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A solar plant under construction in Miyama, Fukuoka, Japan.

Japan's renewable energy incentive law has spurred construction of so many photovoltaic farms like this one, in Miyama, that the nation is expected to be the world's leading solar energy market this year. But Japan must upgrade its system for delivering electricity.

Photograph from Asahi Shimbun/Getty Images

Yvonne Chang in Tokyo

For National Geographic

Published August 14, 2013

Hokkaido, Japan's second largest and northernmost island, is  known for its beautiful wild nature, delicious seafood, and fresh produce. Now another specialty is taking root: Large-scale megasolar power plants that take advantage of the island's unique geography.

A new renewable energy incentive program has Japan on track to become the world's leading market for solar energy, leaping past China and Germany, with Hokkaido at the forefront of the sun power rush. In a densely populated nation hungry for alternative energy, Hokkaido is an obvious choice to host projects, because of the availability of relatively large patches of inexpensive land. Unused industrial park areas, idle land inside a motor race circuit, a former horse ranch—all are being converted to solar farms. (See related, "Pictures: A New Hub for Solar Tech Blooms in Japan.")

But there's a problem with this boom in Japan's north. Although one-quarter of the largest solar projects approved under Japan's new renewables policy are located in Hokkaido, the island accounts for less than 3 percent of the nation's electricity demand. Experts say Japan will need to act quickly to make sure the power generated in Hokkaido flows to where it is needed. And that means modernizing a grid that currently doesn't have capacity for all the projects proposed, installing a giant battery—planned to be the world's largest—to store power when the sun isn't shining, and ensuring connections so power can flow across the island nation.  (See related, "In Japan, Solar Panels Aid in Tsunami Rebuilding.")

Turning to Renewables

Japan historically has had no fossil energy sources of its own; it powered much of its economic growth over the past few generations with homegrown nuclear energy. At the start of 2011, more than 50 reactors provided Japan with 30 percent of its electricity, and the plan was to increase that share to 50 percent. That scenario was upended on March 11, 2011, when the most powerful earthquake ever to shake Japan touched off a tsunami that breached the defenses of Fukushima Daiichi nuclear power plant on the east coast. (See related, "One Year After Fukushima, Japan Faces Shortages of Energy, Trust.")

The second-worst nuclear energy accident in history displaced 70,000 people and saddled the nation with a long and difficult cleanup. (See Pictures: The Nuclear Cleanup Struggle at Fukushima.") The scope of the disaster was driven home for the Japanese people in recent weeks, when the plant operator acknowledged that it has been unable to stanch the daily flow of tens of thousands of gallons of radioactive water into the Pacific Ocean. (See related, "Fukushima's Radioactive Water Leak: What You Should Know.")

Due to opposition from local officials, all but two of Japan's nuclear power plants are now idle. And although Prime Minister Shinzo Abe supports a nuclear restart, his government also is addressing Japan's needs by administering a renewable energy incentive policy that went into effect last year before he took office: a generous "feed-in" tariff.

Modeled after laws that spurred clean power in Europe, it ensures that generators of renewable energy are paid above-market rates for their electricity. At 42 yen (43 U.S. cents) per kilowatt-hour for solar photovoltaic power, the rate is nearly twice what residential customers pay in Tokyo and is nearly four times the average in the United States.

The policy, launched in July 2012, spurred a diverse array of businesses to get in on the solar energy game. Electronics manufacturers Sharp and Kyocera and trading company Mitsui & Company have major projects open or under way. In July, financial services company Orix said construction has started for a 21-megawatt solar power plant on idle land inside the Tokachi Speedway circuit in Sarabetsu, Hokkaido, in a spot that boasts one of the highest levels of sunlight in Japan. Another banking firm, Japan Regenesis Trust, meanwhile, announced it had started operations of its one-megawatt "Smart Farm" in Urakawa Town, Hokkaido, on 5 acres (2.15 hectares) of land once used to raise horses. A leader in solar drive has been mobile carrier Softbank and its chief executive, the billionaire Masayoshi Son, who has advocated a total phaseout of nuclear power for Japan.

While FIT is available for other forms of renewable energy, more than 90 percent of the 1.662 million kilowatts of renewable energy capacity in Japan (as of February, the most recent tally) was solar, according to the Ministry of Economy, Trade and Industry (METI.) Alternatives like wind and geothermal take much more time and money to develop, and solar does not require the lengthy environmental assessments needed for wind farms. METI statistics show that 11,012 megawatts of nonresidential photovoltaic projects have been approved between the start of the FIT policy and the beginning of this year, nearly half of them certified in February alone. The number likely rose due to a rush of last-minute applications before a 10 percent reduction in the FIT rate went into effect in April.

Domestic photovoltaic module shipments were up 271.3 percent compared to last year, according to the Japan Photovoltaic Energy Association. U.S. research firm IHS predicted the Japanese photovoltaic market would surpass Germany as the largest solar revenue market with 120 percent growth this year, installing more than 5 gigawatts of new capacity, with projects more than 2 megawatts in size being the major driving force behind the triple-digit growth rate. Bloomberg New Energy Finance predicted that such commercial and utility-scale projects would boost solar installations to a range of 6.1 gigawatts to 9.4 gigawatts in 2013, making Japan the largest solar market in the world after China.

Rush on Hokkaido

But there are concerns that dampen the solar euphoria. In April, regional utility Hokkaido Electric Power said its ultra-high-voltage transmission system, onto which large PV systems are interconnected, has received four times as many applications as it could handle. This situation, which has yet to occur in other areas of Japan, highlights the need to revamp Japan's electricity system soon if renewable energy is to maintain its recent momentum.

Japan's electricity system is comprised of ten grids with very limited interconnection. The ten regional utilities enjoy a monopoly on regional power markets, basically operating separate transmission networks independently and rarely supplying electricity to other utilities even if their service areas are adjacent. Further complicating the issue is a mismatch in line frequency: three of the ten grids covering eastern Japan, including Tokyo, use 50 hertz, while the seven covering western Japan use 60 hertz. Only three frequency converter stations are located on the boundary between the two regions, with the ability to convert less than one percent of the nation's power generation capacity.

While the FIT law obligates utilities to provide access to the grids and purchase all of the generated renewable power, there are provisions that allow them to restrict or deny access to ensure the stability of electricity supply. According to a survey of companies involved in solar projects by the Japan Renewable Energy Foundation, 20 percent of the respondents said they were denied access by local utilities due to overcapacity, while 37 percent were told there would be limits to the amount of electricity that the utilities could accept.

With regional utilities planning to put their nuclear power plants back online, there is speculation that grid capacity alone may not be the reason for Hokkaido Electric's decision to limit its purchases of renewable energy. Four of the ten utilities, including Hokkaido Electric, submitted applications this summer to have their nuclear facilities examined for safety review and restart under new guidelines set by the Nuclear Regulation Authority.

All are suffering losses due to skyrocketing fuel prices—mostly for natural gas—while the nuclear stations are out of operation. Paying above-market rates for renewables is an additional cost.

Softbank, which now operates five renewable energy plants and has plans for nine more nationwide, has learned its project to build three large solar power plants in Hokkaido with a combined capacity of more than 180,000 kilowatts is on hold, as Hokkaido Electric hasn't specified which of the applicants will be allowed to connect to the grid. Softbank founder and CEO Son has been openly critical: "There's no point in working to generate solar power if the utilities refuse to connect us," Son said in a video message to the Natural Energy Council in May. "It destroys the fundamental meaning of the (FIT) law."

Experts have also pointed out a sharp discrepancy between the number of applications approved and the number of projects  actually started. Only 4 percent of the 11 million kilowatts of large solar facilities that have been approved actually had started operations as of February.

Trade ministry officials attribute the delay to a shortage of equipment due to the sudden burst in demand as well as the need to negotiate the grid access with the regional utility. But some believe that speculators have gotten into the business, applying early just to secure the high FIT price with the plan of reselling the "right to build a PV facility" later, when the government has lowered the official rate per kilowatt-hour. Domestic media report that METI is considering retracting the permits if the applicant fails to launch the business in a set period of time.

World's Largest Battery

To address the issue of integrating solar energy onto the grid in Hokkaido, METI said it has set aside 29.6 billion yen (US$294 million) to install a large storage battery at Hokkaido Electric's Minami Hayakita substation by March 2015 to stabilize the flow of solar power onto the grid. By installing the new battery, expected to be the world's largest with a storage capacity of 60 megawatts, the regional utility will be able to receive an additional 10 percent more electricity. (It would be nearly double the size of the largest battery currently operating in the world, at 36 megawatts, installed in 2012 in China to help integrate renewable energy onto the grid in Zhangbei, Hebei Province.) (See related quiz, "What You Don't Know About Batteries.")

But the installation alone provides no fundamental solution, and the ministry said it "will continue to ask business enterprises to seek locations other than Hokkaido for large-scale solar power plants."

Hiroaki Fujii, executive deputy president of SB Energy, Softbank's group company operating the renewable energy business, said the grid issue is not just the utilities' fault. "The government needs to show what direction it wants to take the nation's energy policy," he said. "Only then can the utilities make plans about future investment and the operators think about profitability and draw up business plans."

Since the Liberal Democratic Party returned to power late last year, Prime Minister Abe's government has dismissed the previous administration's aim to become nuclear-free by the 2030s. While the government launched a study in January to discuss the nation's energy policy, a clear vision has yet to emerge. But responding to public criticism of the utilities' virtual monopoly on the power industry, the Abe cabinet decided in April to separate the transmission division from the utilities beginning in 2018 at the earliest, a move deemed necessary to address the grid issue. The bill requires parliament's approval, however, and it was one of four pieces of administration-sponsored legislation scrapped amid political turmoil in Tokyo in June, when the Diet ended its regular legislative session by passing a nonbinding censure motion against Abe.

Trade Minister Toshimitsu Motegi said he will seek passage of the bill "without fail" in the next parliamentary session, but even if the bill were to be passed and a new power distribution organization established, Fujii warns that it wouldn't help the situation without transparency and a commitment to renewable energy. "There must be open discussion on what role this new transmission company is to play," he said.

The FIT law calls on the Trade Ministry to give "special consideration to the profits of renewable energy suppliers" for the first three years of the new tariff to promote the scheme. Once the current line of projects is completed, there are concerns that this solar boom would not last long, as tariffs would be further lowered and available land would become scarce.

Fujii believes otherwise. "The growth of solar business itself may slow down after three years, but Japan still has other resources, like wind and geothermal, and I don't believe the renewable energy business as a whole will shrink just because the legal provisions expire."

This story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.

Diwani Kamatoden
Diwani Kamatoden

A dome with reflective materials and giant magnifying glass will be able to produce enough heat energy .a reflected light that pass through magnefying glass will produce super heat and electricity!

Gerhard Fasol
Gerhard Fasol

You are totally right, that registrations by Japan's Industry Ministry METI for renewable energy projects peaked in March 2013 before feed-in-tariffs for solar energy were reduced by about 10% from April 2013.

In April 2013 registrations by METI dropped dramatically: April 2013 and May 2013 registrations under the FIT program were only 1/15th of the March 2013 volume - unless there are other factors in play this seems to demonstrate the enormous effect of feed-in-tariffs on the solar project market and on investors, for graphics and details see:

Eric MacLaurin
Eric MacLaurin

I thought the whole power thing was a national emergency and yet, just like in the US, the utilities fight and refuse to grant access to the grid so they can install really expensive power plants and enjoy their government guaranteed return on investment.

The government needs to assume control of the grid or insist on reasonable access.

Justin Case
Justin Case

I just took a drive through rural Japan, and I will report that things ARE changing rapidly.  What is getting a lot of press is a few urban/suburban multi-MW scale facilities, but the rooftop revolution is accelerating. New homes seem to all have some panels, but I am seeing a lot of nice (and some ugly) installations on homes and structures throughout rural areas, just in the last couple of months. 

Why? Well, the FIT rate has fallen, but every utility in Japan has raised its rates this summer. Most people I know in the US are paying 10 cents or less per kWh, but people in Japan are paying 30 cents or more. It used to be that people could say "solar is for rich people" but interest rates are low, and the financials now go the other way, so "solar is for thrifty people" is the new mantra.

This article could have been a lot more interesting. Rural voters are embracing solar, and rejecting nuclear. Pretty soon, Tokyo will be the only place to put all these nuclear plants. Perhaps that is the way it should be. All the power from Fukushima was going to Tokyo anyway.

Ron S
Ron S

The goal should be to have each home or office generate it's own renewable energy and move away from these huge energy distribution systems.  As solar panels more efficient I can hear the death knell of the large electrical distribution systems. Of Course utilities will fight this tooth and nail. 

paul bedichek
paul bedichek

Don't say megawatts for energy storage it's megawatt hours.

Justin Case
Justin Case

There are many more issues to consider about this. Electrical deregulation is occurring in Japan even as all of this other nuclear, renewable, and other issues are being resolved. Being a utility worker/manager in Japan USED TO be a boring job. Not anymore. 

If Hokkaido stiffs all of these renewable energy providers, then they are creating competitors. Deregulation forces the utilities to find some way to work with them. Therefore, the long-term solution is likely to be energy transmission to the Tohoku grid or some other accommodative solution or storage option.

Another interesting point that the article misses is that the use of solar energy is legislatively mandated, so although it is "expensive", once it is installed to the grid, it becomes the "cheapest" energy available to the utility. It has zero marginal cost. Therefore, utilities have NO disincentive to use as much as they can. Moreover, solar has reached grid parity in many areas of Japan. Peak rates are higher than 30 cents per kWh, and the installed price of solar can beat that.

Anyway, I assure readers that although the article paints a picture of "oops... Japan screwed up", nothing could be further from the truth. Their policies are not perfect, but the rapid growth of renewables will yield important benefits for the future. 

Justin Case
Justin Case

The article includes an important factual error. The FIT policy did NOT start after the earthquake. This error was included in a recent Japan Times article, and it it is just plain wrong. Japan was a leader in renewables before 3/11 on the basis of the Kyoto Protocol. The FIT policy started before 3/11, and I know it as a practical fact. I also know that the FIT has been decreasing even as electricity rates have been increasing, so one might infer that the FIT is not the only motivation for the rise of this renewable market.

Bruce Hall
Bruce Hall

That's a massive amount of arable land for a country with a large population and limited land.  As with wind turbines, the local climate is affected by this land use.  Yet "surprisingly" little is mentioned about these negatives.  Given the vulcanism in the region, the potential for clean, geothermal energy must far outstrip the potential for solar energy without requiring vast stretches of farmland to be sacrificed.

Christian Roselund
Christian Roselund

While this is an interesting and well-researched article, I need to make a technical correction. Solar photovoltaics (PV) represent 90% of the _new_ renewable energy capacity added - that is, in the recent financial year since the feed-in tariff was passed. Japan currently has 27 GW of hydroelectric capacity (much more than PV), and 2.4 GW of wind power.

Also, while IHS may have called 2013 for Japan, Mercom Capital and other market researchers are saying that China will be larger, as is BNEF who you cited in the text. Thus the claim of "world's leading market" in the caption is dubious.

Justin Case
Justin Case

@Gerhard Fasol 

Um. If you mean "people will try to get as much money as they can before the rules change" as highlighting the role of feed in tariffs, then you are right. 

Of course applications are going to peak before the FIT is lowered. If you can get 42 yen per kWh for the next 20 years of electricity you generate if you make a contract today, but only 38 yen if you sign a contract next month, then you are going to do what you can for that extra 4 yen. 

But that is a very backward looking analysis, and it really highlights human nature, not the preferability of a policy. If electricity rates are going to jump 10--15% during the next year, and they are slated to, then people will be paying more than 30 yen per kWh for electricity anyway, which is above the installed price for small solar systems. 

What we will see in Japan is the crossing of a threshold. Grid parity. From about September 2013, solar will not be a plaything of investors and yuppies. Misers and skinflints... people who just want to save money... will be increasingly coming to the solar market just to eliminate their electric bills.

Justin Case
Justin Case

@Eric MacLaurin It is so messed up Eric. 

Just imagine. You go out and buy a great truck and start a business hauling dirt. Your truck is all paid for and you are earning more profits with that truck than anything else. Someone told you last year that if you did not pay 50000 dollars to upgrade your truck, there is a one in a million chance that it would break. 

Well, yours didn't break, but someone else's did because it was hit by an asteroid. Now everyone wants you to stop using your truck, forever. 

What do you do? Go buy a new truck? Wait to see if the government will change the rules? Even if the government says it is ok, local protesters might stop you anyway. In the meantime, people start hauling their own dirt with their own solar trucks, and competitors are coming out of the woodwork. 

Hokkaido Electric has a legal obligation, but it also has to run a business. And you can imagine that the public are not sympathetic. 

Anyway, it is a tense situation, and I am one of the few people who believes that people are genuinely doing their best. Nobody in Japan has made buckets of money for decades. It isn't like that.

Finally, you should know, Eric, that the article is alarmist. Hokkaido is THE ONLY utility in Japan I know of that is backing off. It has an isolated grid (it is an island!) and it has more wide open spaces than any other place in Japan. The Japanese utilities are a DREAM to work with compared to those in the US Southwest. I have read what people have to go through in California, Arizona, and Colorado, and the utilities absolutely screw people who want solar there. 

Ron S
Ron S

@Bruce Hall Well I believe that if they gave incentives to home owners to a some form of solar collector to their homes then they could distribute the collection of energy over a larger area and feeding it to the grid would happen at every location and restructuring the grid could go at a slower pace if at all.

Justin Case
Justin Case

@Bruce Hall 

Japan has a lot of land that can be used. Former industrial sites, recently flooded areas, mountainous areas, recently (lightly ) irradiated areas, and many many rooftops.

It was very little reported that a geothermal plant in Tohoku had an accident just a couple of months before March 11, 2011. It killed one and seriously injured another, which means that geothermal has killed more people than radiation from Fukushima. 

But Japan was using geothermal energy longer than white people have been walking around North America, so they understand the benefits and problems. One is that geothermal might affect the rights of hot springs owners in rural areas. The springs are one of the few revenue sources open to many such people, so it is a thorny issue. Vulcanism, which is related to tectonic activity, is also, as one can imagine, prone to instability. Events of the last few years have discouraged geothermal use just about as much as they have discouraged the use of nuclear power in Japan.

Justin Case
Justin Case

@Ron S @Bruce Hall 

In fact, they DO give incentives to home owners by the FIT. And in fact, the "grid problems" that the article drones on about have occurred in Hokkaido, the equivalent of North Dakota in terms of importance to Japan's economy. 

The "grid problems", in my opinion, are a contrivance by Hokkaido electric. The "problems" can be solved by patching into Tohoku's grid, with new infrastructure, or using storage means such as  hydrogen or batteries or compressed air or what have you. 

The story would have been ten times more interesting if it had taken the angle that hesitance over whether to restart nuclear reactors is actually hurting the use of renewables. Hokkaido power does not know its costs, so it can't invest correctly. A dollar is waiting on a dime while people wring their hands over a few perfectly good reactors. 

Instead the story made the silly point that some grid problem in Hokkaido is going to keep Japan from doing what it needs to do. As if Japan does not have the will or the means or the brainpower to solve its electrical engineering problems. HA!

George Zip
George Zip

@Justin Case @Bruce Hall And before white people used geothermal energy, there were white snow monkeys that taught them to use it by showing them the hot volcanic springs.  Nuclear is still the way to go despite the bad press.  The worst case scenario has happened and nobody died.  If they take what they learned and make upgrades to existing systems there is no reason they shouldn't have nuclear as the primary source of energy again.  The nuclear industry is just not as well funded and heavily lobbied as other sources are.

Ron S
Ron S

@Justin Case @Ron S @Bruce Hall  It is a shame to see large corporations play the lying game. They can be caught out because common sense is all that is required to see their lies. I look forward to the day that solar panels become more efficient and most homes can cut their cords to the large power distribution system. Every home should have a renewable energy power generating system.

Justin Case
Justin Case

@George Zip @Justin Case @Bruce Hall Yes. Monkeys DO use hot springs. They defecate in them too, which is no bueno, muy guano.

I am pro-nuclear in many ways. I don't fault TEPCO for Fukushima. I don't even think the radiation is that dangerous, or that waste is a particular problem. 

But I am turning against it. Frankly, I think communities can handle nuclear power, but corporations and politicians can't. I realize that this is the opposite of what most people believe, but that is because most people who support nuclear are scientists. Just because nuclear  works and works well does not mean that society can manage nuclear power well. 

Fukushima's meltdowns don't bother me any more than a bridge somewhere falling down, but look at the finger pointing, second-guessing, and name-calling! It is terrible. Modern human society cannot handle risk and it is not willing to hedge or insure. If it can't do those things, it should not be building reactors.

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