Japan Takes A Huge Leap Into Solar

There is good news for the solar industry this week. It comes at a good time, after several bankruptcies this spring, expiration of certain US tax credits and a reduction in Germany’s feed-in tariff program. The unexpectedly good news comes from Japan.

Industry Minister Yukio Edano announced a new price structure for electricity that pays a premium for solar-generated power that is roughly triple the price of conventional electricity. This is essentially a feed-in tariff (FIT) similarly to the one that drove Germany to become the world’s solar leader with roughly 25 gigawatts (GW) or half the world’s total solar capacity. Bloomberg New Energy Finance forecasts that this will bring in roughly $9.6 billion in new solar investment. This should be enough to buy 3.2 to 4.7 GW. When combined with the 2.6GW already installed (as of last year), this should put them in the number two position worldwide,  well ahead of Italy (12.7GW), Spain (3.4 GW), and the US (forecast to exceed 3.2GW by the end of this year). In Japan, a GW is enough to power roughly a quarter of a million homes.

The move is clearly motivated by a desire to move away from nuclear power in the wake of Fukushima debacle. The projected new solar capacity is equivalent to three or four nuclear plants. The new tariff will include all types of renewables, though solar is expected to benefit the most. The new tariff extends the reach of a 2009 tariff which required utilities to buy up all unused solar power.

A number of solar companies have announced plans to scale up in response to this announcement, including the Chinese company Yingli, which plans to build a new plant in Japan, and Kyocera, which also plans to expand its build capacity.  Panasonic, said it expects domestic sales as percent of total sales to increase to 80 percent. “We expect a boom in the residential market as the FIT price was set at a very good level,” said Kazuhiro Yoshida, who heads Panasonic’s solar business. The company also plans to open a new plant in Malaysia to increase capacity. Sharp is also expected to ramp up solar panel production.

The tariff will be paid for by ratepayers, who will face a surcharge of approximately one dollar per month. Some conservatives had reservations about the move. Masami Hasegawa, of Keidanren, the most powerful Japanese business lobby said, “This is a mechanism with a high degree of market intervention, by setting tariffs artificially high and making users shoulder the cost. We question the effectiveness of such a scheme.”

The rate paid by utilities will be roughly twice that paid in Germany under their FIT. But these costs pale in comparison with the costs incurred in response to Fukushima.

Although the solar panels will only provide electricity during the day; that is when it is needed most, when businesses are running. According to Mikio Katayama, chairman of the electronics manufacturer Sharp and the Japan Photovoltaic Energy Association, “We no longer have enough electricity, especially during the day, and that is when solar power can help.”

In 2011, Japan got only 1.6 percent of its energy from alternative sources. Considering its geographical isolation and lack of domestic fuel supplies, this is clearly a concern, now that the country is steering away from nuclear. Japan’s economy could be quite vulnerable to price shocks if it found itself importing all of its energy.

As a result, there is now great interest in renewables in the Land of the Rising Sun. Last fall we reported an impressive new advance in wind power, developed at Japan’s Kyushu University. It is a type of “wind lens,” which focuses the flow and supposedly creates three times as much power as a conventional wind turbine of the same size. The system is now under test a half mile offshore in Hakata Bay.

[Image credit: BWJones: Flickr Creative Commons]

RP Siegel, PE, is the President of Rain Mountain LLC. He is also the co-author of the eco-thriller Vapor Trails, the first in a series covering the human side of various sustainability issues including energy, food, and water in an exciting and entertaining format. Now available on Kindle.

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