Recharged Japan Solar PV Industry Hits 10 GW of Installed Capacity

by Finlay Colville, Vice President
September 11, 2013

Solar photovoltaic (PV) installations in Japan have now reached the 10 gigawatts (GW) milestone for cumulative PV capacity, according to new research featured in the NPD Solarbuzz Asia Pacific PV Market Quarterly Report.

Japan is only the fifth country to reach this mark, after Germany, Italy, China and the U.S. Both the U.S. and China reached 10 GW of solar PV within the past few months.

The First GW PV Country in 2004

This new landmark for the Japanese solar industry comes nine years after Japan was crowned the first country to break through 1 GW of cumulative solar PV, back in 2004.

  • The Ministry of Economy, Trade and Industry (METI) launched a subsidy program for residential PV systems as far back as 1994. Initially, the subsidy covered 50% of the cost of PV systems. The budget for FY 1994 was 2 billion Yen.
  • Until 2005, Japan had the largest installed PV capacity of any country in the world. This early leadership position was achieved through a well-managed set of programs, coupled with attractive market incentives.
  • The early growth of the Japanese PV market was a strong factor in establishing Japanese manufacturing as the first dominant force in the solar PV industry. Manufacturers that benefited from the first phase of government initiatives include several of the companies that are now leaders in the domestic PV industry revival: Sharp, Sanyo and Kyocera.

Solar PV deployment in Japan slowed in the mid-2000s, due in part to the country’s ten-year energy plan that was approved in March 2002 and called for an expansion of nuclear generation by approximately 30% by 2011.  This was envisaged to result in the construction of between 9 and 12 new nuclear power plants, equivalent to 17.5 GW of new nuclear generating capacity.

Reaching 10 GW in August 2013

In July 2012, the federal government launched a feed-in tariff (FIT) program to accelerate the deployment of large-scale renewable technologies. This has been instrumental in Japan’s PV market growing rapidly over the past 12 months, and becoming only the fourth country to break the 10 GW mark.

  • Cumulative solar PV installed in Japan broke through the 10 GW barrier during August 2013 and exceeded 10.5 GW at the end of August.
  • Until the end of 2012, the Japanese PV market had been heavily weighted towards the rooftop segment, with 97% of PV capacity.
  • During the first eight months of 2013, the ground-mount segment has accounted for 27% of new solar PV capacity installed.
  • Over the first three quarters of calendar year 2013, Japan is forecast to install more PV capacity than during the entire three-year period spanning 2010 to 2012.
  • At the end of August 2013, rooftop solar PV installations remain the dominant type of PV installations by project number and by MW volume, with 89% of market share by capacity. The remaining 11% is spread across the ground-mount and off-grid segments.

Figure: Cumulative solar PV installed in Japan at the end of August 2013 (shown as 2013 YTD).

Source: NPD Solarbuzz Asia Pacific PV Market Quarterly

Challenges Going Forward

With demand from the commercial and utility segments surging during the past few quarters, the Japanese PV market is now experiencing new challenges.

Recently, project developers have been experiencing shortages in module supply and have been confronted with delays in acquiring suitable land and securing grid connection.

Additionally, several domestic PV module manufacturers are fully booked through the remainder of 2013 and early 2014, creating a strain on local supply and putting a short-term upward pressure on prices. However, as component supply catches up with demand, price erosion is anticipated, similar to trends seen in all other PV markets globally.

Despite the strong short term outlook, concerns over the sustainability of the Japanese FIT program (as well as growing worries over grid congestion) have raised fresh concerns about a possible Japanese PV ‘bubble’, similar to some European countries in the past. It remains to be seen how administrators will manage this potential issue during 2014.

Indeed, the future trajectory of PV demand in Japan is likely to be dictated by the willingness of regulators to continue to approve FIT installations and the ability of local developers to obtain grid connection rights and acquire land.

If installations grow too fast, the government is likely to intervene either through a cap in annual installation or through reduced incentives (or a combination of both). Corrective action could be implemented prior to the start of the new Japanese fiscal year from April 2014.

Despite these challenges, Japan is currently forecast to be the second largest country for PV demand during 2013, with China set to become the global leader this year.

While the demand dynamics of the Japanese market differ considerably from the Chinese PV market (average pricing, brand premiums, access to foreign suppliers), these two countries have now established the Asia Pacific region as the driving force for PV demand over the second half of 2013.

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