In an effort to stop using nuclear power as an electricity source, Japan has implemented generous feed-in tariffs (FITs) on renewable energy, including solar energy. The announcement renewed optimism towards solar electricity, prompting share prices of solar energy companies such as First Solar, Yingli and Kyocera to rally. According to Bloomberg the incentive scheme could generate 9.6 billion dollars of solar installations in Japan.
The recent initiative to produce clean and safe energy is starting from a low base. Today, renewable energy sources (except for hydro) account for only about 1% of electricity production in Japan, according to a Reuters' report. While the country has enormous potential in renewable sectors such as wind, solar and geothermal, so far the bulk of its electricity has been produced by nuclear and fossil fuel plants.
Reuters described Japan's new policy in a recent article saying that: "The FIT scheme requires Japanese utilities to buy electricity from renewable sources such as solar, wind and geothermal at pre-set premiums for up to 20 years". The feed-in tariffs will be more than double the size of those in Germany, which has the most solar installations worldwide. Bloomberg reports that while Japan is not a leader in solar electricity production, the new policy could change that by adding 3.2 gigawatts to Japan's solar capacity. This is equivalent to three nuclear power reactors.
The subsidies, in addition to expectations that China and Saudi Arabia might put in place similar schemes, prompted a rise in solar stock prices. This provided a measure of relief to the industry, which has been rocked by predictions that European incentives would soon decline. However, many believe that the rebound was misguided. A large number of foreign solar panel manufacturers are barred from the market due to Japan's strict regulations against cadmium. In addition, companies that are already operating in Japan have big advantage over newcomers. Some analysts forecast that these two factors will limit growth to domestic solar companies.
Entrepreneurs such as Masayoshi Son, the Japanese telecommunications billionaire who introduced the iPhone to his country, have already made plans to take advantage of the government measures. According to the Wall Street Journal, Son intends to construct 10 large solar power plants and has a "crazy, crazy idea" to connect Japan to other Asian nations in a "super grid". He envisions a system where Japan would import renewable energy from countries such as Mongolia. His actions are widely supported by local governments and represent a national push for renewable energy
In the wake of the Fukushima Daiichi disaster, Japan's new FIT scheme could help eliminate its energy shortages while reassuring concerned solar energy investor. Though government support for renewable technologies has been expected in Japan since the country closed its nuclear plants, the incentive scheme's size was unprecedented and surprising. This plan is poised to make Japan the second largest solar electricity producer in the world, overtaking countries such as Italy and the US. However, this growth will come at a steep price. Reuters reports that the policy's cost "will be passed on to consumers through higher bills".
