Japan's new feed-in tariff is attractive for solar and wind

Go Japan !

The development of wind and solar projects in Japan will generate highly attractive returns under the feed-in-tariffs recently proposed by the Japanese Government, despite the much higher costs for solar in Japan than elsewhere in the world, the analyst says.

The feed-in tariff programme, set to start in July 2012, is part of policy measures to diversify Japan's energy mix after the Fukushima nuclear disaster last year.

If the Japanese Government implements the rates it is now proposing, they will rank among the world’s most attractive support mechanisms for renewables, Bloomberg New Energy Finance says.

The analyst estimates that under the proposed tariffs solar and wind projects could achieve equity returns as high as 44% and 51%, respectively. This could lead to a surge in project proposals, particularly for the solar photovoltaic (PV) industry.

Depending on how projects are treated by Japan’s traditionally conservative planning regime, Japan could see a cumulative 20 GW of wind and solar capacity by 2014, requiring total investments of up to US$37.5 billion over the next three years, assuming costs stay near current levels.