Japan’s Government Guarantees Debt to Develop its Geothermal Potential

Japan’s government is guaranteeing debt to build geothermal power stations.
Published: Tue 20 May 2014

In a bid to develop its geothermal potential, Japan’s government is taking a bold step by guaranteeing debt to build geothermal power stations. The aim is to attract investment by private financial institutions, according to the Ministry of Economy, Trade and Industry.

Encourage financing

State-run Japan Oil, Gas & Metals National Corporation will, for the first time, offer the guarantee for a 5MW project planned by a unit of Kyushu Electric Power Co. in the southwestern prefecture of Oita, Kyushu Island. The project developer has secured long-term financing from Nippon Life Insurance Co and Mizuho Bank, totalling US$39 million.

The Corporation will also be guaranteeing debt for a 400Kw station in Fukushima in northeastern Japan. The plant has JPY 557 million in long term loans in place from Fukushima Shinkin Bank.

According to Hidefumi Nakashima, a Japan Oil, Gas & Metals National Corporation, the aim is to encourage financing from institutions that are unfamiliar with geothermal projects.

Japan’s relentless search for alternative power sources

Since the closure of Japan’s nuclear reactors following the March 2011 Fukushima Daiichi nuclear crisis, Japan’s government continues to seek and harness alternative power sources to make up for the loss of power generation. The country has been forced to rely on expensive hydrocarbon imports for its power.

Japan was the world's third largest producer of nuclear power after the United States and France before the nuclear power plant accident.

To make up for the loss in power generation, Japan has been exploring a number of alternatives and geothermal power is certainly one of them. Japan’s Ministry of Economy, Trade and Industry has already targeted 20 sites across the country for potential geothermal power generation.

Geothermal potential is significant

Three Japanese industrial concerns - Toshiba, Mitsubishi Heavy Industries and Fuji Electric have a combined total of over half the world market for geothermal turbines, even though currently geothermal power accounts for a mere 0.3% of Japan’s total electricity production.

As a significant milestone on Japan’s increasing diversification of energy sources, in April Chuo Electric Power Co. l opened a new geothermal plant in Kumamoto Prefecture, Japan’s first geothermal power plant opened since 1999.

While the initial kilowatt-hour price of geothermal remains higher than hydrocarbon-based power generation, Japan remains an indigenous power source costing out eventual kilowatt hours after factoring out start-up costs. And, unlike most other renewable energy sources, like hydroelectric power generation, it is available around the clock.

Except for the initial start-up prices then, geothermal seems to be a good idea for Japan. With the government’s backing, geothermal projects should see some serious development going forward.