Developers Are Rushing to be Among the First in Japan’s New Renewable Industry

White & Case LLP

On June 18, 2012, Yukio Edano, the Minister of Economy, Trade and Industry (METI) accepted the recommendation of an advisory committee on the new renewable energy industry and adopted a comprehensive system of feed-in tariffs in order to put Japan on the path to a more sustainable energy mix. As the move had been widely expected following the adoption of the Renewable Energy Act (REA) (effective July 1, 2012), numerous Japanese companies have been positioning themselves to take advantage of the unusually generous rates. METI has reported that, as of June 29, it has approved 44 applications (moshikomi) to establish facilities all over the country for a total of 41,605 kilowatts of renewable power. This year, the Ministry said that it expects to introduce approximately 2.5 MW of new renewable power; capacity equalto two nuclear reactors.

While feed-in tariffs have been set for a wide variety of technologies, it is widely expected that the focus will be on solar (42 yen/kWh) and wind (23.1/kWh) for the first year (July 1, 2012 – March 31, 2013). Under the REA, the tariffs for solar and wind will be fixed for a 20-year period if the developer can achieve two conditions precedent: (i) a “Facility Authorization” (setsubi nintei) from METI and (ii) an interconnection agreement for the grid, beginning with the later of these two dates. It is also widely expected that the tariff rates will decline over time. For example, the rates for the first period under the program were recently decided but at this stage, it is not known what the rates will be for the second period (April 1, 2013 – March 31, 2014) and the third period (April 1, 2014 – March 31, 2015) under the scheme.

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