Why The Japanese Solar Market Could Be Poised For A Slowdown
The Japanese solar market has proven to be one of the key growth levers for the photovoltaics industry over the past two years, driven by the void created by the suspension of the country’s nuclear power plants; attractive incentives and the availability of cheap funding for solar power projects. The country is now the world’s second largest solar market in terms of annual capacity additions. The surge in Japanese installations have helped solar companies to largely offset declines in markets such as Spain and Germany, which had previously accounted for a bulk of global panel demand. According to Bloomberg New Energy Finance, Japan’s investment in solar technology rose to about $30 billion in 2013, or almost triple the 2010 level, with about 7 gigawatts (GW) of new capacity being installed through the year. However, the Japanese solar industry has been facing some headwinds of late, as utility companies have been unable to accommodate the flood of new installations on the electric grid and also due to concerns that the government will scale back its solar incentives. [1] In this note, we take a look at some of the factors that could contribute to a slowdown in the Japanese solar market.
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Unlike commercial and residential solar installations, which can be mounted on rooftops, utility-scale solar installations are typically ground-mounted and require large swathes of land. This is proving to be a significant issue in Japan. The country’s population density is very high, with around 343 people living in each square kilometer compared to around 231 in Germany and 141 in China. Additionally, around 73% of the country’s land is either mountainous or forested, leaving little suitable land for solar projects. [4] The lack of suitable land could prove to be a hindrance to the growth of the utility-scale solar sector in Japan. Additionally, the recent decline in crude oil prices could play a role in influencing investment in renewable energy in Japan, at least in the near term. Japan uses a significant amount of imported LNG for its electricity generation, and since the price of LNG is influenced by crude oil prices, there is a possibility that utility companies will increasingly utilize their natural gas-based electricity generation capacity instead of investing in sources such as solar, if oil prices remain under pressure for an extended period of time.
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- Trina Drops as Japan Outlook Sinks Chinese Solar Makers, Bloomberg,October 2014 [↩]
- Minister Obuchi Quits, + Japan Feed-In Tariff & Energy Update (In Depth), Clean Technica, October 2014 [↩]
- Power Companies in Japan Move to Restrict Solar, Scientific American, October 2014 [↩]
- Japan: Solar’s Real Deal?, Renewable Energy World, June 2013 [↩]