14 T. WAKIYAMA ET AL.
chasing system and cannot be used to ensure the quantity to be purchased.
In addition, purchasing green power certificates are largely treated as
donations in Japan (Shimizu 2009 ). Thus, excess company donations can-
not be treated as write-offs for tax purposes.
2.2.2.3 Feed-in Tariff
The FIT price-based system offers electricity producers long-term fixed
prices on electricity generated through renewables, which can help reduce
price risks by ensuring long-term cash flows at fixed prices. In Japan, long-
term fixed prices are determined by estimating the average generation
cost of each renewable energy technology based on projections made by
governmental expert committees^2 in Japan (METI 2012a, b). After the
Fukushima nuclear accident in 2011, discussions on increasing renewable
energy sources emerged in Japan. The FIT system was implemented in
July 2012, and installed capacity levels of renewable energy have rapidly
increased since that time, particularly in the case of non-residential solar
power generation installation. Following the introduction of FITs, the
installed capacity of solar PV increased to about 11.9 GW (9.1 GW of
non-residential (more than 10 kW) solar PV) over two years from July
2012 to July 2014.^3 However, total hydro, wind, solar, and geother-
mal electricity generation levels reached only 0.097 TWh^4 in 2014. The
renewable energy ratio in the total electricity generation is at 10 %.
2.2.2.4 Tax Policies and Subsidies
In addition to cost reduction strategies to increase competitiveness of
renewable energy, renewable energy requires not only an FIT system but
also a system that mitigates upfront costs. The greater the scale of the
installed capacity, the greater the upfront costs. Policy options such as tax
deductions and subsidies or financing mechanisms (in combination with
risk mitigation efforts to increase access to funding for upfront costs) are
necessary to ensure that investment returns can be generated over a rea-
sonably short period of time.
Numerous studies have examined the effects of price- and quantity-
based systems that have been employed to increase renewable energy sup-
plies (Ayoub and Yuji 2012 ; Buckman 2011 ; del Río and Gual 2007 ;
Menanteau et al. 2003a, b; Muhammad-Sukki et al. 2014 ; Pizer 2002 ),
although the effectiveness of FIT systems and of associated funding poli-
cies as risk mitigation tools have not been assessed in details. This chapter
assesses the effects of FIT and related policies in a city-scale case study.