New foreign investments, product innovations and strategic partnerships are taking Japan’s solar market by storm and local PV businesses are struggling to keep up.
Opportunities within this market are growing and the government is making it easy for new entrants by introducing large feed in tariffs (FIT) and tax benefits- for both local and foreign entrants.
However, leading Japanese PV manufacturers have been struggling to retain market share in the last year due to increased foreign competition. Japanese manufacturers, including early market leader Sharp, have resorted to buying panels produced abroad and selling them in Japan.
Not long ago, Japan was one of the market leaders in PV manufacturing but due to the government’s focus on nuclear development during the mid-2000s, photovoltaic sales in Japan declined steadily. By 2007 Japanese producers had ceded global market leadership to US, Chinese and European manufacturers. Local manufacturers have been struggling to keep up with overseas competition since then.
Japan’s solar opportunities
Before Fukushima, nuclear power supplied 27% of Japan's electricity. By 2014, that had dwindled to zero. To make up the gap, Japan has had to import more coal, oil, and natural gas from overseas which is obviously costing the country dearly.
Solar is seen as part of the solution to the country’s post-Fukushima energy crisis and is fueling hopes for a more stable (and cost-effective) energy supply. The opportunities are certainly there. Japan boasts some of the world's largest feed in tariffs (FIT) which are guaranteed for 20 years. Japan added around 10GW of new PV capacity in 2014, making it the second largest PV market in the world. Growth is not only in large-scale commercial and industrial markets, Japan's residential market in particular is huge and continues to grow.This is certainly proof that the incentives are working across the board.
A growing solar market needs innovation in order to drive down costs further and drive development in better quality products in order to further develop the sector.
And foreign companies are more than happy to showcase their products in this hot market. PV Japan 2015 is certainly one way in which to launch new products. China-based PV manufacturer ET will be showcasing its new multicrystalline AC module along with US-based Northern Electric and Power (NEP)’s new ultra-thin integrated microinverter.
This product launch represents the wide range of opportunities available to vendors and it echoes the great potential in creating strategic partnerships and a local presence through new innovations.
Importance of local presence and partnerships
Japan’s solar power market has attracted several foreign investors over the last few months after the government announced a push in the renewable energy sector and notified new tariffs for solar power projects.
While there is no discrimination against foreign ownership of renewable projects in Japan, it is important that foreign companies partner with local companies due to the simple fact that most people on the ground, land owners, project owners, local authors, electricity operator officials speak exclusively Japanese. Paperwork, official and non-official documents are exclusively in Japanese and correspondence, submissions and applications have to be done exclusively in Japanese.
Foreign companies are realising that in order to be successful, a local partner will help to navigate local rules and regulations, as well as assist with all things cultural especially when it comes to business customs.
Recently, China-based SPI Solar announced a joint venture with an Osaka-based corporation to develop 500MW solar power project in Japan. SPI Solar will be responsible for project funding, construction, and equipment procurement.
California-based Pattern Energy acquired majority stake in Tokyo-based renewable energy project developer and operator Green Power Investment Corporation, and will also have ‘right of first offer’ to acquire around 1GW of solar power projects under development by Green Power Investment.
Last year, GE Energy Financial Services announced equity investment in a 32MW solar PV project being developed by Pacifico Energy, a Japanese power plant development company.
With the right incentives and government support in place, as well as willingness by local vendors and financial institutions to partner with foreign entrants, Japan could become a force to be reckoned with in the solar market.
With Japan’s government planning to bring the share of nuclear generation to 20-22% by 2030, let’s hope that solar development is not forgotten once more.