Japan’s push into solar is producing too much

Japan’s solar energy boom is starting to fizzle after two years of rapid expansion left utilities saying they’re unable to accept electricity from so many new sources that generate power only when the sun shines.

At least five of the nation’s biggest utilities are restricting the access of new solar farms to their grids.

Struggling to compensate for nuclear shutdowns after the Fukushima reactor meltdowns, the government of Prime Minister Shinzo Abe offers some of the highest incentives for solar in the world. That’s helped make Japan the second-biggest market for photovoltaic panels, providing an alternative to downturns in Germany and Spain, nations that once led the industry.

“Everyone was entering the solar market because it was lucrative, and that has strained the market,” said Yutaka Miki, who studies clean energy at the Japan Research Institute.

Japan’s trade ministry has approved plans for about 72 gigawatts of renewable energy projects since July 2012. The country installed almost 7.1 gigawatts of solar capacity last year, more than currently exists in all of Spain, according to Bloomberg New Energy Finance. A gigawatt is about the size of a nuclear reactor.

Japan’s investment in the technology more than tripled to $29.6 billion in 2013 from 2010 levels, data from London-based BNEF show.

Kyushu Electric Power, which supplies power to the southern island of Kyushu, said in late September that it will suspend giving new grid access to clean-energy producers while examining how much more capacity it can take on. The question is whether Japan’s grid can handle intermittent power deliveries from solar systems that only generate when the sun is shining.

Shikoku Electric Power, Tohoku Electric Power, Hokkaido Electric Power and Okinawa Electric Power also are curtailing grid access.

Wind power, which accounts for just 1.7 percent of all approved capacity since July 2012, may benefit from bottlenecks in connecting solar plants. After the rapid expansion of solar, more government efforts may be made to increase wind, especially offshore wind, Miki said.

Japan’s incentive program was put in place in July 2012 after the Fukushima nuclear disaster in 2011. The country responded by idling its fleet of reactors, and introducing a feed-in tariff, above-market rates for power from renewable sources.

Minus a consumption tax, Japan today pays 32 yen, or 30 U.S. cents, for a kilowatt-hour of solar power and as much as 40 yen for projects approved in fiscal 2012. That’s effectively the highest rate in the world, above the 11.15 pence (18 cents) per kilowatt-hour offered in the United States, according to New Energy Finance.

“Plans need to be made to slow down solar, but any forced measures require thorough reviews and explanations,” said Mika Ohbayashi, director of the Japan Renewable Energy Foundation. The group was set up by Softbank founder Masayoshi Son in the aftermath of the Fukushima disaster to promote clean energy.

The government is increasingly concerned about the cost of the rapidly expanding solar industry on top of rising fossil fuel costs. Consumers in Japan paid 28 percent more for electricity in September than they did four years ago while the cost rose just 8.1 percent in the United States.

Japan’s feed-in tariff program was designed to encourage solar and other renewables, which also include energy from wind turbines and geothermal wells. It was modeled after policies pioneered in Germany in 2004 and replicated across Europe. The high rates triggered installation booms and later painful efforts to constrain demand.

The goal of Abe’s predecessor was to have renewables account for a fifth of the energy mix by the 2020s. Abe’s administration is pushing to restart reactors and is seeking a balance between renewables and other forms of power.

“We will set the target for clean energy taking into account a balance,” Abe told parliament earlier this month. Renewables still make a fraction of Japan’s supply. Without atomic power, traditional fossil fuels now account for about 88 percent of Japan’s power output, compared with about 60 percent before Fukushima.Bloomberg