Japan’s new renewable law to boost photovoltaic sales

It’s still early, and all the details aren’t yet worked out, but last week Japan passed a new renewable energy law, enacted in response to the Fukushima nuclear and tsunami disasters earlier this year.

The law, which goes into effect in July 2012, will establish a new feed-in tariff for solar in Japan and could provide a boost to the solar industry.

“We view the passage of the long awaited Japanese renewable energy bill as a strong positive for solar. Although economic details are pending, we believe solar will be the largest beneficiary of the bill given Japan’s history as the first country to adopt solar as a viable energy source and a number of large Japanese solar companies,” wrote Jefferies & Co., Inc. Equity Analyst Jessie Pinchel in a research note.

With the passage of the bill, Japan plans to have 28 gigawatts of solar installed by 2020, according to Pichel.

“By the end of this year, they’ll have about 4.8 gigawatts,” he said.

Already the country is installing solar on a roughly 1 gigawatt-per-year rate, Pichel said.

“That’s before this new subsidy and target. They already have an existing subsidy. This turbocharges it,” he said.

The exact level at which the solar incentive will be offered has yet to be determined, according to Pichel.

“They have not announced the new subsidy or what the rate of the new subsidy is and how the market will hit the target,” he said. “So it has to be something more than the existing feed-in tariff.”

Japan’s costs for solar installations have been high, according to Pichel.

“Because the market has been closed and hard to penetrate,” he said.

However, inexpensive modules made by Chinese companies like Suntech and Canadian Solar are starting to gain a foothold in the country, he said.

“Because, overall, this has helped bring down the cost of solar projects [in Japan],” he said.

While Japan has its own photovoltaic manufacturers in Sharp Corp. and Kyocera Corp., Pichel doesn’t necessarily think that the feed-in tariff will have the same domestic content provisions as does Canadian province, Ontario. Since Japan is such a big exporter, such a protectionist policy could be more difficult for the country, Pichel said.

While the tsunami and subsequent nuclear power failures reduced Japan’s electricity production capacity, thus far there haven’t been large new projects announced or installed, Pichel said.

“We have seen a slight pickup in Japan in residential solar deployments, but it’s not a significant increase overall,” he said.

Share this post