World's fourth largest solar market

Government support driving Japan’s photovoltaic market, Japan has emerged as one of the largest markets of solar PV installed capacity in the world, it is also counted among the world’s largest manufacturers of solar cells. The encouragement to PV industry in Japan has stemmed from a range of national strategies, legal measures, and frameworks brought in by the government. The Japanese government has given more stress on R&D, model projects, demonstrative researches, laws & regulations, and dissemination measures for the deployment of PV systems. Efforts made by the Ministry of Economy, Trade and Industry (METI) and the Ministry of the Environment yielded positive results in the form of impressive expansion of PV industry. The METI promotes technological development of PV systems to reduce cost and accelerate the introduction of PV technology.

Solar Energy in Japan has a long future dating back to 1994 when the government introduced capital subsidies to boost solar energy installations on rooftops. Till 2004, Japan was the largest solar market in the world after which it was overtaken by Germany. After 2004, the growth in the solar industry tapered off as the government reduced the subsidies for solar panels to almost zero. The huge domestic market gave rise to Japanese companies like Sharp, Mitsubishi, Kyocera, Panasonic-Sanyo become top solar panel producers in the world. Since the 2009, the Japanese government has again started giving generous solar subsidies and feed in tariff to boost the renewable energy production in the country which remains far off targets. This has led Japan to become the top non-European market after USA and the growth seems set to continue in the future as well. Japan has relatively low installations costs and is much nearer to grid parity. Also lack of wind energy makes solar energy more attractive as a renewable energy choice. While large scale solar installations in Japan are almost absent, there remain large numbers of rooftop solar installations.

Polysilicon supply disrupted

Most of solar panels and polysilicon which produced in Japan are sold in domestic markets, some polysilicon is shipped overseas. The earthquake caused shutdown of production from Sanyo, Panasonic and Sharp. Some facilities are not severely damaged, but what impacts the industry is the infrastructure. It is believed that at least 2-3 months will be needed to repair the power grid. It will even take longer to repair the roads and ports in the northern coast.Over the course of the last few days, Prime Minister Naoto Kan has for the first time discussed both the need to rebuild Japan from scratch and the national resolve required to achieve this. Clearly, the choices to be made in the formulation of a reconstruction plan will have great economic implications. In particular, the choices to be made by Japan in terms of the reconstruction of its power generation capacity will not be the least of these. Barclays analyst Vishal Shah says that the major earthquake in Japan with serious aftershocks, improves the longer term policy outlook for the renewable solar energy sector even though it weakens the near term supply/demand outlook. Barclays does not anticipate any immediate change in policy developments in Europe. Longer term, however, the US, Japan, China and several other Asian countries will consider greater use of clean generation technologies (wind, solar) over nuclear power. In the near term, Shah sees some supply disruptions, potentially negatively impacting fundamentals across the solar supply chain. The entire Japanese economy will be impacted for a while, which may cause some minor shipment and short-term pricing issues for PV components. Piper Jaffray analyst Ahmar Zaman says that Japan accounts for 2GW of expected 2011 demand, Piper is cutting its estimate to 1GW following the earthquake disaster.

Market research firm DisplaySearch offers its assessment of the impact on the photovoltaic industry of the devastation in Japan. In brief, the firm sees little impact to manufacturing, outside of the the facilities of polysilicon producer M.Setek, whose Soma Fukushima factory is in the midst of the disaster and has been hit hard. But M.Setek is only the third largest producer: Tokoyuma and Mitsubishi, the numbers one and two, have facilities in the West of Japan and in central Japan, and are therefore have not suffered significant damage. Again, M.Setek’s wafer production in Fukushima is affected. The country produces about 10 percent of the world’s polysilicon, wh i c h i s u s e d t o fabricate solar panels and semiconductors, a c c o r d i n g t o B l o o m b e r g N e w Energy Finance. Solar cell and module plants in western Japan were unscathed. “A shortt e rm di s rupt ion of this size should not have much effect in the market as there is enough polysilicon out the r e , ” Dani e l Guttmann, director of renewable at the consulting firm PwC, said. “It could lead to an upward tick in polysilicon prices, which have risen in the past few months.” Shares of non-Japanese polysilicon makers such as Wacker Chemie AG and MEMC Electric Materials Inc. have gained since the quake following reports of damage to Japanese manufacturers and rolling power outages.

I had a interview with Kyocera and AUO about the earthquake disaster situation, the relevant person of Kyocera said that Kyocera’s solar cell plants are far from the epicenter, were not affected directly. By March 22, all the staff of Kyocera confirmed safe. In terms of production，only part of the factory which in the northeast of Japan was slightly damaged, and was resumed on March 15.

The relevant person of AUO said that its head office in Taiwan and the subsidiary in Japan have already set up an emergency center. Its Japanese subsidiary M.Setek’s polysilicon production base is located in Soma City, Fukushima Prefecture, to the current situation, staff and equipments are all safe, no significant damage. The time for resume will depend on the public facilities such as water, electricity and gas, it is still unpredictable now. M.Setek’s fourth quarter’s revenue in 2010 accounted 0.3% of the consolidated revenues of AUO.

Nuclear crisis introspection, the best opportunity for solar industry?

Worldwide, 5.8 percent of energy was produced by nuclear power in 2008’s figures. Solar photovoltaic, solar thermal, wind, and geothermal all lump together at 0.7 percent of global energy supply. After Fukushima nuclear power plant crisis, lots of counties said that they should develop clean energy, and create more job opportunities for clean energy, to make our energy supply more safe and secure.

Chancellor Angela Merkel put government plans to prolong the lifespan of Germany’s nuclear power plants on hold for three months pending the outcome of an inquiry into reactor safety. The Swiss government has put application procedures for the replacement of nuclear power stations on hold and ordered safety inspections of existing facilities to be brought forward. Later, announced to close seven nuclear power plants which were built before 1980. In a statement, Merkel said that the nuclear power is a transitional technology. Meanwhile, the Chinese government said it will fully review the nuclear power plants which under constructions.

In the immediate aftermath of the nuclear disaster in Japan, that the solar industry would likely have the opportunity to be part of the solution. There are obviously likely to be two main sources of this increased demand for solar product going forward: First, an increased desire for residential power security. This will likely produce a burst of demand for both energy efficiency products for the home and home power generation products. Demand for solar installations will likely to a significant part of this. Second, as Japan rebuilds its utility-scale generation capacity, a number of factors suggest that solar will again be a beneficiary.

The scale of the problem and resultant opportunity is immense. Of course, solar by itself cannot possibly offer an allencompassing solution. With a necessary reconstruction program of the size outlined below, even if solar only has the opportunity to provide a small percentage of the necessary new capacity it will still represent an extremely significant contribution to the total level of global demand facing the solar industry.

The debate over Japan's energy future is only just beginning. However, both Japan's heavy reliance on nuclear and its lack of domestic sources of hydrocarbons suggest that the country will look toward renewable and solar is set to be a main beneficiary.

Reconstruction

Since the Japanese government resume the subsidies for residential solar system, the Japanese solar market grow rapidly. Just days before the disaster, SunPower announced a new 48- megawatt contract with Toshiba to supply the company with solar panels for its residential solar business in Japan. But the company declined to comment on what the company’s role may be in rebuilding Japan. Chinese enterprises will certainly not miss the big cake. Suntech, JA Solar, Yingli and Canadian Solar all enter the Japanese market. Japanese PV enterprises have the geographical advantages plus the national brand identity, Japanese PV enterprises have the absolute advantages in market share, but Chinese enterprises are accelerating the steps.

The relevant person of Yingli New Energy said that the Japanese government resumes the subsidies for residential solar systems in 2009, so Yingli entered Japanese market two years before. In Japan, the roof-top projects accounted for 80% of PV systems, so the end consumer is particularly important. The biggest challenge for Yingli is to make the Japanese consumer know and aware about Yingli, Through becomes the sponsors of the FIFA World Cup and Bayern Munich, make Japanese consumers have a deep impression for Yingli. Also, looking for local partners and plans to set up branches in Japan make Yingli has the confidence to open up Japanese market. About the opportunities for the solar industry after the crisis, the relevant person said that Yingli has a long-term development plan for Japanese market and will not be affected by the earthquake.

Currently, Chinese enterprises account 60-70% of market share in European photovoltaic market, while the rest are occupied by Japanese enterprises, compete with Chinese PV enterprises, Japanese enterprises are already in the inferior position, and the earthquake will make them lose more market share, while create big opportunities for Chinese PV enterprises, how to seize the opportunities, let us wait and see how these PV giants show their prowess.

Appendix: Top Japanese Solar Companies

Sharp

Sharp, known more for its Electronics Products and also the world’s No 1 Company in terms Solar Module Revenues. Though the quality of Sharp’s crystalline silicon modules is considered much better, the cost difference has become too big in a rapidly commoditizing industry.

Sanyo

Sanyo has never been as successful in the hyper competitive electronics market as other Japanese companies like Sony or Sharp. However its lithium batteries and solar panels possess cutting edge technology. Its solar panels with proprietary HIT technology rival the best in terms of efficiency and quality.

Panasonic

Panasonic after acquiring Sanyo has completely changed its strategy to become a major Green Player targeting a Major Percentage of Sales in the future to come from Green Products. Panasonic which is the world’s biggest Plasma TV producer is going to spend $1 Billion on Green Building investments. Panasonic will combine its Green Strengths with Sanyo’s to sell a complete Eco-Friendly Home complete with Solar Power, LED Lighting and Energy Storage and Efficiency capabilities.

Kyocera

Kyocera is Japan’s second largest solar panel producing company. In 1975, Kyocera implemented a development effort that led to the world's first mass-production technologies for multicrystalline silicon solar cells.

Mitsubishi

Mistubishi is another old time Japanese solar company which has a low profile solar module and system business. The company is known for its high quality panels and has a decent presence in USA and Japan. However like Kyocera it has not been aggressive enough leading to loss in market share.

Mitsui

Mitsui owns a solar system business in the US after acquiring Sunwize.

Toshiba

Toshiba the Japanese Giant known for its Global Leadership in Nuclear Power Equipment and Electronics has decided to become a big player in the Solar EPC business. This strategy is quite different from the other global conglomerates entering the Solar Energy Field. South Korean Players like Samsung, LG, Hanwha and Hyundai are all building Crystalline Silicon Modules. Toshiba wants to enter the Smart Grid business by leveraging its experiences of the Solar EPC business.

Honda

Honda, the Japanese auto giant has also joined the Solar Energy Race by selling Thin Film Modules based on CIGs technology.