Keiji Kimura

Avoided costs of renewable energies have been used for calculating additional costs to purchase electricity from renewables under feed-in tariffs (FiT) in Japan. Historically, the concept of avoided costs had been the basis of tariffs for purchasing electricity from decentralized power plants in areas without wholesale electricity markets in the United States (U.S.). This article reviews the concepts and calculation methodologies of avoided costs of renewable energies in the U.S., with a particular focus on avoided energy costs. Based on this review, the total amount of avoided costs of renewable energies under FiT in Japan is calculated and compared with the amount calculated based on METI’s methodologies. This paper concludes that, in the latter estimate, the amount of avoided costs must have been undervalued, and as a result, an excessive FiT surcharge imposed.

The Cost Verification Commission of The Energy and Environment Council in the National Policy Unit of Japanese Government issued a report on the re-examination of comprehensive calculation of projected costs of generating electricity including nuclear power. However, at least there are 2 problems in the calculating method. The first problem is that the commission distributed construction costs of power plants in the years under operation as depreciation costs. The second problem is that the commission did not take into account interest during construction. Because of these problems, capital costs of the power plants are underestimated. This article re-examine costs of generating electricity by modifying these problems.