In Japan, in the wake of the serious nuclear event due to the
massive earthquakes and tsunami, the use of renewable energy has
been receiving remarkable attention from both public and private
sectors. Local governments are keen to promote local production for
local consumption of their own electricity through renewable energy
rather than building and operating politically and physically
hazardous nuclear power plants. Also, many major companies have
announced their considerable interest in renewable energy.
In Japan, a system for purchasing surplus electricity exceeding
the amount consumed by each renewable energy producer, e.g., a
homeowner who installed a photovoltaic facility on the roof of
her/his house has existed so far. However, a system for purchasing
total amount of renewable energy, which obliges electricity
utilities to purchase the electricity generated from mega solar
plants and wind power plants established with the purpose of
selling electricity, has not been established. As a consequence,
Japan has made little progress toward development and expansion in
Now, on August 26, 2011, the Law on Special Measures Concerning
Procurement of Renewable Energy Sourced Electricity by Electric
Utilities (the "Law") has passed. The Law obliges
electric utilities to purchase the total amount, not limited to
"surplus," of electricity generated from renewable energy
sources at a rate and a period of time set by the government. It is
expected that the Law which, except for some provisions, will
become effective on July 1, 2012 prompts the use of renewable
energy, which is now attracting wide attention in Japan.
1. Outline of the Law
(a) Renewable Energy to be Purchased
Renewable energy which electricity utilities are obliged to
purchase under the Law includes photovoltaic, wind, water,
geothermal and biomass energy.
(b) Obligation to Accept an Application for an Agreement
Pursuant to the Law, as a general rule, electricity utilities
are obliged to accept an application of a renewable energy producer
for an agreement under which electricity utilities are supposed to
purchase renewable energy.
(c) Obligation to Make Electrical Connection
According to the Law, when a renewable energy supplier asks for
the electrical connection between the supplier's
power-generating facility and the electricity utility's
facility for substation, transmission or distribution, the
electricity utility is, in principle, obliged not to reject the
(d) Purchase Rate and Period
The purchase rate and the period of time for purchase will be
set by the government. At this writing, they are not yet
determined. However, the government has already announced the
outline of the envisaged purchase rate and purchase period as the
(e) Surcharge on Customers
According to the Law, electric utilities are allowed to impose a
surcharge on their customers, for the purpose of compensation for
the cost of the purchases of renewable energy under the Law. The
surcharge is imposed in accordance with the volume of each
customer's usage of electricity, and considering the possible
increase in burden on companies with large consumption of
electricity, the Law gives preferential treatment for those
2. Opportunities for Foreign Companies
Depending on the purchase rate and the period of time for
purchase to be determined by the government in the near future, not
only Japanese companies but also foreign companies which are now
acting or to begin the renewable energy related business in Japan
are expected to have the following opportunities. Considering the
recent energy crisis in Japan, many companies are very sensitive to
the current situations in the renewable energy markets in Japan,
and thus, quick and discerning decisions to realize these
opportunities are desirable.
The Japanese markets for manufacturers and suppliers of the
facilities and equipment for renewable energy would expand. In
addition, development in related businesses could be also expected,
among others, smart grid related business including installation of
smart meters, electric storage related business, electric vehicle
Independent power producing business could be launched in
Opportunities for an investment in renewable energy would
increase. After the implementation of the Law, a fund scheme as
following becomes more feasible and practicable. Investors could
join in such a fund scheme, as an investor.
1 Source: material by Ministry of Economy, Trade and
Industry (modified).The table is expected to be subdivided further
on the basis of the mode of installation of facilities and the
volume of the generation.
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