Potential effect of the earthquake and Fukushima crisis on solar PV market in Japan
Right before the disasters that struck Northeast Japan, Frost & Sullivan had released the prediction titled ¡®Japanese Solar Power Market to Shine in 2011¡¯. They¡¯re telling the latest story about Japan¡¯s PV market that is supposed to ¡®shine¡¯. Let¡¯s look into how the recent earthquake in Japan may cause a shift in the way we¡¯re seeing PV energy and how the Japanese use PV energy as a way to overcome this crisis.
By Ravi K, Suchitra Sriram
The impact of the ongoing crisis in Japan on the global solar market should be analyzed from three different dimensions:
The fact that the Fukushima crisis could not have come at a more inopportune time for global nuclear resurgence, is beyond doubt. The nuclear industry now needs to work overtime to regain the confidence of the global investment community. There will be increasing calls to abandon nuclear power and promote alternative energy sources. Solar power will be one of the top choices of the green lobby. The prices of Suntech Power, First Solar and Trina Solar increased last week, even as the stock prices of companies associated with nuclear energy like General Electric, Areva, Energy Resources of Australia and TEPCO itself fell sharply. But for the solar industry to really benefit from the problems of nuclear, it takes more than market sentiment. The solar industry will still depend heavily on governmental financial and policy support to grow. It is possible that some countries or states will encourage development of solar energy, and try to postpone or cancel their plans for nuclear power. But this direct correlation will not be large enough to have a significant impact at the global level.
Outlook for Japan as a Key Solar Market
Primary drivers for the aggressive adoption of Renewable Energy (RE) technologies in Japan is the strong government commitment towards ensuring energy supply security, mitigating the impact of Greenhouse Gas (GHG) emissions, and identifying its key role in industry policy. Hence, from time to time, RE policies and targets are revised to facilitate ease of doing business as well as to assertively stimulate growth.
The new government that was elected to power in August 2009 has put forth high targets for RE industry which include:
-25.0% reduction of GHG emission by 2020 based on 1990 levels;
-Introduction of a Feed-in-Tariff (FiT) for projects of all capacities and types of RE, and;
-Increasing the percentage of RE in the primary energy source to 10.0% by 2020.
Besides policies for the RE market, Japan had some of the following policies in place exclusively for solar energy:
-The PV Roadmap toward 2030 (PV2030) suggested measures like mass deployment of PV system to make it competitive against other energy sources in terms of cost, innovations in terms of technology, efficiency and manufacturing process, and the widening of PV application areas. According to the revised roadmap released in 2009, a goal has been fixed to decrease the generation cost to less than US$0.07 (7 yen) by 2050, which, in turn, is likely to contribute significantly to the future development of the PV industry.
-Renewable Portfolio Standards (RPS) which obligates electric utilities to use a fixed amount of new energy and utilization target (electricity to be produced from new energy) was established for the fiscal year 2014 at 16.00 billion kWh.
-Ministry of Economy, Trade, and Industry (METI) introduced the Feed-in Tariff (FiT) in 2009 and the initial rate to be paid to the owners of PV systems would be 48 yen per kWh for residential customers (which is double the current rate of 24 yen per kWh) and 24 yen per kWh for systems on non-residential structures for a period of ten years for the surplus electricity that is not used on the premises. All electric utilities in the country are mandated to take part in this scheme. The tariff is likely to start digressing in 2011.
Japan, that was once a global leader in the solar power market, witnessed slow growth between 2006 and early 2009 due to the discontinuation of subsidies for households in 2005. To spur the domestic market and to regain its supremacy in the global solar power market, the country re-introduced its Feed-in Tariff policy in 2009 that resulted in the strong growth in solar panel shipment during the end of 2009 that continued in 2010. Given that almost 1 GW of solar PV was installed in Japan during 2010, the market looks very positive and is expected to post another 1 GW in 2011. As a result, Japan¡¯s total installed solar PV capacity is forecast to rise from 3,504 MWp in 2010 to 16,959 MWp by 2017. The corresponding market revenues were US$7,280.0 million in 2010, rising to US$8,970.0 million in 2011 and further expected to increase to US$18,315.0 million in 2017 at a CAGR of 14.1% between 2010 and 2017.
Japan¡¯s dominance in the Asia Pacific solar PV power market will continue in 2011. This modular technology continues to hold household owners¡¯ interest as Japan is one of the countries where retail electricity tariff charged by utilities for residential customers is the highest in the world.
While it is still very early to predict the direct impact of recent events in Japan on the above forecast, following are some potential scenarios:
1.With significant damage to the electric power infrastructure in the country¡¯s North East, Japan may look towards solar PV as a solution to alleviate power needs in the short term and also to maintain the growth of one of its sunrise industries;
2.With utilities being hard pressed to provide base load capacity and avoid rolling blackouts, Japan may spend more money on creating temporary base load power, either by running some of the designated peaking plants or hiring large capacity power generators. This may mean RPS and other solar incentives may take a back seat where utilities are concerned;
3.As a part of the reconstruction package, the Japanese government may allocate a share of the expenditure to promote solar PV, a technology which Japan has been in the forefront before.
But in all likelihood, the beleaguered government and the power sector will not do anything that will portray them as less environment-friendly. Hence, the support for solar is likely to continue, if not increase, post crisis.
Japan as a Key Supplier to the Global Solar Industry
Japan is home to several of the world¡¯s leading solar cell and module manufacturers who invest significantly in R&D to improve energy conversion efficiency. Japanese companies like Mitsubishi, Tokuyama, and M. Setek are the three largest producers of polysilicon. Leading wafer producers include Kyocera, M. Setek and TKX. Sanyo, Sharp and Kyocera are the three large cell manufacturers. Except for M. Setek, whose facilities are in the crisis epicenter, all other manufacturers have their facilities in Central or Western Japan.
Also Japan¡¯s share in the global solar PV supply base has come down over the last several years, because of the meteoric rise of Chinese suppliers across the value chain. Accelerating global demand from both established and emerging markets have forced Japanese companies to ramp up their production capacities and set up new manufacturing facilities overseas to take advantage of cost and near geographical locations to the markets.
Thus the impact to the supply chain will be minimal and the industry has enough buffer capacity to overcome any potential short-fall from Japan.
Ravi Krishnaswamy is Vice President of Frost & Sullivan¡¯s Energy & Power Practice in the Asia Pacific region and is based in Singapore (www.frost.com). Ravi has spent more than fifteen years in the Energy & Power sector as a design engineer, project manager, senior industry analyst and research director. He is also Frost & Sullivan¡¯s in house expert on clean technologies, utilities, power generation, power plant MRO and power quality areas. After graduation, Ravi joined ABB Alstom and subsequently he worked for Doosan Babcock, before joining Frost & Sullivan in 2001. He¡¯s got a Post Grad. Dip. in Strategic Management in the U.K. and a Bachelor¡¯s Degree in Mechanical Engineering in India.
Suchitra Sriram is the Program Manager with the Asia Pacific Energy & Power Systems group. She joined Frost & Sullivan as Senior Research Analyst in December 2005. Her area of expertise is the ¡®Power Generation¡¯ segment of the business with specific focus on renewable/green energy. Besides, she has worked on consulting assignments for clients such as Deltak, Thermax, Foster Wheeler, Solar 3 SA, ST Engineering, SunTechnics, Wood Group, Greens Power, Abraaj Capital, TNB Remaco, AT Biopower, ECER and Cummins in areas such as competitive intelligence, benchmarking, business expansion and acquisition. She has a Master¡¯s Degree in Business Administration in University of Madras.
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