Renewable energy push blunted as ad-hoc rules stymie private upstarts 

Ever since Japan kicked off a system to encourage the use of renewable energy for electricity in July 2012, businesses, civic organizations and even local government bodies have been trying to break into the tightly held power market.

Under the so-called feed-in tariff system, utilities are required purchase any generated electricity derived from five types of renewable energy for a fixed price and a set time.

But the momentum seems to be slowing. Several potential power suppliers are dropping their bids after coming face to face with restrictions that make it difficult for them to link to the power grids run by the utilities, which are essentially monopolies.

Since there are no regulations defining grid access, the restrictions can be imposed at will by the major utilities.

“We entered a lottery held by Hokkaido Electric Power Co. but did not win,” said Taisuke Takahashi, who manages the secretariat of the nonprofit Minami Hokkaido Shizen Energy Project in the city of Hakodate.

The group planned to build a wind farm composed of 10 units with a capacity of 2,000 kilowatts each on Mount Kijihiki in neighboring Hokuto, using bank loans and money invested by citizens.

“Wind conditions are good and roads are there that can transport large turbine blades,” said the group’s leader Peter Howlett. Few places offer equally good conditions, he said.

The group filed its application after setting up a company to make it easier to receive funding from financial institutions. It had planned repay the loans and offer dividends to investors via the electricity sales, but its application for a 200,000-kw slot fell through.

The group even held a meeting for residents on conducting an environment impact assessment for the project, which is now up in the air.

Complicating the matter, Hokkaido Electric announced in April that it will limit electricity purchases from large solar plants to 400,000 kw. This is a narrow window, given that potential suppliers have filed to sell output worth 1,568,000 kw – nearly four times greater than the new quota.

Similar problems have been reported outside Hokkaido. The Ministry of Economy, Trade and Industry said its regional offices have received complaints from aspiring energy providers.

“We scaled down equipment because we’ve been told that (the buyer) doesn’t have available capacity to deliver power,” one potential applicant told METI’s Chubu office.

To the west, in the Chugoku region, another provider said the utilities are also changing plans on them.

“Initially, we were told that we could access a grid nearby but were requested later to access one farther away,” the person said.

In a survey by the Japan Renewable Energy Foundation, in Tokyo, as many as 60 solar power providers said they had given up selling power because of the grid access problems.

Allowed multiple answers, 43 said power firms limited the purchase volumes, while 17 said they were asked to shoulder a large portion of the construction costs. Eight said the utilities simply refused to let them hook up.

One operator was asked to pay 20 times the cost mentioned in the utility’s initial briefing.

These grid issues are closely linked to geographical conditions needed for renewable energy production. Laying large-scale photovoltaic panels for solar power requires wide areas of flat, vacant land, ruling out urban areas. Land for wind farms, meanwhile, is often in the less populated Tohoku and Hokkaido regions. While these areas have power delivery lines, their capacity is often limited due to low regional demand.

“We have built the minimum necessary facilities, including power transmission lines according to demand, and there are times when connecting (renewable energy sources to power lines) is difficult due to capacity issues,” an official with Hokkaido Electric said.

The official also mentioned limits as to what they can do to ready hydropower and fossil fuel facilities that would have to be activated when solar panels do not generate enough power during cloudy weather.

Critics question the rationale behind the utilities’ “limited capacity” arguments. They say that power delivery infrastructure and fossil fuel capacity are limited because the utilities are counting on nuclear power plants to be restarted.

Toru Morotomi, professor of environmental economics at Kyoto University, said that in the absence of grid access rules, utilities often do not reveal how limited their delivery lines actually are or the details of the construction costs for letting providers use their grids.

“Eventually, the question is who will bear the costs of grid connection. Unless (authorities) establish rules requiring power companies to pay the initial cost and recover it through electricity sales, this will pose a major stumbling block for renewable energy,” Morotomi said.