Japan: Japan Launches The Feed-In Tariff System For Renewable Energy

Last Updated: 16 July 2012
Article by Kaoru Umino and Junko Dochi

Effective July 1, 2012, Japan implemented a new feed-in tariff ("FIT") system under the Act on Special Measures Concerning the Procurement of Renewable Energy by Operators of Electric Utilities (the "Act"). Under the terms of the FIT system, power utilities must purchase electricity from applicable renewable energy sources, including solar, wind, hydro, geothermal, biomass, and others, generated by certified power generating facilities (the "Certified Facilities") at a fixed price (the "Purchase Price") for a given period (the "Purchase Period"). This Commentary provides an overview of the FIT system with specific focus on key items stipulated in the newly promulgated ordinance for the Act (the "Ordinance").

Purchase Price and Purchase Period

The Ministry of Economy, Trade and Industry ("METI") has set the Purchase Price and the Purchase Period for the mandatory purchase of power generated by renewable energy sources under the FIT system for fiscal year 2012. The initial Purchase Price and the Purchase Period apply to a renewable energy project if (1) a power utility receives a written request from the generator for connection of a Certified Facility to the power utility's transmission facility and a power generating facility is certified as a Certified Facility and (2) the date of such request or certification (whichever is later) falls between July 1, 2012 and March 31, 2013. The Purchase Period starts from the date renewable energy supply commences to the power utility. The following chart sets forth the initial Purchase Price and Purchase Period for each type of renewable energy subject to the FIT system:

METI designed the Purchase Price and the Purchase Period for each type of renewable energy with the goal of providing sufficient incentives for new investments in renewable energy projects. Although METI fixed the Purchase Price for the applicable Purchase Period, it retains authority to revise the Purchase Price during that period if required by a significant change in prices and other economic factors, in accordance with the opinion of a third-party committee of experts and subject to reporting the basis of the calculation of the revised prices to the Diet.

Following the initial Purchase Period, METI must determine the Purchase Price and Purchase Period annually, subject to reporting the basis for its calculations to the Diet. Purchase Price determinations must be based primarily on (1) costs generally incurred for the efficient supply of renewable energy; and (2) appropriate level of profits for the generators of renewable energy. One of the reasons that the Purchase Price for each type of renewable energy source that has been set for fiscal year 2012 is high is that the cost of implementing a renewable energy project in Japan remains relatively high as compared to that in other jurisdictions such as Germany. In order to boost the expansion of renewable energy, the Ordinance permits special consideration during the first three fiscal years starting from the 2012 fiscal year to the appropriate level of profits for power generators when determining the Purchase Price.

While consumer electricity surcharges fund the FIT system, periodic adjustments of the Purchase Price to reflect actual costs, which may drop sharply, are intended to balance the goal of expanding the use of renewable energy and the burden to the electricity consumers in order to sustain the FIT system efficiently. In this regard, the Ordinance requires that power generators (1) report installation costs upon the commencement of the electricity supply and (2) report annual operating costs of the Certified Facility once a year so that the actual costs can be reflected in the determination of the Purchase Price for the following year. Ultimately, the Act requires review of its implementation by the Japanese Government by March 31, 2021.

Facility Certification

A power generating facility must qualify as a Certified Facility for eligibility under the FIT system. According to METI, facility certification takes approximately one month (or two months in the case of biomass facilities). The Ordinance requires that Certified Facilities implement a domestic maintenance and repair system for the duration of the Purchase Period, capable of starting repair work within three months after repairs become necessary. If the maintenance and repair system becomes unavailable during the Purchase Period, due to the bankruptcy of the manufacturer of a Certified Facility, for example, METI may revoke certification unless the generator or other third party implements a replacement maintenance and repair system.

Power Supply Agreement

The Act requires that power utilities requested by a power generator enter into an agreement on the supply and purchase of power generated by a Certified Facility, unless a statutory exemption applies. This obligation of the power utility applies to any request from a generator's Certified Facility. Valid exemptions under the Act include: (1) instances where the agreement includes false or illegal content or obligates the utility to compensate for damages not attributable to it or damages in excess of the amount resulting from its breach of its contractual obligations and (2) instances where the generator does not accept certain terms in the agreement, including (among other things) payment terms, jurisdiction (Japanese courts), and governing law (Japanese law). In addition, if the utility requested to enter into the agreement differs from the utility providing the related power connection, the requested utility may refuse by providing reasonable evidence that geographic reasons make it impossible for the former to access the power supply from the renewable energy source.

Power Connection Agreement

Similarly, the Act and the Ordinance require a power utility requested by a power generator to connect the Certified Facility to the utility's transmission facility, unless an exemption exists. Valid exemptions under the Act include: (1) instances where the generator does not bear certain costs necessary for the connection specified in the Ordinance or where the connection interferes with the utility's smooth supply of electricity, (2) instances where the generator does not provide information necessary for the connection or where the agreement includes false or illegal content or obligates the utility to compensate for damages not attributable to it or damages in excess of the amount resulting from its breach of its contractual obligations, and (3) instances where the generator does not accept certain terms in the agreement, including (among other things) the restraint of power output without compensation under certain circumstances and compensation terms for the restraint of power generally. In addition, where allowing connection is reasonably expected to exceed the utility's transmission capacity or receptive capacity, the utility may refuse to enter into the agreement by providing reasonable evidence and alternative connecting points financially reasonable for the generator in the case of excess transmission.

Restraint of Power Output

Although the Ordinance sets no limit on the total amount of power required to be purchased by power utilities from Certified Facilities under the FIT system, in certain circumstances specified in the Ordinance, the power generator must restrain its power output in accordance with the power utility's instruction. For instance, the generator must restrain its power output without compensation (1) if the supply of power estimates exceed demand, despite certain countermeasures by the utility, including the restraint of power output by the utility (as long as such restriction is not imposed for more than 30 days per year); (2) in cases of a breakdown or suspension of the utility's facility resulting from force majeure, or intrusion by a third party or a movable not attributable to the utility; or (3) in case of inspection, repair, or connecting work on the utility's facility. When imposing any restraint on power output for any of the foregoing reasons, the utility must provide reasonable evidence for the basis of its request. For any other restraint of power output imposed by the utility, the generator may claim compensation for damages resulting from the restraint.

Further Challenges

Japan recognizes that the promotion of renewable energy also requires further deregulation to eliminate or minimize time-consuming and cumbersome requirements that create disincentives for developing renewable energy projects. In April 2012, the Japanese Government adopted a plan for deregulation in the energy sector, listing 103 items for deregulation or reform to promote renewable energy. The Japanese Government has proceeded with this deregulation in accordance with the plan, through (among others) the following actions:

  • The government amended the Factory Location Act abolishing area-to-land ratio restrictions and filing obligations for large-scale solar power facilities.
  • The government revised restrictions on drilling in national parks to facilitate drilling for geothermal energy sources.
  • A new bill promoting the generation of renewable energy in agricultural, forestry, and fishery areas submitted in the current Diet session streamlines procedures and requirements for obtaining authorization required under laws restricting the use of agricultural, forestry, and coastal land, fishing ports, and grounds.
  • An expected simplification and shortening of the procedures and requirements for environmental assessments required for wind power.
  • An expected revision of required standards for wind power facilities under the Building Standards Act.

Japan's promotion of renewable energy faces a bigger challenge around the enhancement of its power grids. In order to cope with unstable power output from renewable energy sources such as solar power and wind power, Japan adopted policies to enhance transmission grids and storage facilities. Further, because areas suitable for power generation from renewable energy sources such as wind power are geographically limited (located mostly in the Hokkaido and Tohoku regions) and are remote from large consuming urban centers (such as Tokyo and Osaka), Japan's grid requires significant expansion to accommodate the plans. Given the large capital expenditures required and Japan's division into 10 regions for power generation and transmission, with each region controlled by a regional power utility that enjoys a monopoly, the grid initiative requires strong governmental leadership for the development of extensive cross-regional grids. METI recently announced a plan promoting grid enhancement through governmental financial support, with areas such as the Hokkaido and Tohoku regions designated as a priority for wind power generation. METI is seeking an acceleration of grid enhancement through cooperation among the Japanese Government, power utilities, and wind power generators.

In a final recent development, the Japanese Government adopted a "green" innovation strategy setting priorities including new energy control systems (such as smart communities), storage batteries, ocean development (including offshore wind power), and "green" materials (including materials for wind power facilities). This newly developed "green" innovation strategy, together with the implementation of the FIT system, are expected to be a driving force in the revitalization of the Japanese economy.


The FIT system reflects the Japanese Government's desire rapidly to expand the renewable energy sector, especially in light of the current uncertainty over the future of nuclear power in Japan. The Purchase Price and Purchase Period that have been set for each type of eligible renewable energy source for fiscal year 2012 suggest that the FIT system is one of the most attractive feed-in tariff systems in the world for power producers. At the same time, in order to ensure that the FIT system can be effectively and efficiently implemented and benefit both the power producers and consumers, the Japanese Government actively must address a number of challenges through deregulation to facilitate the development of renewable energy projects and enhancement of the power grids to enable extensive crossregional power transmission within Japan.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.