Japan's new clean energy bill offers a tantalizing business bonanza and companies are scrambling to find an edge.
The so-called feed-in tariff on renewable energy passed by the Diet on Aug. 26 requires utilities to purchase wind, solar and geothermal energy from households and businesses at above-market rates.
The legislation, which will take effect in July 2012, has ignited expectations of new business opportunities within industries that offer products and services related to the generation of electricity using renewable energy sources, ranging from solar panels and wind turbines to equipment and systems for smart grids.
In a news conference following Diet passage of the feed-in tariff law, Mikio Katayama, chairman of the Japan Photovoltaic Energy Association, said the legislation will prove to be a major boon to the solar power industry.
"The new law creates a system that guarantees the purchase of renewable power for 20 years," said Katayama, who is also president of Sharp Corp. "The solar power market will grow to five to 10 times its current size over the short term, creating many new jobs in the process."
Sharp, the nation's largest manufacturer of solar panels, intends to play a leading role in industry-wide efforts to lower the cost of installing solar panels in homes and offices.
Softbank Corp. President Masayoshi Son has also announced plans to diversify his business operations with plans to build solar farms in fallow rice paddies and other idle land.
Electric power companies will be obliged to purchase power produced with renewable energy at fixed prices. This will force them to put more effort into developing their own solar power projects.
Tokyo Electric Power Co., for instance, started operating a full-fledged solar power plant in Kawasaki city outside Tokyo in August and plans to bring another online in the same city in December. Hitachi Ltd. and Toshiba Corp. have won orders to supply equipment for these plants.
Smart grids will be vital to efforts to expand the use of renewable energy sources, which by nature do not offer a constant supply of electricity. Smart grids use a variety of technologies, including sensors, meters and digital networks to monitor and control the two-way flow of power across operations. A smart grid can ensure a stable power supply and efficient power consumption by using equipment like storage batteries.
In a move that underscores the importance of smart grid technology for future power supply systems, Toshiba in May acquired a Swiss company that is a major manufacturer of smart meters. These devices record power consumption and relay that information back to the utility.
Hitachi has announced it will take part in a joint overseas smart grid project involving Japanese and U.S. companies.
Large consumer electronics retailers are also trying to capitalize on the expected growth of demand for solar power systems.
Yamada Denki Co., operator of a major consumer electronics store chain, is moving beyond simple sales of rooftop solar panels for households. In August, the company announced it will acquire a controlling stake in a midsize homebuilder to charge into the market for "smart houses," or energy-efficient homes equipped with solar panels, storage batteries and other green technologies.
Mitsubishi Heavy Industries Ltd., the nation's largest manufacturer of wind turbines, has gobbled up a British energy start-up to to take advantage of the growing global wave of interest in wind power generation. The move is aimed primarily at expanding its presence in the British market for wind power projects.
However, a senior Mitsubishi Heavy executive said the company is also looking at ways to energize the Japanese market.
Whether the outlook for wind power generation at home brightens will depend on the government's policy support and the commitment of electric utilities to promoting this energy source.
The average price at which utilities buy electricity generated with wind power fell to 10 yen per kilowatt-hour in fiscal 2010, down from 11.8 yen in fiscal 2003. The lowest price in the year was 6 yen.
Under the new law to bolster renewable energy, an independent committee to be set up by the government will effectively determine prices at which utilities purchase power.
The panel's decisions on prices will go a long way toward determining the long-term viability of renewable energy businesses.
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