After the nuclear meltdown at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant last year and the subsequent off-lining of their entire nuclear industry, Japan suddenly found itself with a huge energy deficit.

They first turned to fossil fuels, but due to the high prices and large amount of carbon emissions this never offered a long term solution. Instead, Japan hope to encourage renewable energy sources to make up the shortfall, and have released such attractive solar feed-in tariffs that many have predicted Japan will overtake both Germany and the current leader, Italy, to become the largest solar PV market in the world.

The tariffs, which will take effect next month, will force utility companies to pay a generous 42 yen (53 cents) per kilowatt-hour to solar energy producers. Japan hopes that the tariffs will quickly motivate investment to add 3.2 gigawatts of solar energy to the electric grid, and replace the power supplied from the nuclear industry, which accounted for 21% of Japan’s energy needs. Germany was the first country to make use of feed-in tariffs, which helped it to attract a massive 22GW of solar installations.

Mina Sekiguchi, an associate partner and head of energy and infrastructure at KPMG, admitted that the tariff is attractive and “reflects the Government’s intention to set up many solar power stations very quickly.”

However not everyone is excited by the potential of the new tariffs. Quite obviously the fossil fuel companies, who are currently benefitting from Japans energy demand needs and will lose out if the tariffs are as successful as predicted, are complaining. They voice concerns over the high rates that utilities will be forced to pay, nearly three times the current cost of conventional power.

Masami Hasegawa, the senior manager of Keidanren, Japan’s most powerful business lobby, criticised that this mechanism forces “a high degree of market intervention by setting tariffs artificially high and making users shoulder the cost. We (Keidanren) question the effectiveness of such a scheme.”

By. Joao Peixe of Oilprice.com