Japan's renewable energy subsidy brings $2B investments

Japan's subsidies for renewable power suppliers have sparked more than $2 billion of investment since they were launched two months ago.

But the government of Japan believes that spending could reach $640 billion by 2030.

A renewable energy law that came into effect on July 1 requires utilities like Tokyo Electric Power Co and Kyushu Electric Power Co to buy electricity from renewable sources at pre-set premiums for up to 20 years.

Taking advantage of those premiums are families installing solar panels on their homes to sell power to utility grids, and businesses across the economy buying into the market.

To encourage capacity-building, utilities must pay subsidies as much as 42 yen ($0.54) per kilowatt hour to owners of solar, wind or other renewable energy capacity in this business year, compared with generation cost of about 10 yen per kWh for conventional gas or coal power plants.

That is double the tariff offered in world number one solar market Germany, which this year said it would cut subsidies as it tries to limit the impact of energy prices on consumers.

In the first month of the Japanese scheme's operation, 33,695 companies and individuals registered to sell renewable energy, data from Japan's Ministry of Economy, Trade and Industry shows. More than three-quarters of the registered capacity is solar.

"People are in a hurry to wrap up solar projects to avoid the uncertainty of whether the current high price level is maintained next business year," said Teiko Kudo, a banker involved in financing solar projects at Sumitomo Mitsui Banking Corp.

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