By Charles Kennedy:
Since public confidence in nuclear power was shattered by the Fukushima disaster, Japan has had to rely heavily on LNG and coal imports to create its power. This has put a huge strain on the country’s economy, and in an attempt to alleviate this Japan introduced generous subsidies to encourage investors to build large scale solar installations around the country.
This dream to develop a large solar generating capacity to supplement the lost nuclear power has failed, and some have estimated that it will cost the country’s utilities nearly $3.5 billion a year in extra coal and LNG imports.
The subsidies offered great potential and developers rushed to the government with promises to create the same generating capacity as 21 nuclear reactors; the only problem was that the majority of the speculative developers lacked the experience and expertise to actually install the solar farms they had promised.
Arthur Mitchell, a lawyer at White & Case in Tokyo who specialised in solar projects, said that it became a gold rushas “everybody and his brother and sister were kind of rushing in without any ability. The law doesn’t have any eligibility requirements; absolutely none.”
Reuters claim that less than a fifth of the projects licensed by the government have actually been completed and are supplying power to the grid, as a range of problems, such as lack of finance, land permit issues, lack of equipment, and a shortage of qualified solar technicians see most efforts struggling to become a reality.
Japan’s Ministry of Economy, Trade and Industry (METI), released data stating that as of July this year only 3,916 MW of the total 22,068 MW approved since the subsidies were first offered in July 2012 have actually begun to sell electricity to the grid. Now most solar projects do take a few years to be completed, so tis possible that some are still being built, but it is estimated than over half will never produce energy.
A Tokyo-based solar consultant told Reuters that, “there’s a lot that won’t come to fruition. If 30-40 percent of (projects approved by March) come online in three years, that would be a good outcome.”
In September METI began a review of approved large scale solar projects in order to try and work out what was causing the delays that have plagued so many projects. First impressions suggest that the main reason for the delays is the difference between the ease with which METI grants approval to the projects, and the developer’s actual ability to build its plans.
Seth Sulkin, the President and CEO of Pacifica Capital, explained to Reuters that “there is no connection between obtaining the facility approval from METI and a project’s feasibility, in terms of cost, design and (other) government approvals. Many projects receiving METI approval cannot be built as they are designed on forests or mountains with no regard to anything but obtaining the facility approval.”
This failure in the solar subsidy scheme has hurt the Japanese solar market, which many international solar panel manufacturers had seen as an alternative to the saturated European market.
This piece is cross-posted from OilPrice.com with permission.