Solar Market and Business Management

GPE SOLAR /
Solar Market and Business Management /
Solar Japanese Market Report /
Gottschalck Cavalcanti, Fabian /
10/06/2012 /

INTRODUCTION...... 3

JAPAN´S CLIMATE & GEOGRAPHICAL DATA……………………..….4

OVERALL ECONOMY...... 6

ELECTRECITY IN JAPAN...... 7

ELECTRICITY DISTRIBUTION……………………………………………11

SOLAR INDUSTRY...... 12

CONCLUSIONS...... 15

REFERENCES...... 16

INTRODUCTION

The basic requirement for producing solar energy is enough sunshine, which is why solar power is particularly suitable in the “sunbelt” between latitude 30 degrees north and 30 degrees south. As concerns about climate and energy supply issues escalates, government support for the development of renewable energy is increasing and the cost reductions in the industry aremoving towards a level approaching grid parity.Besides that, solar cells have become more efficient, which makes them an even greater value than they were a few years ago. There have also been great strides in our ability to install and implement PV technology as contractors and builders have begun to treat PV as a mainstream building technology.The economics of solar energy are compelling, particularly as the costs of conventional oil and gas continue to climb. Most PV systems are warranted for at least 25 years and usually pay for themselves in much less time, even assuming that gas and oil costs don't rise.

The 2010 global photovoltaic (PV) market soared past the forecasts of the previous year allowing prices, throughout the PV chain, to hold up much better than anticipated. Worldwide, PV market installations reached a record high of 18.2 GW in 2010, representing growth of 139%. The PV industry generated $82 Billion in global revenues in 2010, up 105% from $40 Billion in 2009. Meanwhile, worldwide solar cell production reached 20.5 GW in 2010, up from 9.86 GW in 2009.

Due to the recent sharp cuts in tariffs in Europe, the industry will need to stimulate positive PV policies across new markets and regions in order to continue being successful.

Germany, Spain, USA, Italy, Japan and South Korea are the most developed solar markets today, but other markets are following and see solar power as a key resource in their future energy supply.

FIGURE 1: MAJOR PV COUNTRY MARKETIN 2010AND 2011.

The Japanese market continues experiencing highgrowth –increasing its solar energy size from 477 MW in 2009 to almost 1.5 GW in 2011, as a result ofthe nationwide residential incentive program and the introduction of a Japanese version of a Feed-In-Tariff (FIT) in 2009. New government initiatives have made a declaration to increase the cumulative installed PV capacity by 20 times to reach 28GW by 2020 - and if implemented thoroughly theses government initiatives present very strong opportunities to bring world leader position back to Japan.

JAPAN CLIMATE AND GEOGRAPHICAL DATA

Japan is an island nation in East Asia comprising a volcanicarchipelago extending along the Pacific coast of Asia. Measured from the geographic coordinate system, Japan stretches from 24° to 46° north latitude and from 123° to 146° east longitude.

Japan belongs to the temperate zone with four distinct seasons, but its climate varies from cool temperate in the north to subtropical in the south. Japan is generally a rainy country with high humidity. Because of its wide range of latitude and seasonal winds, Japan has a variety of climates, with a latitude range often compared to that of the east coast of North America, from Nova Scotia to the U.S. state of Georgia. Climate also varies dramatically with altitude and with location on the Pacific Ocean or on the Sea of Japan. Northern Japan has warm summers but long, cold winters with heavy snow. Central Japan in its elevated position has hot, humid summers and moderate to short winters with some areas having very heavy snow, and southwestern Japan has long, hot, humid summers and mild winters.The climate, in general, from June to September is marked by hot, wet weather brought by tropical airflows from the Pacific Ocean and Southeast Asia. These airflows are full of moisture and deposit substantial amounts of rain when they reach the land. There is a marked rainy season, beginning in early June and continuing for about a month.

Sunshine, in accordance with Japan’s uniformly heavy rainfall, is generally modest in quantity, though no part of Japan receives the consistently gloomy fogs that cover otherregions in Asia. Amounts range from about 6 hours per day in the Inland Sea coast and sheltered parts of the Pacific Coast and Kantō Plain to 4 hours per day on the Sea of Japan coast of Hokkaidō. In December there is a very pronounced sunshine gradient between the Sea of Japan and Pacific coasts, the former side can receive less than 30 hours and the Pacific side as much as 180 hours. In summer, however, sunshine hours are lowest on exposed parts of the Pacific coast where fogs from the Oyashio current create persistent cloud.

FIGURE 2:SOLAR IRRADIATION IN JAPAN.

OVERALL ECONOMY

The economy of Japan is the third largest in the world after the United States and the People's Republic of China and is the world's second largest developed economy. According to the International Monetary Fund, the country's per capita GDP (PPP) was at $34,362 or the 24th Highest in 2011.

The general inflation rate in Japan was last reported at 0.5 percent in March of 2012. From 1971 until 2010, the average inflation rate in Japan was 2.97 percent reaching an historical high of 24.90 percent in February of 1974 and a record low of -2.50 percent in October of 2009.

FIGURE 3:JAPAN’S INFLATION RATE OVER THE LAST5 YEARS.

Japan has the largest electronics goods industry, and is often ranked among the world's most innovative countries leading several measures of global patent filings. Facing increasing competition from China and South Korea, manufacturing in Japan today now focuses primarily on high-tech and precision goods. The fields in which Japan enjoys high technological development include consumer electronics, automobile manufacturing, semiconductor manufacturing, optical fibers, optoelectronics, optical media, facsimile and copy machines, and fermentation processes in food and biochemistry.

With a population of 126,860,000 and only 377.944 square kilometers of area (about same size as the state of Montana/US), Japanhas inadequate natural resources to support its growing economy and large population. Although many kinds of minerals were extracted throughout the country, most mineral resources had to be imported in the postwar era.Local deposits of metal-bearing ores were difficult to process because they were low grade. The nation's large and varied forest resources, which covered 70 percent of the country in the late 1980s, were not utilized extensively. Because of political decisions on local, prefectural, and nation levels, Japan decided not to exploit its forest resources for economic gain. The nation therefore built up the manufacturing and processing industries to convert raw materials imported from abroad. This strategy of economic development necessitated the establishment of a strong economic infrastructure to provide the needed energy, transportation, communications, and technological know-how.

ELECTRICITY IN JAPAN

Japan lacks significant domestic sources of fossil energy and must import substantial amounts of crude oil, natural gas, and other energy resources, including uranium. Therefore roughly 80% of its oil is imported from OPEC: especially, United Arab Emirates, Saudi Arabia, Kuwait, and Iran. Also most coal comes from Australia and the United States.Using large amount of oil and coal for energy affects the environment negatively. Fossil fuels emit carbon dioxide, which lead to global warming. In 1999, it is reported that Japan emitted carbon dioxide totaling 5% of global emissions. In 2010, Japan wasnumberone hard coal importer (187 Mt, 20% of total world coal import) and number one top natural gas importer (99 bcm, 12.1% of total gas import).In 1990 Japan's dependence on imports for primary energy stood at more than 85%, and the country had a total energy requirement of 428.2 million tons of petroleum equivalent.

In 2008, Japan ranked third in the world in electricity production, after the United States and China, with 1.025× KWhproduced during that year. In 2011, Japan’s total electricity production was 1 053 934 GWh.

FIGURE 4: JAPAN’S ELECTRECITY PRODUCTION IN 3 DIFFERENT YEARS.

In terms of per capita electricity consumption, the average person in Japan consumed 8169KWh in 2009. That was 115% of the EU15 average of 7409 kWh/person and 95% of the OECD average of 8991 kWh/person. Its per capita electricity consumption decreased by 3.43% between 2004 and 2009.

With 53 active nuclear power generating reactor units in 2009, Japan ranked third in the world in that respect, after the United States (104 reactors) and France (59). Almost one quarter (24.93%) of its electricity production was from nuclear plants, compared to 76.18% for France and 19.66% for the United States. After the 2011 earthquake and tsunami some nuclear reactors were damaged, causing much uncertainty and fear about the release of radioactive material, as well as highlighting the ongoing concerns over Japanese nuclear seismic design standards.

FIGURE 5:JAPAN’S ELECTRICITY PRODUCTION BY SOURCE.

Now days, the renewable energy is becoming stronger in Japan.The Japanese government announced in May 2011 a goal of producing 20% of the nation's electricity from renewable sources, including solar, wind, and biomass, by the early 2020s.According to the OECD, Japan produced more electricity in May 2011 than it did in May 2010, but did so with 34% LESS nuclear energy and 1% hydro.Citing the Fukushima nuclear disaster, environmental activists at a United Nations conference urged bolder steps to tap renewable energy so the world doesn't have to choose between the dangers of nuclear power and the ravages of climate change.

From 2010 to 2011, Japan produced 295% more electricity from renewable-energy resources – including geothermal, solar and wind power.

FIGURE 6: ELECTRICITY PRODUCTION IMPROVEMENT ACCORDING TO EACH SOURCE.

Although it only makes a minor contribution to the total, Japan was the world's first largest producer of photovoltaic electricity until overtaken by Germany in 2005, a year in which it had 38% of the world supply compared to Germany's 39%. In December 2011, Tohoku Electric Power began operating a solar power plant in Hachinohe, Aomori. The 10,000 panel plant, occupying a 50,000 square meter site, is expected to produce 1.6 million KWh of electricity a year, about the equivalent needed to power 500 households.Also, in September 2011, Japan had 1,807 wind turbines generating 2440 MW of power. A lack of locations with constant wind, environmental restrictions, and emphasis by power utilities on fossil and nuclear power hinders the employment of more wind power in Japan.

As the energy prices increase in Japan, photovoltaic’s systems are very welcome. As an example, the latest news said that Japan's 10 major power utilities plan to raise electricity prices in June due to higher fuel costs. Japan's largest utility, Tokyo Electric Power Company, said its household customers, who consume an average 290 kW/month, will pay about Yen 6,973 (€69.32) in June/12, up from Yen 6,912 (€68.71) in May/12. Household customers of Kansai Electric, Japan's second-largest power utility will pay Yen 6,769 (€67.29) in June/12, up from Yen 6,739 (€67.00) in May/12, for average usage of about 300 kW/month.Household customers of Chubu Electric, the third largest, will pay Yen 7,082 (€70.40) in June/12, up from Yen 7,040 (€69.99) in May/12, for average consumption of 300 kW/month.

Each utility uses a different mix of feedstock for power generation, including coal, oil, LNG, nuclear and hydro, accounting for the variation in prices.

ELECTRICITY DISTRIBUITON

The electric power industry in Japan covers the generation, transmission, distribution, and sale of electric energy.

Japan doesn't have a single national grid like most other industrial countries have, but has separate eastern and western grids.The grids are connected together by 3 frequency converter stations (Higashi-Shimizu, Shin Shinano and Sakuma), but these can only handle 1 GW.

FIGURE 7: POWER GRID OF JAPAN.

In Japan, the electricity market is divided up into 10 regulated companies:

Chugoku Electric Power Company (CEPCO)
Chubu Electric Power (Chuden)
Hokuriku Electric Power Company (HEPCO)
Hokkaido Electric Power Company (Hokuden)
Kyushu Electric Power (Kyuden)
Kansai Electric Power Company (KEPCO)
Okinawa Electric Power Company (Okiden)
The Tokyo Electric Power Company (TEPCO)
Tohoku Electric Power (Tohokuden)
Shikoku Electric Power Company (Yonden)

SOLAR INDUSTRY

The domestic PV market was originally created by a national policy in the early 1970s to lead the nation away from its dependence on foreign oil. The federal government funded R&D projects and created policies to support the introduction and dissemination of PV systems. One of the most important of the federal programs was the Residential PV System Dissemination Program, which provided up-front cash rebates. Between 1994 and 2005, this governmental program funded total installations of over 930MW, comprising over 250,000 residential PV systems. During this period, Japan dominated the world PV market in terms of both production and installation.

After 12 years, the federal government thought the PV market was self-sufficient and discontinued the residential incentive program, while Germany and several other countries moved ahead with national FIT policies. In 2006, Japan saw its first ever decrease in the annual PV market; it declined further to 230MW in 2007, and remained at about the same level in 2008. The market decline was due not only to lack of incentives, but also to lack of domestically-available modules, since Japanese module makers focused on exporting to Europe, where profit margins were much higher.

To stop the market from further decline, the federal government re-launched the national residential incentive program in January 2009. In this program, the government covers up to 35 percent of a home PV system’s installation costs. A requirement that utilities pay homeowners a premium for electricity fed back into the grid by renewable energy systems—known as a feed-in tariff or FIT—makes residential PV even more attractive. Japan’s FIT rate for PV is about twice what a resident would normally pay for a kilowatt-hour of electricity. In November 2009, the federal government initiated a Net FIT policy, requiring electric power utilities (a total of 10) to buy excess electricity generated by PV systems at a premium rate. Residential PV owners currently get paid for 10 years a rate of ¥42/kWh, compared to the average of ¥20/kWh under the traditional net-billing. The main reason Japan is implementing the Net FIT policy – purchasing only excess generated electricity, instead of purchasing all generated electricity – is to incentivize energy conservation and to limit the program cost burden that is shared by all electricity ratepayers. Since then, the Japanese residential PV market has been making a strong come back.

FIGURE 8: JAPAN’S PV INSTALLATION GROWTH.

The dominance of the residential sector remains strong, accounting for 86% of the total market in 2011. The residential segment will continue to dominate domestic PV demand, though its share will fall gradually as the non-residential segment starts to take-off with a new FIT that will start in July 2012.

In the past, the federal government supported the non-residential PV segment with hefty upfront cash incentives (about 30-50% of the installed system cost), but the segment didn’t grow as fast and as large as the residential segment due to higher installed system costs and lower electricity rates. By 2011, the federal PV incentive program was no longer available for the non-residential segment. To compensate for the lack of incentives, the government raised the net FIT rate for the non-residential segment from ¥16/kWh in 2010to ¥40/kWh in 2011. This increase has not been sufficient enough to drive the non-residential segment since this policy compensates only excess generated PV electricity, is available only for systems below 500 kW, and is not available for power generators.

Moreover, with technology improvements and further installations under the national PV 2030+ initiative, the government aims to make solar PV among the cheapest electricity options available. .By 2020, Japan aims to increase this eightfold, to 28,000 megawatts, with a goal of 53,000 megawatts by 2030. This would be sufficient to power 18 million Japanese homes.

Many homeowners are qualified for not only federal incentives, but also incentives from their prefecture, city and town, respectively. As of October 2011, a total of 870 local governments offer PV support programs, including subsidies and loans.

With only a few months before the true FIT is implemented in Japan, many projects are in limbo due to uncertainty in rates and terms for the FIT. The Japanese government is under pressure to come with the “right” rates to accelerate the domestic PV market, while at the same time minimizing the burden on homeowners and businesses who suffer from slow economic conditions, and also to prevent a repeat of the market swings seen in Spain and the Czech Republic.

CONCLUSIONS

In the end the Japanese market is considered to be a very preferment market. The Japanese government wants to assure that in the future they will have a safe, clean, and self-sustainable environment, but unfortunately the renewable energy (specially the solar energy), still depend a lot of the of local regulations and incentives. Companies are waiting for the announcement of the Japanese government of the new Fid-in-Tariff, for non-residential solar installations, in July/2012, in order to invest their money in this market.

With the increasing electricity prices in Japan, solar generated electricity becomes an even better power source to stop Japan’s dependence of foreign raw-material for electricity generation and also to unleash Japan from the danger of a nuclear power, which in Japan it becomes even more dangerous due to the enormous quantity of natural disasters that can occur in the country.

Ultimately, if Japan achieves its photovoltaic’s installations goals for 2030, with the ambitious “2030+” national program, certainly the photovoltaic system still has a very bright future ahead.