Japan’s wind farm market allows developers to build larger projects and according to the Ministry of Environment offers greater potential capacity. The country could accommodate 280,000 megawatts of wind capacity onshore and a further 1,600,000 megawatts off the coast, compared to 150,000 megawatts of commercial solar power, the ministry said last year. Photographer: Tomohiro Ohsumi/Bloomberg

Sumitomo Sees ‘Solar Bubble’ as Japan Rejects Nuclear: Energy

By Yuriy Humber and Tsuyoshi Inajima

As Goldman Sachs Group Inc. (GS) and billionaire Masayoshi Son lead a swarm of investors exploiting Japan’s solar power subsidies, the world’s biggest, Sumitomo Corp. (8053) is betting on wind.

The trading house, Japan’s second-largest investor in power generation outside utilities, will add wind farms and at least two biomass plants to take advantage of the above-market rates for electricity from renewable sources the government introduced in July. Sumitomo’s local utility, Summit Energy Corp., expects profits from wind power to triple in as many years, said the unit’s president, Shinichi Kitamura.

Sumitomo’s focus is in part a response to a rush into solar projects that’s pushing up land prices and salaries, as well as luring investors from gambling parlor operators to asset managers. While government data show that Japan can build wind farms at a cheaper price and with higher returns than solar, 99 percent of applications for the new tariffs are for electricity generated from sunlight.

“With so many companies rushing in we are seeing a solar bubble forming and land prices are rising,” Kitamura said in a Sept. 7 interview. Japan’s ambitions in renewable energy look more manageable in wind energy, he said.

Prime Minister Yoshihiko Noda announced on Sept. 14 an energy policy that calls for a phaseout of nuclear energy over the next three decades and to triple generation from renewable sources. The ruling Democratic Party of Japan last month recommended renewable energy make up about 40 percent of Japan’s total by the early 2030s, from the current 8 percent that mostly comes from hydropower.