Low Carbon Urban Infrastructure Investment in Asian Cities

RENEWABLE ENERGY INVESTMENT RISK ANALYSIS FOR LOW-CARBON CITY... 9

This chapter first identifies the risks associated with renewable energy
investments and the financial schemes that may be applied to promote
renewable energy production (Sect. 2.2). Second, it examines the cur-
rent status of global warming action plans and strategies that promote
renewable energy sources by using the city of Yokohama as a case study
(Sect. 2.3). Third, it describes the methodologies and data used for the
analysis of the investment risks and returns (Sect. 2.4). Fourth, it discusses
renewable energy investment outcomes with a focus on solar photovolta-
ics (PV) in both the residential and commercial sectors (Sect. 2.5). In
this study, we focus on investment in solar PV. Challenges associated with
investments made under the current feed-in tariff (FIT) system are pre-
sented as other types of risks using a case study in Japan (Sect. 2.6). The
last section presents a discussion and conclusion (Sect. 2.7).

2.2 renewable energy FInancIng renewable

energy Investment rIsks and costs

2.2.1 Barriers to Accelerating Renewable Energy Investments

One of the barriers to accelerating investments in renewable energy
involves the pricing of renewable energy, which is more expensive
than other forms of electricity generation. In the case of Japan, the
cost of generating electricity using renewable energy—and using solar
PV energy in particular—remains high compared with other energy
sources (Table 2.1). The emission abatement cost of solar PV exceeds
50,000–100,000 JPY/t-CO 2 (MOEJ 2010 ; CAS 2009 ). However, in
the long run, renewable energy may reduce electricity generation costs
(Sims et  al. 2003 ). Although generating electricity using fossil fuels
may be less costly at present, there is a risk and uncertainty that these
costs may escalate in the coming years and a regulation may restrict

Table 2.1 Energy generation costs as of 2010 (JPY/kWh)

Nuclear Coal Oil LNG Hydro Onshore
wind

Geothermal Small

hydro

Solar Mega

solar

8.9– 9.5–
9.7
(2.5)

22.1–

23.7

(1.1)

11.5–

11.9

(2.1)

10.6 9.9–17.39.2–11.6 19.1–

22

33.4–

38.3

30.1–

45.8

Source: Cost evaluation committee (CAS 2012 )
The capacity factor of coal and LNG thermal power generation is 50 %