Research and analysis

Japan: climate change and energy round-up - November

Published 21 November 2014

This research and analysis was withdrawn on 21 May 2019

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For up to date information see Overseas Business Risk - Japan.

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Summary

First nuclear reactors receive political approval to restart. On low carbon growth, the suspension of purchase of renewable energy by Japanese utilities drives a call for redesigning the FIT.

Detail

Nuclear

Prime Minister Abe repeated in his general policy speech at the 187th Extraordinary Session of the Diet that safe nuclear reactors will be restarted gradually. In a separate development, JAEA decided that the Tokai reprocessing plant will be shut down, due to difficulty of covering the cost of more than JPY 100 billion to retrofit the facility to meet the new security standard. JAEA will come up with the decommissioning plan next year.

The Sendai Nuclear Power Plant restart process is moving forward. In late October Satsuma-Sendai (the location of the power plant) City Council approved the restart of two reactors that had applied for safety inspection by the regulator with a view to restart; Kagoshima Prefectural Assembly and the Prefectural Governor, Itoh, upheld the City’s earlier approval on 7 November. Prefectural approval completes the political side of the process for the restart of the two reactors.

Prefectural Government approval was clearly important to the National Government. The new METI minister, Miyazawa, visited Kagoshima early in the week of the Prefectural Assembly meeting and met with Governor Itoh to explain the necessity of approving the restarts.

While political approval has been achieved, the technical side of the process and final ok by the regulator are remaining hurdles. We understand that KEPCO (the operators of the plant) hope to complete all the regulator-required paperwork within this month (November) although admit that will be a challenge. The regulator is expected to need two months following receipt of the paperwork to match up the documentation with a technical inspection, making February 2015 the earliest likely date for restart. Any required revisions will push this back further – local elections in the spring may also delay the restart date.

Low Carbon Growth

At the end of September, five utilities (Kyushu, Shikoku and Okinawa [southern Japan], Hokkaido and Tohoku [northern Japan]) announced that they would stop accepting new applications for the purchase of electricity from renewable energy projects due to fears of power transmission capacity shortages. On 17 October, Kyushu Electric decided to restart buying geothermal and hydro power, while suspending the purchase of solar and wind power. METI’s new and renewable energy subcommittee has been discussing ways to cope with the weak grid connection to enable utilities to increase the amount of renewable energy it purchases, but the utilities’ decision took place before the committee came up with any substantial measures.

Japan’s generous feed-in-tariff (FIT) encouraged rapid renewable deployment following its introduction in July 2012, particularly solar. Because the tariff for solar is relatively high, and installation is both cheap and quick, there have been about 400 applications for mid and large sized solar facilities with 50 kW capacity as of June 2014. The sudden suspension of new entrants into the renewables market may cause confusion among companies that have invested in renewables assuming policy certainty based on the FIT. ORIX Corporation, for example, planned to invest about 220 billion yen in mega solar businesses, aiming to install a total capacity of up to 800 MW by FY2018. There is a danger possibility that these active investors in the renewable sector may now need to reconsider their business strategies.

METI plans to review the FIT this fiscal year. At the 15 October New and Renewable Energy Subcommittee meeting, ideas such as capping the total amount of the certification as well as introducing competitive bidding were discussed in order to reduce the number of new entrants into the solar business. A grid connection working group was also established under the subcommittee on 16 October with the mandate to verify utilities’ power grid connection capacity. The working group members showed an interest in learning from experiences from overseas. Injecting the UK’s policy design and business experience on grid development could be an effective way to encourage wider deployment of renewables in Japan.

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