VZCZCXRO2332
RR RUEHAST RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD RUEHTM RUEHTRO
DE RUEHKO #0596/01 0770527
ZNR UUUUU ZZH
R 180527Z MAR 09
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 1566
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUEHFK/AMCONSUL FUKUOKA 3022
RUEHNAG/AMCONSUL NAGOYA 0787
RUEHNH/AMCONSUL NAHA 5362
RUEHOK/AMCONSUL OSAKA KOBE 6814
RUEHKSO/AMCONSUL SAPPORO 3566
RUEAEPA/HQ EPA WASHDC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RHEHAAA/NSC WASHDC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 03 TOKYO 000596 
 
SIPDIS 
SENSITIVE 
 
STATE FOR S/SECC, IO, EEB, EAP/J 
STATE ALSO FOR OES/EGC - TTALLEY, NBARTH, CSIERAWSKI 
NSC FOR CCONNORS, JLOI 
EPA FOR SFULTON 
USDOE FOR S-3, RMARLAY, SRUEN 
 
E.O. 12958: N/A 
TAGS: ENRG SENV JA
SUBJECT: JAPAN MOVES TOWARD SURPLUS POWER BUYBACK SCHEME TO 
FOSTER SOLAR ENERGY 
 
REF: A. 08 TOKYO 1848 
     ¶B. TOKYO 219 
     ¶C. TOKYO 476 
     ¶D. OSAKA KOBE 34 
 
TOKYO 00000596  001.2 OF 003 
 
 
¶1. (SBU) SUMMARY: METI officials hope the Diet will approve a 
bill during the current legislative session introducing a 
feed-in-tariff (FIT)-like scheme to compel electric power 
companies to buy surplus solar photovoltaic (PV) power from 
residential generators.  If approved, the surplus power 
repurchasing scheme will add to several GOJ incentives now 
promoting solar energy.  The GOJ has considered a FIT program 
to promote residential installation of PV technology since 
mid-2008.  However, the Cabinet's current legislative 
proposal caught many in industry and energy policy circles 
off guard.  A METI official told emboffs the hard push to 
implement a FIT buyback scheme results from intense political 
pressure from various quarters for more vigorous policies to 
promote alternative energy and to encourage Japanese 
technological innovation.  END SUMMARY. 
 
------------------------------------------- 
OVERVIEW OF JAPAN'S PROPOSED BUYBACK SCHEME 
------------------------------------------- 
 
¶2. (U) Japan's Cabinet approved a proposal March 10 to amend 
Japan's Basic Energy Law to compel electric power companies 
to purchase surplus electricity generated by residential 
solar power generation.  The bill is now before the Diet. 
According to METI New and Renewable Energy Office Director 
Shoji Watanabe, the buyback scheme proposes to fix the price 
for solar energy at around 49 yen/kWH, roughly double the 
amount companies currently pay under a voluntary purchase 
scheme introduced in 1992.  Watanabe explained the repurchase 
scheme legislation guarantees a fixed price for ten years as 
an incentive for PV installation.  Thus, an individual 
consumer who installs a PV power generator during the first 
year of the program would receive 49 yen/kWH for their 
surplus solar power for up to ten years.  The 10-year 
repurchase price has a sliding scale, with rates dependent on 
when the household installs the PV panels.  METI devised the 
program to provide incentives for early investment in PV 
technology in order to bring down installation and generation 
costs. 
 
¶3.  (U) Watanabe explained the average Japanese household 
consumes 1,200 kWH/year of electricity.  If this household 
installs a typical 2.1 million yen 3kW PV unit, the household 
could sell back 1,800 kW/year in surplus electricity to the 
power company.  Based on these projections, the household 
could expect to earn 900,000 yen from the FIT in the first 
ten years following installation.  The household would also 
receive a 210,000 yen installation subsidy from METI in 
addition to whatever regional government benefit package may 
be available.  He noted the Tokyo Metropolitan Government 
offers 300,000 yen for PV installation, which would make the 
net ten-year cost of installing a PV system to a Tokyo 
household 690,000 yen.  However, the homeowner would also 
avoid paying an average of 288,000 in energy bills over the 
ten years, thereby further reducing the cost of the PV system 
to 402,000 yen.  Assuming the household continues to sell 
power back to the electric company at the current price of 24 
yen/kWH after the 10-year elevated buyback price expires, a 
household that invests in PV technology would see the 
investment pay for itself in just over 15 years. 
 
--------------------------------------------- ---- 
METI LOOKS ABROAD FOR EXAMPLES OF FEED-IN-TARIFFS 
--------------------------------------------- ---- 
 
¶4. (U) In mid-2008 METI began studying a feed-in-tariff along 
the lines of those in effect in Germany as part of a suite of 
measures to boost demand for photovoltaic energy.  (NOTE: as 
reported in ref A, Japan has targeted a ten-fold increase in 
solar power generation by 2020. END NOTE.) Watanabe said 
 
TOKYO 00000596  002.2 OF 003 
 
 
METI's initial analysis concluded a German-style FIT would 
likely result in a 360 yen/month hike in what an average 
household pays for electricity because utilities would pass 
the additional expense of buying surplus energy along to 
consumers.  METI's analysis also determined the buyback 
period under the German FIT, which fixed the price of PV 
electricity for 20 years, is excessive.  As a result, Japan's 
proposed buyback scheme includes several departures from the 
German model, specifically: (1) it will only apply to PV 
electricity, not to wind, biomass, or other sources; (2) it 
only applies to surplus electricity generation from 
residential consumers, not to straight-to-grid generation; 
and (3) the buyback scheme is being implemented to 
complement--not replace--other tax incentives and subsidies 
designed to promote PV power generation (ref B). 
 
--------------------------------------------- ----------- 
ANNOUNCEMENT CATCHES INDUSTRY AND POLICYMAKERS OFF-GUARD 
--------------------------------------------- ----------- 
 
¶5. (SBU) On Feb. 24 METI Minister Toshihiro Nikai first 
announced the GOJ had resolved to implement a solar power 
repurchase scheme along the lines described above (after 
notifying Federation of Electric Power Companies head Shosuke 
Mori).  The announcement caught many in Japan's energy policy 
community off-guard, including members of METI's Advisory 
Panel on Energy, which is a consortium of industry and 
academic experts commissioned by METI's Agency for Natural 
Resources and Energy (ANRE) to examine ways to promote 
alternative energy in Japan.  The Committee had issued an 
"urgent proposal" in September 2008 warning a German-style 
FIT would be too costly.  It urged policy makers instead to 
continue to expand PV electricity demand through research and 
development spending and installation subsidies, continued 
voluntary buyback, and expansion of Japan's Renewable 
Portfolio Standard (RPS) to require electricity companies to 
meet targets for renewable energy generation from a variety 
of alternative energy sources.  At a hastily-convened meeting 
on Feb. 25, METI DG for Energy Conservation and Renewable 
Energy Hideo Hatou apologized to the Advisory Panel members 
for not informing them of the decision prior to Minister 
Nikai's announcement.  Hatou explained the measure was a 
"necessary industrial policy" to support solar power 
development and Japanese manufacturers of PV technology. 
 
¶6. (SBU) Predictably, manufacturers of solar technology 
welcomed the GOJ's proposal.  Toshishige Hamano, Sharp 
Corporation's representative director, told the advisory 
panel the buyback scheme is essential to promote widespread 
commercialization, to lower production costs, and to achieve 
the GOJ's ambitious targets for solar power generation. 
(NOTE: representatives of Sharp and other firms previously 
expressed hope Japan would implement a FIT scheme during 
discussions with Consulate Osaka/Kobe (ref C).  The American 
Chamber of Commerce in Japan has also called for expanded 
incentives for households to install solar energy panels in 
its recent IT stimulus recommendations (ref D).  END NOTE). 
 
¶7. (U) Several experts, however, questioned the fairness and 
effectiveness of picking a winner in solar power.  These 
experts queried Hatou on the impact on other policy reforms 
under consideration that intended to expand the use of 
alternative energy.  Tsutomo Takei, CEO of Ennet Corporation, 
a small-scale private power supplier, was concerned the FIT 
scheme might unduly favor large-scale power companies who can 
pass the additional costs to consumers more easily. 
Shigehito Nakamura, managing director of the energy holding 
company and wind power developer Eureus Energy Holdings, 
questioned the GOJ's rationale for singling out PV 
electricity, arguing that enhancement of the Renewable 
Portfolio Standard law would enable more flexible expansion 
of alternative energy. 
 
¶8. (U) Other advisory committee experts raised the potential 
burden on consumers.  In addition, University of Tokyo 
 
TOKYO 00000596  003.2 OF 003 
 
 
engineering professor Kenji Yamaji raised a fairness issue, 
saying the policy would pass the additional cost of the 
buyback to all consumers while favoring only those affluent 
enough to install PV technology.  METI's Watanabe told 
emboffs the impetus to move forward on the solar power 
buyback proposal without first securing broad consensus, and 
in spite of the advisory committee's recommendations, came 
directly from Minister Nikai following an almost daily Diet 
debate on the subject in late December.  Watanabe said he 
hopes the bill will pass in the current Diet session, giving 
METI time to prepare the necessary administrative ordinances 
so that the buyback scheme can start in the Spring of 2010. 
 
¶9. (SBU) COMMENT: METI's decision to move ahead on the 
proposal without first securing broader consensus is unusual. 
 The manner METI made its proposal public reflects political 
pressure to move quickly to build Japan's solar power 
capacity.  At the same time, a review of Diet discussions 
leading to Nikai's announcement reveals both ruling party and 
opposition party parliamentary calls for either adoption of 
the German-style system or a scheme more rigorous than METI's 
proposal.  For instance, LDP Diet member Yasuhisa Shiozaki 
and other eco-oriented members of the Diet advocated a 
broader FIT along the German model, as did the New Komeito's 
Eda Yasuyuki.  Meanwhile, the opposition Democratic Party of 
Japan's (DPJ) election platform includes a FIT scheme that 
calls for repurchase of wind and biomass power in addition to 
PV.  DPJ parliamentarians Tetsuro Fukushima and Kenzo Fujisue 
have been particularly vocal in calling for broader measures 
to promote alternative energy.  END COMMENT. 
ZUMWALT