Japan Inc. makes big renewables push

SoftBank's utility-scale solar power plant in Omuta, Fukuoka Prefecture, began commercial operation on March 10. It is the company's 18th solar facility.

TOKYO -- Japan's retail electricity market will be liberalized in April 2016. Regional power companies from that month will lose their monopolies on electricity sales to households, mom-and-pop retail stores and other small businesses. With the opening of the retail market a year away, competition to get into the huge market is growing. There are 84 million low-voltage contracts nationwide, worth a total of 7.5 trillion yen ($61.2 billion).

     New power suppliers will need to offer attractive tariff menus in the retail market. They expect renewable energy to help them create "electricity brands." Major nonpower companies, including telecommunications, gas and housing businesses, as well as foreign players, are scrambling to set up renewable energy infrastructure.

     When the last market segment for regional power companies' monopoly is opened to other electricity suppliers, service area boundaries will also be removed to allow nationwide sales. Telecom companies, which have fee-collection systems in place, will have an advantage in the liberalized market.  SoftBank, a cellphone carrier with about 50 million customers nationwide, could not overlook the opportunity.

     SoftBank sees great business potential in renewable energy. While the cost of generating electricity with water power or geothermal energy is about the same as that for coal-fired power generation, the cost of generating electricity from solar cells, the most widely used renewable energy sources, is about three times more. Power generation from renewable sources also requires investment in facilities that guarantee stable power supply.

     SoftBank will offer price discounts for users of combined power supply and telecom services, but it will be unable to cut its electricity rates significantly. However, if the company differentiates its power services with added value, it will be able to sell electricity at prices similar to or somewhat higher than those of its competitors. The company is also considering selling energy from photovoltaic and wind power plants nationwide as "local electricity." Solar energy is created by converting heat from the sun into electricity. Photovoltaic energy does not make electricity from heat, but directly from sunlight.

     SoftBank last December started a business of buying photovoltaic electricity from households at 1 yen per kilowatt-hour higher than the government-set fixed prices. This business also has a market research purpose. "Ahead of the liberalization," said a SoftBank executive, "we want to see how much awareness consumers have of electricity prices and renewable energy."

     Daiwa House Industry, a homebuilder, announced in February that it will enter the hydroelectric power business. Misawa Homes, another homebuilder, began buying photovoltaic electricity last spring.

     Some foreign companies are also interested in entering the renewable energy business in Japan. The Japanese subsidiary of Hanwha, a South Korean conglomerate, got registered as a new power supplier last summer.  In South Korea, Hanwha operates power plants. "In Japan, we want to sell photovoltaic electricity to residential customers," said an official at Hanwha's Japanese unit. China's Yingli Green Energy Holding, a major solar panel maker, has started an agency business for buying photovoltaic electricity in Japan.

     When power companies buy electricity from renewable sources, they receive funds from renewable energy levies paid by consumers as part of their electricity bills. New power suppliers also receive such funds at the same rates when they buy electricity from renewables. Because of the revenue from the levies, selling renewable electricity is "adequately profitable, even if the electricity is purchased at higher prices than the government-set fixed prices," said an industry insider.

     Therefore, new power suppliers can buy electricity at higher prices. They purchase photovoltaic electricity at 1-2 yen per kilowatt-hour higher than the fixed prices. Their purchase prices for electricity from biomass, which is popular as a stable power source, have risen to about 4 yen above the fixed rates for such power. New power suppliers are trying to get hold of renewable energy to secure electricity for retail sales.

     What are consumers thinking of renewable energy? In an Internet survey conducted by advertising agency Hakuhodo last autumn, covering 1,000 people, nearly 30% of respondents said they wanted to use electricity from 100% renewable sources.

(Nikkei)