Japan poised to be world’s largest solar market

Just two years after the Fukushima power station melt-down took virtually its nuclear fleet off-line, Japan is emerging as the world’s largest market for solar power.

Analysts at Deutsche Bank last week suggested that Japan will become the biggest market for solar within the next two years, while industry consultant IHS suggested that in revenue terms, Japan will overtake Germany in 2013 with sales of $20 billion of solar modules this calendar year.

Data released by the Japan Photovoltaic Energy Association on Friday showed that first quarter installations in Japan rose nearly three-fold to 3,809MW, helped by the introduction last July of above-market incentives in the form of feed in tariffs (FiTs).

Those FiTs, widely used around the world, were wound back in April from 37.8 yen (37.5 cents) per kilowatt hour from 42 yen, but according to Bloomberg is still more than twice those of China (1 yuan or 16c/kWh) and Germany (0.1082 Euro of 14c/kWh).

In the seven months from the introduction of the tariffs and the end of February, the Ministry of Economy, Trade and Industry approved 12,258MW of solar projects – both residential and non-residential – at the higher tariff, and Deutsche Bank estimates that Japan will have an annualised “run rate” of up to 9,000MW.

The Deutsche Bank analysts said the tariffs had already had an impact on costs, with the total system costs for large-scale projects declining by nearly 30 per cent from 280 yen/watt in the last quarter of 2012 to as low as 200 yen/W now.

This meant that even with the decline in tariffs, developers would still make attractive internal rates of return “in the low teens”,

“We see low policy risk in Japan as the new government was involved in the proposal of the 3 year promotional period for (feed in tariffs) last year and is unlikely to change the mix of renewables in the new energy master plan that may get introduced later this year,” the analysts said. Because of this, they see little risk to the government reaching its target of 63GW by 2030.

Japanese module supplies have been the chief beneficiaries of the boom in solar, but international solar manufactures have also benefited, accounting for as much as 40 per cent of supply.

These include Canadian Solar, which said last week that Japan accounted for 25.4 per cent of its sales, and Yingli,  JA Solar and SunPower have also been seeing strong sales in Japan.

Yingli, the world’s largest manufacturer, said late last week that demand from new markets including Japan accounted for approximately 20 per cent of its total module shipments. It also noted that the return on investment for residential, commercial and the utility-scale projects in Japan remain attractive even after the subsidiary reduction. “This will continue to drive a robust demand for modules.” it said.

Yingli was asked to identify the strong growth markets for solar around the world. It cited Japan, China, the US, South Africa, north Africa, southern America and India. No mention of Australia.