With Japan’s Nuclear Power Out, Solar is In

Panels on Panels on Panels (Source: Inhabitat)

Panels on Panels on Panels (Source: Inhabitat)

According to a recent Asahi Shimbun telephone poll, 59% of respondents said that they opposed the restart of the Sendai nuclear power plant, located in Kyushu’s Kagoshima prefecture. Even though the reactor received approval from the Nuclear Regulation Authority (NRA) a few weeks ago, there is growing public opposition to the reactor’s restart. With all of Japan’s 48 reactors offline, the Japanese economy is taking an enormous hit as it is forced to import very expensive liquefied natural gas, oil, and other fossil fuels. Restarting just a few of the nuclear power plants would greatly benefit the Japanese economy. There is one industry greatly benefiting from the lack of nuclear energy, and it isn’t natural gas producers. Solar photovoltaic (PV) systems are on the up and up, and it doesn’t look like it will slow down anytime soon.

Solar PV is Nearly Non-Existent in the 2000s (Source: METI)

Solar PV is Nearly Non-Existent in the 2000s (Source: METI)

In 2009, the Japanese government set a solar PV capacity target of 28GW by 2020 and 53GW by 2030. At the time, Solar PV was growing at a moderate pace. In 2010, roughly 1GW of new capacity was added. Solar PV was a very small aspect of Japan’s renewable energy portfolio. Most analysts in the 2000′s were hedging their bets on wind power or even biomass.

Installed Capacity of Renewable Generation (Source: IEEJ)

Solar PV: “I. Am. KAZAAM.” (Source: IEEJ)

But after the Fukushima crisis and the closing of all nuclear power plants, investment and construction of solar PV systems skyrocketed.  In 2012 1.7GW of new solar PV went online. In 2013, 6.9GW went online. To put that in perspective, PV capacity doubled in 2013. It is expected to double again by 2015, reaching a capacity of 28.6GW. The government hoped to reach 28GW by 2020, Japanese developers did it by 2015 – that is something that is worth celebrating.

Today, the government has authorized about 89 GW of renewable energy, of which 71 GW is solar PV. Massive solar parks are popping up by the dozen, and companies are mounting panels atop warehouse and factory rooftops as part of a rapid buildup that one developer likened to an “explosion.” And although solar pv by itself would never be able to replace the void left by nuclear energy, it is great news for the renewable industry, which had been fledgling for the last 20 years.

Solar PV is demolishing its renewable energy competition. Even though wind and biomass are on the rise, they aren’t seeing the triple digit growth that the solar PV industry has been profiting from.

This explosion in development can be attributed to a feed-in tariff (FIT) established by the government in July 2012 (as well as a major drop in the price of solar PV panels). A feed-in tariff basically provides compensation at above the retail price for a set number of years. It is a strategy by the government to accelerate investment in renewable energy technologies.

Because of the FIT and its guaranteed high return rate, Japanese PV developers have been tirelessly looking for investment partnerships, particularly from overseas companies. Foreign companies are flocking to Japan because of the return they can make on their investment, but also because of the country’s stable political and economical environment. Japan’s solar PV market has attracted investors from the US, China, Europe, and Taiwan.

Earlier this year, METI announced that in April it would cut the feed-in tariff from ¥34 to ¥32. This immediately sparked some criticism from the industry. “I don’t know of any developers that can make the numbers work at 32 yen,” said Seth Sulkin, President & CEO of Pacifica Capital K.K., a Tokyo-based solar power and commercial real estate developer.

But even with a lower feed-in tariff, developers are “making it work” as foreign investors are still clamoring to get in on Japanese solar PV projects. Right after the feed-in tariff was cut, GE financially backed a chunk of a 230MW plant, which will be the biggest solar plant in Japan and will cost well over $700 million. Earlier in July, it was revealed that Deutsche Bank will lend well over $1 billion for construction of about six large-scale plants. And earlier this week, First Solar announced that they will be supplying XSOL, Japanese PV systems distributor, with 100MW of solar supply modules a year.

Cumulative Burden of FIT Over 20 Years (Source: IEEJ)

Gonna add to dat Japanese debt. (Source: IEEJ)

Japan still has a long way to go before solar PV becomes a major staple in the country’s power generation. Some are worried that the grid won’t be able to support such a large influx in solar power generation. It also seems that the government might have approved too many projects, which could cost them as much as $18.66 billion a year if every project goes online. Plus many projects have been delayed because of bureaucratic inefficiency and a general lack of qualified technicians.

Yet despite the hurdles, foreign companies are lining up to invest in Japan’s solar boom. Will solar PV solve all of Japan’s energy woes and replace nuclear energy or LNG? Nope, but it will definitely help diversify Japan’s fossil fuel-heavy energy portfolio. Before the Fukushima crisis, no one would have guessed that Japan could surpass Germany as the world’s biggest consumer of solar power. But low and behold, Germany has a solar PV capacity of about 36GW, and it is looking like Japan will pass them well before the end of the decade.

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3 comments

  1. In the States solar is in. All kinds of opportunities for net metering deals. Especially as fracking get more controversial all the alternatives are rising in importance.

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