1

2014 in

2-A

Assessing Regional Value Added of

Renewable Energy in Japan-

Dr. Irg kaupach-Sum|ya
rofessor
Iacu|ty of 8us|ness Adm|n|stranon, k|tsume|kan Un|vers|ty

Iebruary 2
nd
, 2014
2
Industry Value Chain
Mode||ng of reg|ona| va|ue added by renewab|e energy
based on |ndustry va|ue cha|n ana|ys|s
Regional Value Added
Personal Income after tax
Business Profit after tax
Regional Tax Income
+
+
Production
Installation
Operation &
Maintenance
Management
=
3
keg|ona| va|ue added from renewab|e energy |n Iapan - kesu|ts
4
Main results from comparative performance analysis of
renewable energy in Germany and Japan
Significantly better economic results for operations of
renewable energy in Germany than in Japan
Return-on-Sales (ROE): double-digit in Germany ! (mostly)
low single-digit in Japan
Return-on-Equity (ROE): 6~12% in Germany ! 1~7% in
Japan

Significantly higher total and other investment cost in Japan as
main reason for differences in economic performance
Significantly lower Return-on-Sales (ROS) from operation of
renewable energy facilities in Japan due to higher depreciation,
labor and material cost in Japan

5
Main results from comparative analysis of regional value
added by renewable energy in Germany and Japan

Significant share of regional value added from renewable energy both on
investment and operation stage as long as activities along the industry value
chain are located within the region
Level of operating profit as the main factor that determines the level of
regional value added from renewable energy during operation
Rather small share of personal income due to the comparatively low labor
ratio

Significantly higher share of value added remaining in the region in Germany
at the stage of investment than in Japan (Germany: 28~56% Japan:
17~22%)
Similar share of regional value added on operation stage in Germany and
Japan for all renewable energy technologies (23~40%) except bio-mass
Significant differences in the distribution of regional value added on
operation stage between Germany and Japan
in Germany, far higher share for business profits
in Japan highest share for regional tax income
6
Source: Fukushima Prefecture
http://www.pref.fukushima.jp/chiiki-shin/saiseiene/potential/abundance/abundance01.html (access on 31.12.2013)
Potential of regional value-added from renewable energy in
Fukushima Prefecture Three Scenarios
So|ar

Water

W|nd

7
Estimate: Potential for regional value-added from renewable
energy in Fukushima Prefecture (with 100% local ownership)
Investment
into
Renewable
Energy

5.6*
over period
of 15 years

Create
annual
regional
value added

2,000
= 3.1%

Fukushima GDP*

Create /
secure

~20,000
permanent
jobs
= 2.1%
of Fukushima
employment*
* 6.4[2011]
* 934,331[2008]
* 8ased on present |nvestment cost
8
Estimate: Scenarios for annual generation of regional value
added and employment (in case of 100% local ownership)
9
114
48
228
95
95
5
189
11
140
106
280
211
0
100
200
300
400
500
600
700
800
Without local business ownership, regional value added
from business profit and personal income declines sharply
317
personal income
business profit
regional tax
Total Regional
Value Added
With Ownership
2020 Scenario 2030 Scenario
Regional Value Added on Operating Stage
with and without local business ownership -
1
0
0

M
|
|
.

\

Without Ownership With Ownership Without Ownership

349
697
159
10
Conc|us|ons
Substantial potential of renewable energy for generation of
regional value added (~3.1% of Fukushima Pref. GDP)
Potential for sustaining and creating ~20,000 jobs permanently
Local ownership as key for maximizing regional value added
" local ownership of renewable energy facilities
" local operation and management of renewable energy facilities
" mobilizing local savings through finance from regional banks
" local planning, construction and maintenance
Fixed asset tax as main sources of regional tax income
Local capacity building as key