Japan's businesses face $1bn energy bill hike under solar scheme

The case for investment in energy efficiency was hammered home to Japanese businesses yesterday with the release of a government-backed report suggesting corporate energy bills could rise by $1.1bn a year by 2020 as a result of the country's new solar energy feed-in tariff scheme.

The proposed incentive mechanism is to be introduced in April 2010 and will allow utilities to pass on the extra cost of acquiring surplus solar power at above market rates to their customers.

According to the new report from the Ministry of Economy, Trade and Industry Japan's business sector will see power costs increase by about $32m per month – or $384m annually – for the first few years of the scheme. It adds that the figure may then triple in the following five to 10 years to $95m per month, or $1.1bn annually.

Households will pay an average of $0.30 a month more, potentially rising to $0.90 – or $11 per year – by 2020, according to ministry estimates. The higher sum is equal to a collective $528m more in annual electricity bills charged to Japan's 48m households.

Under the feed-in tariff, utilities will be required to purchase surplus power generated from factories and households starting from November. Japan's 10 electricity companies will be obliged to pay $0.50 per kWh for any power from homes, while businesses that feed energy from solar panels into the grid will receive $0.25 per kWh.

The tariff structure is aimed at encouraging homeowners to install solar panels and sell excess electricity back to the grid.

Japan has a target of delivering a 10-fold increase on its 2005 solar generation capacity of 1.4GW by 2020, rising to a 40-fold increase by 2030.

The new report is the latest in a series of cost estimates related to Japan's carbon reduction efforts that are currently being calculated and publicised by the government. A panel report released earlier this month estimated that Japan's policies to reduce CO2 output will cost $515bn (£256bn) over the next decade.