Japanese Solar Power Outlook Looks Bright but Wind Power May Not Fly | Katonah Real Estate

TOKYO—New minimum-price rules for Japan’s renewable-energy sector will likely help solar power shine, but bird strikes and tough environmental-assessment needs may make it tough for wind generation to take off.

By 2030, the government wants up to 35% of Japan’s energy needs to be supplied by renewable sources—up from roughly 10% today. Hydropower is the leading renewable, with solar, wind and geothermal energy adding up to just 1.4% of total power output.

Japan must import nearly all the fuel used to make electricity, and with its nuclear sector still almost entirely offline, it introduced last month a feed-in tariff system to promote renewable energy—in which it lags far behind the U.S. and the European Union. The system obliges Japan’s 10 regional power utilities to buy electricity generated by solar and wind projects, paying about ¥40 (50 cents) per kilowatt-hour and ¥23 per kilowatt-hour, respectively. Solar payments are set for 20 years, wind for 15.

Those rules apply to projects either receiving government approvals or finalizing power sales contracts with utilities by June 2015, after which there are no guarantees on future tariff amounts or duration. A rolling back of tariffs in cash-strapped and debt-laden EU countries has hit orders for new solar and wind equipment.

Despite this underpinning in Japan, prospective wind-farm operators will find investment decisions harder than those planning solar projects. Tough and potentially lengthy environmental assessments will be part of the approval process from October, due in part to worry more wind farms will mean more birds killed by windmill blades. A 2007-09 study by Japan’s Ministry of Environment found that wind turbines located in areas inhabited by raptors or used by migratory birds are a significant threat to those bird populations—prompting new wind-farm guidelines last year.

Animal-welfare groups argue that the careful siting of wind farms can keep deaths to a minimum. Migratory birds tend to take the same route year after year, while raptors live in specific areas, said Tomoko Shimura, a director of the Nature Conservation Society of Japan.

Solar projects don’t need environmental assessments unless their plans call for significant changes to topography, such as the flattening of a hill.

This and the new tariffs are good news for solar players like Toshiba Corp., 6588.TO +1.85% Sharp Corp. 6753.TO +2.87% and Kyocera Corp., 6971.TO 0.00% as well as for planned new entrants like mobile-phone service provider Softbank Corp. 9984.TO +1.43% and foreign entrants like China’s Suntech Power Holdings Co. STP 0.00% In the first month after the feed-in tariffs were introduced July 1, the government signed off on many thousands of mostly small projects, but more than 99% of them were in the solar sector.

“There won’t be a lot of wind-power projects coming online one after another,” said Toshio Hori, president of wind-farm developer Green Power Investment Corp.

Mr. Hori said his company will be able to take advantage of the tariff benefits for a 48-megawatt project in Shimane prefecture in western Japan—already iven regulatory approvals needed to ensure final government acceptance—but future projects could suffer. Next in the pipeline is a 126.5 MW wind farm in Aomori prefecture in the north.

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