Some vested interests want you to think that Japan’s new renewable energy feed-in tariffs (FIT) are really expensive! Well, their sort of right – everything costs money, but are the FITs really expensive?
The Japan renewable energy feed-in tariffs system, after its launch in July, will be paid for by electricity consumers. Everyone who buys electricity will have some additional amount tagged onto their bill each month to pay for the renewable deployment.
A typical household with a 7,000 yen (about €68 or US$88 per month) electric bill will be charged an additional renewable energy fee of 70 to 100 yen (about one Euro or US dollar) per month. These fees will be collected from everyone and used to pay for the FITs for renewable energy deployed.
Traditional power rate setting mechanisms are a very inefficient and expensive way to set electricity rates. These mechanisms can, and many times do, incentivize electric utilities to invest in the most expensive forms of power generation. This means that you and I pay way too much for electricity.
In Japan and many other countries/markets, electric utility rates are set through a “Cost Plus” system. As I wrote the other day, the Cost Plus system works like this: