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Through this newsletter, we offer you a regular selection of legislative and judicial decision insights prepared by LPA lawyers from its 4 Asian offices as well as some recent news from our teams.<\/p>\n
SMART ALERT<\/span><\/a> LEGAL INSIGHTS IN ASIA<\/span><\/a><\/p>\n Hong Kong<\/a> China<\/a><\/strong> Singapore<\/a> Japan<\/a><\/strong> OUR LATEST DEALS<\/span><\/a><\/p>\n NEWS FROM LPA<\/span><\/a><\/p>\n <\/p>\n Outline of the renewable energy law and regulation and outlook for 2023 in Japan<\/span><\/span>\u00a0<\/span><\/strong><\/p>\n Japanese energy policy was traditionally focused on nuclear power as a means of reducing carbon emissions and increasing domestic energy production. However, the Fukushima Daiichi nuclear accident in March 2011 led in aftermath of the accident to a general shutdown of nuclear reactors and the energy shortfall was completed with natural gas and coal.\u00a0<\/span>\u00a0<\/span><\/p>\n Conscious that the energy sector is a critical area and aware of the necessity to have rapid development of renewable generation energy, Japan has implemented in 2011, the Act on Special Measures for the Promotion of the Use of Renewable Electricity (Act No. 108 of 2011, the \u201cRenewable Energy Business Act\u201d) which has introduced in July 2012 the Feed-In-Tarif (the \u201cFIT\u201d) system through which renewable energy power producers are entitled to sell electricity to electricity utilities at a fixed price for a fixed term. Under the Renewable Energy Business Act, the definition of \u201crenewable energy\u201d includes solar power, wind power, hydraulic power, geothermal power, biomass, and any other resources other than crude oil, petroleum gas, combustible natural gas, coal, and products manufactured therefrom, which may be designated by a cabinet order in the future.\u00a0<\/span>\u00a0<\/span><\/p>\n In 2017, Japan ratified the Paris Agreement which targets to reduce carbon emissions in comparison with 2013 by 26.3% by 2030, and by 80% by 2050. In October 2020, the Japanese government announced plans for the country to become carbon neutral by 2050 and also announced in April 2021 a new ambitious target to reduce carbon emissions by 46% by 2030 in comparison with 2013.\u00a0<\/span>\u00a0<\/span><\/p>\n In June 2020, the Act to Amend the Renewable Energy Business Act has been adopted which provides various amendments to energy-related law. It entered into force on 1 April 2022 (the \u201cRenewable Energy Promotion Act\u201d) by introducing, among other things, the Feed-In-Premium (the \u201cFIP\u201d) system by which the energy power purchase price of a utility is determined based on the market price by adding a certain premium.\u00a0<\/span>\u00a0<\/span><\/p>\n Since the introduction of the FIT and FIP system, solar photovoltaic projects have developed significantly and offshore winds present now an enormous opportunity since Japan has the seventh longest coastline in the world which could give Japan the opportunity to lead the market for floating offshore wind energy.\u00a0<\/span>\u00a0<\/span><\/p>\n The year 2023 is expected to be a year in which new projects will flourish and the new reform of the Renewable Energy Promotion Act will enter into force on 1 April. In addition, the Tokyo Metropolitan Government plans to enforce a new system from April 2025 requiring home builders and developers to install solar PV panels on new buildings and houses, which will lead the renewable energy market to a new phase of development and innovation.\u00a0<\/span>\u00a0<\/span><\/p>\n In this first Smart Alert Japan of the year 2023, we present some of the important and recent developments in the offshore wind and solar power renewable energy sector, the outlook on the renewable energy plans of the Tokyo Metropolitan Government, and the upcoming reform in the energy regulations in Japan.\u00a0<\/span>\u00a0<\/span><\/p>\n 1. The offshore wind and solar power renewable energy in Japan<\/span><\/p>\n 1.1. The offshore wind renewable energy<\/span>\u00a0<\/span><\/p>\n Considering the potentialities of large-scale implementation, lowering the costs of electricity, and of having a major impact on the country\u2019s energy strategy and economy, Japan considers offshore wind renewable energy as a key for developing renewable energy as the main power source in Japan.\u00a0<\/span>\u00a0<\/span><\/p>\n The development of offshore wind renewable energy presents both an opportunity and a challenge for Japan. Indeed, with a large population and a mountainous and seismic landscape, onshore wind renewable energy projects (and also solar power renewable energy projects) are limited by the few lands available. Such geographical and demographic conditions limit also space for grid connection, and in turn, implied high costs. Therefore, offshore wind renewable energy is a relevant solution to these limitations given that Japan has a long coastline, and the water depths increase quickly near the shore. However, offshore wind renewable energy depends currently on foreign industries for the equipment of the offshore plants. The future challenge for the development of offshore wind renewable energy is to consider reducing costs as well as enhancing competitiveness thereof.\u00a0<\/span>\u00a0<\/span><\/p>\n In its 6th Strategic Energy Plan of October 2021, the Japanese government recall the need to develop domestic offshore wind renewable energy given the natural conditions constraints unique to Japan, such as limited flat land.\u00a0<\/span>\u00a0<\/span><\/p>\n On 30 November 2018, the Japanese parliament approved the Act for the Promotion of Use of Marine Areas for Development of Marine Renewable Energy Generation Facilities (Act n\u00b089 of 2018) to introduce a new national framework for offshore wind projects in Japan. This law bore the purpose to create a much-needed national framework to coordinate efforts to establish an offshore wind industry in Japan in deep water by designating the promotion areas of offshore wind development and installing a competitive auction process for the rights to develop and build projects in these areas. The method of evaluation for applications to the auction process and other details was to be set forth in public tender guidelines published by the government pursuant to which each bidding would be conducted.\u00a0<\/span>\u00a0<\/span><\/p>\n In 2021, the Ministry of Economy, Trade, and Industry (\u201cMETI\u201d), announced Round 1 of the auction for offshore wind auctions under the FIT scheme by designating 3 promotions areas ((i) off the coast of Noshiro City, Mikane Town, and Oga City, Akita Prefecture, (ii) off the coast of Oki City, Yurihonjo-shi, Akita and (iii) off the coast of Choshi City, Chiba Prefecture) taking into account the climate and natural aspects of the area, the sea traffic routes, the fishery activity, the likelihood to establish a grid connection to facilities and the transportation of resources to maintain the facility.\u00a0<\/span>\u00a0<\/span><\/p>\n Round 2 of the auction process began on 28 December 2022 and is projected to provide at least 1.8 GW of offshore power generation under the first FIP scheme. This round covers 4 promotions areas: (1) Happo Town and Noshiro City (Akita Prefecture), (2) Enoshima, Saikai City (Nagasaki Prefecture), (3) Oga City, Katagami City and Akita City (Akita Prefecture), and (4) Murakami City and Tainai City (Niigata Prefecture). Proposals to the tender process are due by 30 June 2023 with the result expected in March 2024.\u00a0<\/span>\u00a0<\/span><\/p>\n 1.2. The solar power renewable energy <\/span>\u00a0<\/span><\/p>\n After the Fukushima Daiichi nuclear accident and the introduction of the attractive FIT system, the number of PV solar power plant projects has considerably increased and solar power accounted for a large part of Japan\u2019s total renewable capacity, occupying the second position following hydropower.\u00a0<\/span>\u00a0<\/span><\/p>\n However, due to the substantial decline in FIT prices year after year, investment in such projects is slowing down. Indeed, the FIT amounted to JPY 40 per kilowatt-hour (kWh) at the beginning of the FIT system in 2012, was higher than the global average. However, power companies struggled to meet the important demand for grid connections of PV solar power companies and have started to block the grid connexion. In addition, with the introduction of the FIT scheme, a portion of the purchase price by the power companies was collected from electricity users in the form of a levy in order to facilitate the introduction of renewable energy in the Japanese energy market which remains costly.\u00a0<\/span>\u00a0<\/span><\/p>\n In light of this situation, to balance the maximum introduction of renewable energy with the reduction of the public burden, from 2017 onwards, METI has adopted a bidding system for new certification for PV solar power plants with an output ranging from 50 kW to 1,000 kW in the FIT target category. In addition, the government has decided to decrease the FIT prices over the years to slow down the rapid development of renewable energy projects and in particular for PV solar power projects. Japan\u2019s FITs are much lower today, with the solar project ranging from 10kW to 50kW being eligible for JPY 11\/kWh and projects ranging from 50kW to 250kW being eligible for JPY 10\/kWh for the 2022\u20132023 financial year. However, residential PV solar power projects under 10kW remain eligible for a FIT of JPY 17\/kWh.<\/span>\u00a0<\/span><\/p>\n The gradual transition from the FIT scheme to the FIP scheme illustrates also the will of the Japanese government to limit the rush by the PV solar power companies. Since 2022, the FIP scheme applies to all PV solar power plants with an output of 1MW or more. In addition, a tender process has become applicable to PV solar power projects with an output between 250kW and 1MW for the FIT system, as well as with an ouptput of 1MW or higher for the FIP system. The tender process is held by the government generally once or twice per year and the government decides on the maximum capacity to be certified and the maximum purchase price. The applicant who is able to propose the lowest purchase price is selected until the total generation capacity of the selected applicants reaches the maximum capacity of the tender process. The conditions of the upcoming tender are published by the tender process public organization, the Organization for Cross-regional Coordination of Transmission Operators.\u00a0<\/span>\u00a0<\/span><\/p>\n Japanese PV solar power industry is also facing a lack of domestic manufacturing of solar technology and equipment, in particular in the field of silicon, a natural semiconductor and key component of solar modules, which implies important costs in the construction of the PV solar power plant. Thus, the next challenge for Japan in the coming years will be to develop its domestic semiconductor industry, a challenge that the Japanese government has begun to address by investing heavily and by providing large subsidies for joint ventures with companies from Taiwan, a crucial semiconductor supplier, and the U.S.<\/span>\u00a0<\/span><\/p>\n Despite this constatation, the outlook on solar power in Japan remains positive. In 2020, Japan has achieved an installed capacity of 61.6 GW and the amount of electricity generated was 79.1 billion kWh, increasing the share of PV solar power energy among the total power sources from 0.4% in 2011 to 7.9% in 2020.\u00a0<\/span>\u00a0<\/span><\/p>\n In its 6th Strategic Energy Plan published in October 2021, the Japanese government has fixed a target of 36 to 38% of sharing of the power sources in 2030 and the study group on the proper introduction and management of renewable energy generation facilities of the Agency for Natural Resources and Energy attached to the METI\u00a0 provides, in its report of 26 April 2022, a target for the PV solar power energy of 14 to 16% of sharing of the power sources in 2030 with an installed capacity of 104-118 GW and 129-146 billion kWh of electricity generated.\u00a0<\/span>\u00a0<\/span><\/p>\n The war between Russia and Ukraine, which began in February 2022, has led to a sharp rise in the prices of resources such as crude oil and natural gas. As a result, electricity prices in Japan continue to soar. Electricity prices include a fuel cost adjustment item relating to fuel prices. If the procurement cost of fuel rises, the fuel cost adjustment rises accordingly, and the burden increases even if the same amount of electricity is used.\u00a0<\/span>\u00a0<\/span><\/p>\n The PV solar power plant can reduce the burden of the electricity bills of the end users, especially in case the PV solar panels are installed in their own houses. In the 6th Strategic Energy Plan published in October 2021, the plan provides that based on the results of the study group on energy efficiency and conservation measures for homes and buildings towards a decarbonized society, the aim is that, by 2050, it will be common to have photovoltaic power generation equipment installed in homes and buildings and that by 2030, 60% of new detached houses will be equipped with photovoltaic power generation equipment.<\/span>\u00a0<\/span><\/p>\n This innovative and positive perspective for PV solar energy in Japan has started to be implemented by the Tokyo Metropolitan Government. Tokyo is planning to make the installation of rooftop PV solar panels on new homes and building mandatory from April 2025 as it entices Tokyo citizens and energy businesses to shift to renewable energy.\u00a0<\/span>\u00a0<\/span><\/p>\n 2. <\/span>The outlook on the renewable energy plans of the Tokyo Metropolitan Government\u00a0<\/span><\/p>\n In accordance with the Japanese government’s target to become carbon neutral by 2050, the Tokyo Metropolitan Government has taken the lead to increase the use of PV solar power energy in its city. The ambitious plan to equip the rooftops with new houses and buildings in Tokyo as announced by the Tokyo Governor, Yuriko Koike in September 2021, was greenlighted by the Tokyo Metropolitan Assembly by way of adoption of an ordinance on 15 December 2022. The ordinance will come into force in April 2025.\u00a0<\/span>\u00a0<\/span><\/p>\n Under the new framework, the obligation to install PV solar panels for large structures, such as offices or apartment buildings, falls on anyone who commissions their construction. For other smaller structures with a total floor space under 2,000 square meters, such as detached houses, developers or housing providers are required to install PV solar panels provided that they construct or sell at least 20,000 square meters of total floor space per year in Tokyo, and such obligation will therefore bind 50 major home developers and housing companies in Japan. However, the ordinance exempts houses with roof space of less than 20 square meters as it would be difficult to secure a space for installing the panels, as well as houses facing the north side due to lack of sun exposure. In total, amongst the 50,000 buildings and houses that are built in Tokyo each year, around 20,800 will be concerned by the new rules.<\/span>\u00a0<\/span><\/p>\n The ordinance does not apply directly to the consumers who purchase homes but they will somehow have to cooperate in a manner to be later clarified by the Tokyo Metropolitan Government. Additional ordinances will set a mandatory tailor-made installation quota target for each concerned company. Indeed, each relevant developer or housing provider will need to report annually to the Tokyo Metropolitan Government the status of its power generation capacity (number of buildings in which renewable energy facilities can be installed x calculation standard rate x standard amount of 2kw per building), the latter which will give birth to a specific target quota of panel installation for each company.<\/span>\u00a0<\/span><\/p>\n Such quota will be adjusted to the location of the buildings as the Tokyo Metropolitan Government sets 3 different district panel coverage rates depending on the availability of the sun: 30% of panel coverage for Chiyoda and Chuo wards, 85% for Meguro, Setagaya wards and Tama region, and 70% for Musashino ward and the area covering the rest of Tokyo\u2019s 23 wards.<\/span>\u00a0<\/span><\/p>\n Finally, each developer or housing provider will keep a relative margin as it will be free to choose which properties it will equip with solar panels, as long as it meets its assigned target.<\/span>\u00a0<\/span><\/p>\n The ordinance does not provide penalties for failing to reach the requirement. However, Tokyo could issue administrative guidance and recommendations to non-compliant companies and publicize their names in case of repetitive non-compliance. On the other hand, monetary incentives will be awarded to exemplary businesses.<\/span>\u00a0<\/span><\/p>\n The ordinance will entail an initial burden amounting to JPY 980,000 per new house or building constructed. To alleviate such costs, Tokyo will provide JPY 30.1 billion in the form of direct subsidies (meaning that JPY 400,000 of the JPY 980,000 will be covered) destined to companies that construct and sell houses and building in compliance with the new system as well as to some buyers.<\/span>\u00a0<\/span><\/p>\n Such direct subsidies are part of a total JPY 116.2 billion subsidies package which will be used to help leasing firms reduce lease fees and will also be used to provide other aids to cover some maintenance and inspection costs, the lease of solar panels and roofs, as well as the recycling of these panels which are expected to have an estimated lifespan of 20 to 30 years.<\/span>\u00a0<\/span><\/p>\n By implementing such plan, Tokyo aligns its renewable energy strategy with some governments in Europe, California, and other states in the U.S. which have already adopted such a framework. And depending on the success of the measure, Tokyo would be able to inspire other Japanese prefectures as a pioneer.<\/span>\u00a0<\/span><\/p>\n 3. <\/span>The upcoming new reform in the energy regulations in Japan<\/span><\/p>\n The Act on the Rational Use of Energy (Act No. 49 of 1979 \u2013 the \u201cEnergy Act\u201d) has been enacted in 1979 and constitutes the pillar of Japanese energy conservation policy as well as one of the key climate laws in Japan. The Energy Act has been adopted in light of the oil shock which Japan faced in the 1970s to promote the effective and rational use of energy. The Energy Act covers energy management for factories, workplaces, and transportation that consume more than 1,500kL of oil-equivalent energy annually.<\/span>\u00a0<\/span><\/p>\n Energy defined under the Energy Act covers energies derived from oil, natural gas, coals, heat (fossil-derived), and other sources of energy derived from these elements. Therefore, electricity derived from renewable energy source such as PV solar, wind, and biomass was not subject to the Energy Act.\u00a0<\/span>\u00a0<\/span><\/p>\n Since its enactment in 1979, the Energy Act has undergone several major reforms up to the present date according to the social, economic, and environmental requirements. The last reform of 2018 will enter into force from 1 April 2023 (the \u201cNew Energy Act\u201d) in order to achieve the carbon neutral target by 2050 and promote the rationalization of the use of energy as a whole, including non-fossil energy, and the expansion of the introduction of non-fossil energy. The New Energy Act will reform the following items.\u00a0<\/span>\u00a0<\/span><\/p>\n 3.1. <\/span>Definition of the Energy under the former Energy Act<\/span>\u00a0<\/span><\/p>\n The former Energy Act defines fossil fuels and fossil fuel-derived heat and electricity as \u201cenergy\u201d and requires their rational use. However, non-fossil energy such as electricity and heat from renewable energy sources such as solar power did not fall under the definition of \u201cenergy\u201d. On the other hand, the expansion of non-fossil energy on the supply side has been progressing in recent years, such as the expansion of renewable energy.\u00a0<\/span>\u00a0<\/span><\/p>\n The New Energy Act revises this definition and makes all energy, including non-fossil energy and renewable energy, subject to rationalization. Non-fossil energy includes biomass, hydrogen, ammonia, waste wood, and waste plastic. This means that from 1 April 2023, energy-saving and other initiatives will be required while using all types of energy as well and the relevant companies must follow the requirement of the New Energy Act such as implementing the rationalization measures related to their activities, the appointment of the Energy management supervisors and energy management planning promoters, the obligation to submit to the METI a monitoring report, etc.\u00a0<\/span>\u00a0<\/span><\/p>\n 3.2. Conversion to the use of non-fossil and renewable energy sources<\/span>\u00a0<\/span><\/p>\n The former Energy Act excluded non-fossil energy from the energy used and therefore did not allow for a positive assessment to encourage Japanese companies to switch to non-fossil energy. In order to achieve carbon neutrality, it was necessary to promote the conversion to non-fossil energy not only through the voluntary efforts of some private companies but also the industry as a whole.<\/span>\u00a0<\/span><\/p>\n The New Energy Act establishes a new system requiring the relevant companies to prepare medium and long-term plans for conversion to non-fossil and renewable energy and to submit regular reports to the METI on the use of non-fossil and renewable energy.<\/span>\u00a0<\/span><\/p>\n 3.3. Changes in electricity supply and demand<\/span>\u00a0<\/span><\/p>\n One of the objectives of the former Energy Act was to equalize electricity demand (i.e. to reduce seasonal or time-of-day fluctuations in electricity demand) and to require the conversion of electricity used to fuel or heat used during summer and winter and the use of electricity-consuming equipment outside of these periods. However, the recent expansion of variable renewable energy sources such as PV solar power energy has led to the implementation of output control of generated renewable energy electricity in some regions in Japan, and tight supply and demand of electricity due to severe winters and other climatic conditions has become a problem.<\/span>\u00a0<\/span><\/p>\n Under the new Energy Act, a framework will be established to optimize demand according to the supply-demand situation for electricity, for example by shifting demand during times when there is a surplus of renewable energy and curbing demand when supply-demand is tight. A mechanism is also planned to be established to encourage electricity suppliers to develop tariff systems that contribute to optimizing electricity demand.<\/span>\u00a0<\/span><\/p>\n Pascal Mages<\/span><\/span><\/a>\u00a0<\/span><\/span><\/p>\n <\/p>\n
\nOutline of the renewable energy law and regulation and outlook for 2023 in Japan<\/a><\/p>\n
\n<\/strong>Hong Kong lures family offices with tax incentiv<\/a>
\nHong Kong court clarifies that cryptocurrencies are property which can be held on trust <\/a><\/span><\/span>\u00a0<\/span><\/p>\n
\nFrance takes the lead as the key jurisdiction for foreign investments in Europe<\/a>
\nHighlights on amendments of the counterespionage law and compliance measures<\/a><\/p>\n
\n<\/strong>Proposed changes to companies act on digital meetings and minority protection<\/a>
\nUpcoming changes to Employment Pass eligibility requirements in 2023<\/a><\/p>\n
\nWhat are the HR obligations applicable to your company ?\u00a0 <\/a>
\nWhat are the new restrictions applicable to consumer agreements?<\/a><\/span><\/span>\u00a0<\/span><\/span><\/p>\n
\n<\/a>SMART ALERT<\/h2>\n
<\/a>LEGAL INSIGHTS IN ASIA<\/h2>\n
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