Overview of Renewable Energy Support Policy in Japan

H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 1 Overview of Renewable Energy Support Policy in Japan

Dr.Hiroshi Asano Senior Research Scientist Central Research Institute of Electric Power Industry and Research Fellow, Lecturer, the University of Tokyo

1. Current status and future targets of RE in Japan 2. Various Renewable Energy Support Scheme 3. RPS 4. Summary and remaining issues

Acknowledgement: I appreciate cooperation from Dr.Tagashira and Mr.Nishio, CRIEPI. H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 2 Share of Renewable Energy Generation in Total Generation Country % of RES in total generation Japan 10.0 US 9.3 Germany 11.2 UK 4.6 Italy 16.5 Spain 17.2

IEA, Energy balances of OECD countries, 2005-2006 H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 3 Costs of RES-E and electricity from conventional power plants (1 USD=100 yen) 60

30 yen/kWh 20

0 PV Wind MSW Biomass Hydro Nuclear LNG H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 4 ◆Wind power: 1680 MW in December 2007 Wind power is favorable in Hokkaido Hokkaido, Tohoku and Kyushu. Tohoku ◆PV: 1920 MW in March 2008 Hokuriku Outcome of various support Chugoku mechanism Tokyo Chubu Kansai Kyushu Shikoku

Okinawa H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 5

Change in production costs and accumulated capacity of PV

250 80

70 200

60 Cost(yen/kWh)

50 150 Off-grid 40 Grid- 100 connected 30 Capacity(10MW) 20 50 10

0 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Sources: NEF and IEA-PVPS H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 6

Generating output by fuel type in Japan: 10 year supply plan (1001.9 TWh) (1041.3 TWh) (1083.8 TWh)

Nuclear

Hydro

Coal

L N G

Geothermal New energy

Oil

2006 2011 2016 H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 7 Electricity production by sources towards 2030

2005 2010 2020 2030 Total Electricity(TWh) 984.5 1013.1 1005.0 890.8 LNG 233.9 251.2 201.3 146.3 Coal 252.9 221.8 200.6 148.1 Oil 107.2 65.0 56.0 38.9 Nuclear 304.8 366.4 437.4 437.4 Hydro 81.3 95.4 84.6 85.6 Geothermal 3.2 3.2 3.3 3.3 Others(PV,Wind,MSW,etc) 5.6 10.2 21.7 31.2 Unknown -4.4 0.0 0.0 0.0 Only electricity fed into the grid H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 8

Targets of RES in Governmental Energy Outlook in 2008

Fiscal Year 2005 2010 2020 2030 remarks

104kl of 104kl of 104kl of 104kl of crude oil MW crude oil MW crude oil crude oil equivalent equivalent equivalent equivalent

2007:191 PV 35 1422 118 4820 350 1300 9(MW) 2007:167 Wind power 44 1078 134 3000 200 269 5(MW) Biomass (+ 252 2100 586 4500 393 494 Waste) power Biomass heat 142 308 330 423 Others 687 764 763 716 Total 1160 1910 2036 3202 Others include solar thermal, black liquel, waste heat, etc. H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 9 Overview of Utility Based Financial Mechanisms that Support Renewable Energy in Japan

 Utility based voluntary buy-back rate scheme from 1992: surplus electricity generated at end-users.  standard offer contracts: historically for large wind power generators  RPS （Renewables Portfolio Standard）  Green power fund from 2000  Green certificates from 2001; Japan Natural Energy Company Limited.

 Complimentary with the governmental support schemes – Subsidy for installation – RPS – Investment tax credits – Low rate loan H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 10 Installation Cost Reduction and Subsidy for PV

◆Revival of subsidy from FY2008 (Jan. 2009) ◆70 thousand JPY/kW by the METI 120 100 Installation cost ◆Additional subsidy by 80 local government: e.g. Installation cost for 60 Toky o generator 40 Subsidy 20

Unit Cost (10^4 JPY/kW) (10^4 Cost Unit 0 FY1997 FY1999 FY2001 FY2003 FY2005 FY2007 FY2009

◆10 ◆Ref. Exchange rate: 1 Japanese Yen (JPY) = 0.90 US cents = 0.74 Euro cents (May 2004) H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 11 Support Policy （1）  New energy is promoted by the government; by definition. Not competitive with conventional energy technologies.  Support for R&D ：the “Sunshine Project” of New Energy Development Organization (NEDO) from 1985.  Subsidy, Low rate loan, tax credits for installation of RE – ＰＶ：New Energy Fund(NEF)’s subsidy program for residential PV until FY 2005. – Some local governments provide subsidy to PV and EE appliance such as HP water heater. H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 12 Support Policy（２）  Voluntary buy back rate for green power – By technology: for PV the same rate with the purchased power from the local utility – optional TOU rate: peak , off-peak period – PV： 23 JPY/kWh for standard flat rate, 31 JPY/kWh for TOD rate  RPS（Renewables Portfolio Standard）  Voluntary green power programs – Utility base green fund – Green Power Fund: local NPO, wind in Hokkaido, PV in Yokohama H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 13

Proposed new regulatory buy-back tariffs for PV

 Transform the current voluntary buy-back rate scheme to regulatory buy-back tariffs regulated by the Ministry of Economy, Trade and Industry (METI) under discussion.  METI will submit a new law called by “Law on promoting non-fossil energy sources and efficient use of fossil energy sources by energy suppliers” to the Diet.  Not feed-in tariff. Only surplus electricity is qualified.  with favorable rate, say, 0.5$/kWh.  Additional cost for customers : Less than US$1 per month estimated  Decreasing rate level in years H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 14 Renewables portfolio standard in Japan  Electricity retailers are required to source a certain percentage of their total electricity from eligible RES every fiscal year.  Trade of RES-E certificates  Banking and borrowing. Maximum certificate price = 11 JPY/kWh.  It has been implemented since April 2003  Liable electricity retailers – Thirty retailers must meet targets in 2008 – Ten utilities incur the most of total amount of obligation. H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 15 Eligible sources of the RPS  Eligible sources: – PV – wind – biomass including municipal solid waste combustion (estimated electricity only from biomass components) – small–scale hydro(<1MW) – geothermal(only advanced technologies) ・All existing facilities are included. ・Self consumption is ineligible.  Issuing unit of credits= 1MWh H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 16 Changes in obligation levels of RPS

8 TWh

0 FY 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 17 Achievements to date http://www.rps.go.jp/RPS/new-contents/top/joholink-kiroku.html

6 Hybrid Geothermal 5 Biomass 4 Small-scale hydro

TWh PV 3 Wind 2 Obligation

0 2003 2004 2005 2006 2007 ◆Source: DTI H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 18

Issues of RES-E in Japan -PV-

 Japan had been a leader in the world in terms of PV manufacturing and installation.  Who bears following costs related to the installation of PV facilities? – Balancing cost caused by intermittent generation – Cost of reinforcing the additional capacity of the grid  Continuation of voluntary net metering system by utilities – Utilities have a right to stop purchasing electricity from PV at any time.  So regulatory buy-back rate systems? H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 19 Summary

 Feed in tariff should be evaluated from the cost- effectiveness including incentives for large cost reduction.  Japan has adapted policy mix for RE historically.  Wind power and biomass energy have technical constraints to supply energy. Not good natural conditions. Environmental regulation of land use, e.g. National Parks  Coordination among manufactures, housing makers, builders, utilities , financial institutes and government is key. H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 20 Next Step

 Long-run priority is on PV in Japan.  Council on Economic and Fiscal Policy, March 2009: 1 trillion JPY market and 110 thousand of employment in solar industry in 2020  In addition to utility-based support programs, Mega Solar power plants are planned. 140 MW towards 2020  Japanese intelligent grid technology:  TIPS: Triple I (Intelligent, Interactive and Integrated) Power Systems support large penetration of intermittent RE generation smoothly. H.Asano: Renewable Energy Policy in Japan,Over APEC 50% Workshop, penetration March of 2009 21 TIPS core technologies renewable energy(PV) in distribution system. Operation/control under ◆Efficient practical application demand/supply of DG and ADAPS technologies integration

◆Demand/supply integrated control of customer‘s equipment for interconnection of renewable generation and benefit analysis

◆Demand/supply integrated emergency control technologies

◆Autonomous appliance control to enhance inherent self -healing characteristics of power system

Development of operation and control technologies to realize demand/supply integration in TIPS. Evaluation of its benefit from customer’s viewpoint. ◆21 H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 22 References

Nishio and H.Asano(2006), Supply Amount and Marginal Price of Renewable Electricity under the Renewables Portfolio Standard in Japan, Energy Policy, 34, pp.2373-2387 H.Asano, Supply potential of electricity from renewable energy sources through 2014 under the Renewables Portfolio Standard in Japan, RPS Subcommittee, the Advisory Committee for Natural Resources and Energy, Dec.2006(in Japanese) H.Asano: Renewable Energy Policy in Japan, APEC Workshop, March 2009 23

Mahalo! Thank you!

Hiroshi Asano http://criepi.denken.or.jp/ http://www.hes.t.u-tokyo.ac.jp/