New Buyback Program for Photovoltaic Generation: Issues in the view of Electric Utilities Industry Policy

Yoko Ito
JEL codes: 

This paper examines the background, the anticipated effects and the issues raised with regards to the New Buyback Program for Photovoltaic Generation, which was introduced based on the enactment of the “Bill on the Promotion of the Use of Nonfossil Energy Sources and Effective Use of Fossil Energy Source Materials by Energy Suppliers” and “Bill to Amend the Act on the Promotion of the Development and Introduction of Alternative Energy”(passed in August 2009). The New Buyback Program is a system whereby general electric power companies are required to purchase excess electric power generated by photovoltaic generating equipment installed mainly in domestic buildings for a period of 10 years at a fixed tariff. Reducing the cost of power generation is the key to achieve the widespread adoption of photovoltaic generation in Japan. This paper therefore pays attention to the acceleration of cost reductions accompanying the introduction of the new Program, and the subsequent anticipated increase in international competitiveness within related industries. It also touches upon a recent trend that the negative impact of the financial crisis may imply the perspective for the photovoltaic industry is not always positive. Against this background, this paper seeks to consider, with regard to the introduction of the new Program, the problems arising from changes in policy focus from reducing dependence on oil and the liberalization of the utilities, to the climate change mitigations. It argues that the implementation of the new Program requires a well-defined policy coordination considering the compatibility with existing policies and frameworks. Namely, those issues such as the passing on of the cost of the buyback tariff against the liberalization policy as well as energy competition in ever increasing environmental pressures need to be reviewed in a wider picture of long-term utility policy that are to be build upon a balance between the three pillars of energy, economy and the environment.