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Japan’s Green Harakiri: Heading for Energy Death Spiral?

Japan approved on Monday incentives for renewable energy that could unleash billions of dollars in clean-energy investment and help the world’s third-biggest economy shift away from a reliance on nuclear power after the Fukushima disaster. The government will pay 42 yen (53 U.S. cents) per kilowatt hour (kwh) for solar-generated electricity, double the tariff offered in Germany and more than three times that paid in China.

Industry Minister Yukio Edano approved the introduction of feed-in tariffs (FIT), which means higher rates will be paid for renewable energy. The move could expand revenue from renewable generation and related equipment to more than $30 billion by 2016, brokerage CLSA estimates.

The subsidies from July 1 are one of the few certainties in Japan’s energy landscape, where the government has gone back to the drawing board to write a power policy after the Fukushima radiation crisis, the world’s worst nuclear disaster since Chernobyl in 1986.

The push for renewables is aimed at cutting reliance on not only nuclear, but pricey oil and liquefied natural gas for energy needs.

The scheme requires Japanese utilities to buy electricity from renewable sources such as solar, wind and geothermal at pre-set premiums for up to 20 years. Costs will be passed on to consumers through higher bills.

The government will pay 42 yen (53 U.S. cents) per kilowatt hour (kwh) for solar-generated electricity, double the tariff offered in Germany and more than three times that paid in China.

Wind power will be subsidized at least 23.1 yen per kwh, compared with as low as 4.87 euro cents (6 U.S. cents) in Germany.

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see also: Japan Heading for Energy Death Spiral?

Nobuo Tanaka’s hair is on fire. The immediate past executive director of the International Energy Agency is on a mission attempting to alert officials in the United States, Japan, Europe, China and elsewhere that post-Fukushima Japan may be approaching an energy death spiral.

Tanaka’s argument is mathematical at its core. He argues that if Japan does not find a way to ‘turn on’ its now shuttered nuclear energy reactors, not only will Japan’s already sluggish economic condition be crushed with much larger oil and gas imports from Russia, Southeast Asia and the Middle East — but because of the costs and risk uncertainty — Japan’s powerful manufacturing base may begin pulling out of the world’s third largest economy. In a morning meeting with me last week, Nobuo Tanaka said that if Japan didn’t get its domestic energy production back on line soon, Japan would experience serious ‘deindustrialization.’