As anyone who has ever played Monopoly knows, if you want to win the game, you’ve got to start buying houses and hotels. If you don’t, getting round just becomes progressively harder and more likely to end with an ‘accidental’ knocking over of the board (or whatever else it takes to stop your 11-year old daughter doing her “who are yer?” victory dance every time you land on one of her many heavily developed properties).
The same basic investment logic can be applied to renewable energy. If you want to get ahead, at some stage in the game you have to put the rhetoric away and actually think about spending some money. Money which you will get back in the future many times over. A little pain now, for plenty of gain later.
A logic which seems to be at the heart of the Japanese government’s plan to increase its renewable energy capacity from 8% (of total) to 40% by the early 2030s. A plan which has been precipitated by the country’s decision, post Fukushima, to phase out its existing nuclear capacity over the next 3 decades.
I’d love to say that the decision was made without opposition, but Japan, like most developed countries that can actually afford to go renewable quickly, had as many vested interests to appease first as anyone else it would seem.
But appease them they did, enough of them anyway, and the final decision to incentivize the industry was made by the Japanese parliament on July 1st and ratified last month by Prime Minister Yoshihiko Noda.
The effects are already being felt with several large financial institutions doing their sums and happily putting in their bids to build clean energy installations.
As reported recently by Bloomberg New Energy Finance:
“To help meet the target, Japan introduced subsidies known as feed-in tariffs (FITs) on July 1 that require utilities to buy power from renewable energy providers at premium prices. As a result, investment in solar, wind and other forms of clean energy may jump to $17.1 billion this year from $8.6 billion in 2011.”
Most investors have so far opted for solar power projects because they can be scaled up in a matter of months and out 170 applications so far lodged with the government’s Energy Department, 155 have been for solar, 14 for wind and just 1 for biomass.
Many analysts are predicting that in the long run most of Japan’s renewable energy will come from wind but that in the short term solar will take the lead.
Analysts are also predicting that more than 25,000 MW (25 GW) of renewable energy capacity will be added to Japan’s grid as the country pursues its course away from nuclear energy.
Projects which will add 1,150 MW of capacity are expected to be completed this year, compared to none last year.
Clear evidence surely that feed-in tariffs do what they say they do.
Sure, the utility companies will look to offset the cost of the tariff against customer’s bills, but that’s exactly what they’ve been doing for years anyway every time fossil fuel prices go up. Which, if you read the writing on the wall, is increasingly likely to happen as supplies dwindle.
A positive move by the Japanese government in our book which will reap rewards in the future and leave their country not only safer than it has been in terms of the risk of nuclear accidents, but also help it achieve a significant reduction in carbon emissions. Something we will all benefit from.