Effective July 1, 2012, Japan implemented a new feed-in tariff
system pursuant to the Act on Special Measures Concerning the
Procurement of Renewable Energy by Operators of Electric Utilities,
also known as the "FIT Law," enacted on August 26, 2011.
Under this new system, power utilities in Japan are required to
purchase electricity from renewable energy sources generated by
certified facilities. The Ministry of Economy, Trade and Industry
sets the applicable purchase price and purchase period for each
type of renewable energy on an annual basis, taking into account
the cost of supply and appropriate return to the power
The initial purchase price for large-scale solar is 40 Yen (0.5 USD)/kWh and for large-scale wind is 22 Yen (0.275 USD)/kWh, in each case for a 20-year purchase period. These prices are among the highest in the world, reflecting both the initial high cost of implementing a renewable energy project in Japan and the desire of the Japanese gGovernment to provide incentives for renewable project developers by ensuring an attractive return on such investments. The implementing ordinance specifies the details of the system, including the criteria for certification of a renewable generating facility, the requirements for utilities to enter into power supply agreements and power connection agreements with power generators with certified renewable facilities, and the circumstances under which renewable generators may be required to restrain power output at the request of the utilities.
While the new feed-in tariff system reflects the Japanese government's desire to expand the renewable energy sector, especially in light of the current uncertainty over the future of nuclear power in Japan, there are still a number of challenges to be addressed. These include the need to liberalize or eliminate legal and regulatory restrictions that hinder the development of renewable energy projects (such as land use restrictions and time-consuming filing obligations), as well as the limitations of the power grids that make it difficult for extensive cross-regional 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.