JAPAN | Big industry to get 80-percent discount on renewable energy premiums

Posted on August 14, 2011


JAPAN | ASAHI | 14 August 2011

Industries that consume large amounts of power will get a huge break on their electricity bills, according to a revised draft of a special measures bill on renewable energy obtained by The Asahi Shimbun on Aug. 12.

The draft, which has been agreed upon by the ruling and opposition camps, will force power companies to buy all electricity generated by solar and wind power stations.

It stipulates that different prices will be attached to electricity from different energy sources, and that the extra cost of purchasing the power will be added to electricity bills in the form of universal premiums.

Those premiums will be slashed by more than 80 percent for steel, chemical and other industries.

The ruling Democratic Party of Japan and the opposition Liberal Democratic Party agreed on Aug. 12 that the Lower House will pass the renewable energy bill on Aug. 19. It is expected to be enacted on Aug. 26 and come into effect in July next year. Enterprises and households in regions hard hit by the Great East Japan Earthquake will be exempted from the electricity bill premiums until March 2013 so as not to hamper rebuilding efforts.

The Ministry of Economy, Trade and Industry estimates that the renewable energy bill, if it comes into effect, will add 0.5 yen per kilowatt-hour to the household and business electricity bills by fiscal 2020. The average household can expect to pay 150 yen extra a month.

Keidanren (Japan Business Federation), Japan’s largest business organization, had criticized the very large premiums for big users of electricity, saying it would hurt corporate competitiveness. The issue was covered in discussions between the main parties over the passage of the bill.

In the revised draft, electricity bill premiums will be slashed by more than 80 percent for enterprises that use more than eight times the average power consumed by a manufacturer. Likely beneficiaries will include steelmakers that use electric arc furnaces to melt scrap iron and chemical companies.

The cost of the concessions to big business will be deducted from the special account for energy measures to avoid increasing the premiums for other electric power users and is likely to be at least partly covered by increased revenues from petroleum and coal taxes, levied on electric power companies.

“Suspension of nuclear power plants will increase demand for petroleum and coal, and accordingly also the tax revenues from them,” an LDP Lower House member said.

Earlier drafts of the legislation had proposed that power from all natural energy sources other than solar power should be bought at a unified rate of about 20 yen per kilowatt-hour.

However, after lobbying from new entrants to the power generation business saying that the pricing system should be more sensitive to investment costs, the revised draft says that prices should be decided by the minister of economy, trade and industry and should vary according to what energy source they came from and the output levels of the originating power plant.

Wind, geothermal and biomass power from small or large plants might all be bought at different rates.

The industry minister will be advised by a newly created panel of third-party experts. The panel will consist of five members, and their appointment will be conditional on Diet approval using a similar mechanism to the appointment of the Bank of Japan governor.

(This article was written by Toru Nakagawa and Tetsuo Kogure.)

Posted in: JAPAN