Market News

 June 05, 2011
Japan May Tap Geothermal Power to Offset Atomic Loss, BNEF Says

 Japan can increase the amount of electricity it generates using geothermal resources to offset power shortages as the government reconsiders its reliance on nuclear energy, Bloomberg New Energy Finance said.

The country has the potential to be one of the "world's biggest generators of geothermal power," the renewable energy research arm of Bloomberg LP said in a report. There have been no major projects since 1996 and geothermal plants, which use underground hot water and steam to drive turbines, account for 0.2 percent of Japan's power capacity, according to the report.

Projects are hindered by regulations including a ban on drilling wells in natural parks, which contain about 82 percent of Japan's estimated 23.5 gigawatts of geothermal resources, according to the report by Tokyo-based analyst Yugo Nakamura. A gigawatt is about equal to the output of a new atomic reactor.

"If the government wants to bring about a step-increase in the development of geothermal power, it will have to review all existing regulations, in particular on access to natural parks and streamlining the project application and approval process," the report said.

Opposition to development also comes from Japan's "onsen," or hot-spring owners, concerned that the use of underground hot water to generate electricity may harm their businesses.

Japan plans to introduce a feed-in tariff, or subsidized power price, of 15 yen ($0.19) per kilowatt-hour next year to cover the added cost of generating electricity from underground steam, a measure it forecast will add as much as 500 megawatts of capacity within a decade, the report said. Japan currently has 537 megawatts of installed geothermal capacity.

The government is preparing a long-term energy strategy in the wake of the crisis at Tokyo Electric Power Co.'s Fukushima Dai-Ichi nuclear plant, where three reactors melted down after they were hit by an earthquake and tsunami in March. The plan is expected to emphasize the role of renewable energy.