Japanese PV Power: New Support Framework Boosts The PV Market

Japan's 'Fukuda Vision' programme created plans for a new support framework for the dissemination of PV systems and technology. Governments, utilities companies and the PV sector are supporting these plans, but what are the prospects for the year ahead in the face of a global recession? Izumi Kaizuka and Osamu Ikki report.

In 2008, Germany, Spain and other European countries led the expansion of global demand for PV, and related businesses attracted significantly more investment than in 2007. With the emergence of the global financial crisis in September 2008, the sector has predictably been affected but, despite the downturn and several years of stagnation, Japan’s PV market is expected to surge in 2009 with the announcement of the ‘Fukuda Vision.’

Policy support for PV

Before the G8 Hokkaido Toyako Summit in June 2008, the then Prime Minister Yasuo Fukuda presented a plan to achieve a 50% reduction of global emissions by 2050. The so-called Fukuda Vision significantly bolstered Japan’s attitudes towards PV and the fact that it was presented by the former PM, rather than the Ministry of Economy, Trade and Industry (METI), positively influenced related government sectors. Many new policy initiatives are now underway and the market, which had been stagnant for three years, is now expected to regain some of its lost vitality.

In response to the Fukuda Vision, the ‘Action Plan for Achieving a Low-carbon Society’ was approved by the cabinet in July 2008, and national targets for cumulative PV were set at 14 GW by 2020 and 53 GW by 2030.As part of this development, METI decided to reintroduce a subsidy for residential PV which had been terminated in 2005. Despite the withdrawal of the earlier support, the largest PV sector in Japan is still residential, accounting for about 86% of domestic shipments. Under the new framework, METI will subsidize residential systems up to 10 kW, providing ¥70,000/kW (US$774 /kW). The new programme, which supports both installation and equipment costs, started in January 2009 with a budget of ¥9 billion ($99.5 million). A further ¥20 billion ($222 million) was appropriated for FY 2009 and tens of thousands of households are expected to be supported.

METI also started a new R&D programme to develop cells with conversion efficiencies of over 40% and established a ‘Study group on low-carbon power supply systems’ to identify the challenges of expanding PV, and appropriate responses.

The Ministry of the Environment (MoE) has also been accelerating measures in accordance with ‘a strategy for becoming a leading environmental nation in the 21st century’ (a decision made in June 2007). While continuing support for a ‘mega-scale PV power plant’, the MoE also started a new residential programme. Three local governments receive MoE subsidies to introduce housing PV systems and MoE is also preparing new measures for 2009.

Moreover, four ministries, namely: METI and the MoE together with the Ministry of Education, Culture, Sports, Science and Technology and the Ministry of Land, Infrastructure and Transport jointly announced an ‘action plan for the dissemination of PV power generation’ declaring that the four would join hands on the project.

Local governments not only continued subsidy programmes for residential PV systems, but also started unique programmes to support PV power generation. By the end of 2008, such activities were being promoted on municipality level – and over 300 municipalities continue to provide their own subsidy or preferential loan programmes for residential PV systems.

For example, in the capital the Tokyo Metropolitan government has made preparations for a large-scale project to install PV systems to 40,000 houses, totalling 1 GW from 2009 to 2010. Aichi Prefecture started a buy-out system for Green Energy Certificates as a method to support PV. Kyoto Prefecture implemented a system for companies to buy credits for residential CO2 reduction and started a model system to accredit Eco Points for energy consumption reduction efforts. In Yokohama City, Kanagawa Prefecture developed an anti-climate change policy and conducted further promotion of PV. The City also utilizes the Green Power Fund to demonstrate community-based new energy resource projects.

Electric utilities have also been supporting PV system installations through net-billing and buy-back of excess electricity at the retail price as well as the Green Power Fund supporting PV deployment in public facilities, and compliance with Renewables Portfolio Standards (RPS). In addition to these measures, utility groups have announced a plan to construct PV power plants with total capacity of 140 MW at 30 locations across Japan by 2020.

Utilities are formulating specific plans to construct megawatt-scale PV plants, one after another. For example, Tokyo Electric Power (TEPCO) established a joint company with Mitsui & Co Ltd, planning a 2 MW PV plant at Haneda Airport. TEPCO has also announced construction of a 20 MW system in Kawasaki City. Other utilities such as Chugoku Electric Power, Chubu Electric Power, Hokuriku Electric Power, Kyusyu Electric Power and Kansai Electric Power, have announced similar plans.

Activities of the PV industry

In addition to national and local policy measures and utility company backing, PV manufacturers are also supporting PV system development by enhancing industry structure: accelerating the reduction in system costs, as well as expanding production capacity. It is expected that these activities will make a major contribution to the expansion of the domestic PV market.

Currently, 11 companies are manufacturing PV cells/modules in Japan: Sharp, Kyocera, Sanyo Electric, Mitsubishi Electric (MELCO), Kaneka, Mitsubishi Heavy Industries (MHI), Space Energy, Fuji Electric Systems, Honda Motor, Showa Shell Sekiyu and Clean Venture 21. These groups, some of the world’s largest PV players, cover a range of technologies. For instance, Hitachi sold its bi-facial silicon PV module business to Space Energy. Fuji Electric manufactures flexible amorphous silicon (a-Si) modules while Honda Motor and Showa Shell Sekiyu manufacture copper indium gallium selenide (CIGS) modules. Clean Venture 21 plans spherical Si modules. Honda Motor established Honda Soltec, which started module production at its Kumamoto plant while Showa Shell Sekiyu has started production at its 20 MW/year plant in Miyazaki Prefecture.

MSK is specialized in manufacturing PV modules and it was acquired by Suntech Power Holdings, China, in 2006. Another manufacturer specializing in PV modules, YOCASOL, was established in 2007 through an employee buyout when former employees of MSK’s Fukuoka Plant bought the facility. Fujipream also manufactures PV modules with its own technology, such as its double-glass light-through PV modules.

Table 1 (above), shows current plans for expanding production capacity, entries highlighted in green show capacity of thin-film PV modules.

As well as solar cell manufacturers, other companies in the PV industry have also been expanding production capacities, including: silicon feedstock; silicon ingot/wafers; gas for semiconductors; raw materials and components; as well as manufacturers of PV manufacturing equipment.

In the distribution of PV systems, some major prefabricated housing manufacturers have strengthened their partnerships with PV manufacturers to introduce the systems to residential houses. In response to the government’s efforts, the housing industry in Japan – in co-operation with the PV industry – established the ‘Council on promoting solar housing’ to encourage the fully-fledged dissemination of residential PV. Working groups will be established to discuss accelerating roll out, development, and the integration of PV modules.

Prospects for 2009

In the wake of Fukuda’s presentation, ministries and agencies, as well as local governments have launched numerous efforts to promote PV in Japan. This widespread policy backing was read as a clear go-ahead by the Japanese market, then hovering at around 200–300 MW installed annually. This is expected to reach 400–500 MW through three core measures:

• subsidy programmes for residential PV systems
• subsidy programmes for public and industrial PV systems
• construction of PV power plants.

In 2009, the global economy is facing harsh conditions and the PV industry is expected to experience some turbulence, at least partly due to cell supply and demand gaps. It is anticipated that the manufacturing sector will see some consolidation, with an increasing number of mergers and acquisitions. As competition grows more intense, prices of solar cells are expected to fall, hitting margins and making it more difficult to secure profits. Nonetheless, though the speed of growth may be reigned in, with the revival of extended support mechanisms; as well as positive changes anticipated from the new Obama administration in the USA, and the continued development of European markets, the growth of PV is a global trend, on a sound trajectory.