambition

Tomas Kåberger, chair of the executive board of REI, hailed Japan’s efforts to develop solar over the past four to five years. But he also urged the Japanese government — which has pledged that renewables will account for 22% to 24% of the national energy mix by 2030 — to be more ambitious about the development of clean energy.

“We’re around 20% already in Japan,” he said. “And I think we can quite clearly say that the official target of 22-24% can be done much faster than in 14 years.”

In September 2014, Kyushu Electric Power temporarily stopped accepting grid-access applications from developers of solar and wind projects, arguing that the rapid development of PV projects had compromised the stability of its grid network.

Under rules that Japan’s Ministry of Economy, Trade and Industry (METI) introduced in early 2015 in response to complaints by Kyushu Electric and other utilities, power companies have been granted the right to curtail renewables-generated electricity for up to 360 hours per year before they have to compensate owners of projects.

Kåberger, the former director general of the Swedish Energy Agency, acknowledged that the development of renewables poses a legitimate threat to utilities.

“Some incumbent utilities, when defending their interests, are using arguments about the technical difficulties in the electricity grid. Japan in this respect is far behind Europe,” he said.

“Problems like ‘balancing the electricity system’ are extremely important — even necessary for an electricity grid to function. But we know from European experience that it is not particularly difficult and not particularly expensive. It can be solved. And we must not let such arguments delay developments that are desirable for the country and the world.”

Amory Lovins, chief scientist and chairman emeritus of the Rocky Mountain Institute, noted the importance of taking a long-term view on policy.

“The technology keeps changing, actually on both sides. Transmission gets cheaper, renewables get cheaper, efficiency gets cheaper,” Lovins said. “And this is a horse race — but we must bet not on a particular horse, but on the race.”

Asia Super Grid

Many of the speakers at the REI conference pressed the need to connect the countries of Northeast Asia — Japan, South Korea, China, Mongolia and Russia — in a regional, meshed grid network to ensure long-term energy security.

SoftBank’s Son has longed promoted the concept of an “Asian super grid.” In April, Son announced plans to work with Chinese utility State Grid, Korea Electric Power Co. (Kepco) and Russian power company Rosseti to jointly conduct feasibility studies on his proposal.

“The Asia Super Grid was called a ‘crazy’ idea… not economically or politically viable,” Son said, adding that he thought it was “miraculous” when Liu Zhenya, former chairman of Chinese utility State Grid and the current chairman of the Global Energy Interconnection Development and Cooperation Organization (GEIDCO), which has been established to push the super grid proposal.

“In the computer industry, all information and communications is already connected under the sea, all over the world. So why not connect electricity under the sea, all over the world?”

While it remains unclear whether a regional grid network will ever be set up — given the enormous political and economic hurdles — the region’s powers appear to be slowly warming to the idea.

Oleg Budargin, director general and chairman of the board at Russian power company Rosseti, claimed that Russian President Vladimir Putin has praised the super grid concept.

“The shift to renewables means that integration is necessary,” Budargin said.

KEPCO President Hwan-Eik Cho also noted that regional grids have already been established in Europe and North America.

“Only Asia is not connected, or integrated,” Cho said. “There needs to be a super grid. We need to think about integration.” GEIDCO Chairman Liu agreed.

“Japan’s energy sector is at a crossroads — the country is over-reliant on fossil-fuel imports,” he said. “This is the time to make a decision.”