The Future of Japan’s Solar Industry Is Uncertain

The ECOreport Publishes Part Four of The Five Most Attractive Nations For Renewable Investments, The Future of Japan’s Solar Industry Is Uncertain

By Roy L Hales

Screen-shot-2014-03-18-at-3.43.47-PM1According to Amory Lovins, “Japan has twice the per-hectare high-quality renewable potential of North America, three times that of Europe, and nine times that of Germany.” Japan is currently #4 in the Renewable Energy Country Attractiveness Index (RECAI). There is a large untapped geothermal potential. By the end  of 2013 wind energy was feeding 2.6 GW to the grid, but the real leader of the renewable sector was solar. There was 13.5 GW of solar capacity. Now the future of Japan’s solar industry is uncertain.

In The Wake Of The 2011 Meltdown

Photo Credit: Prime MInister Shinzō Abe by Day Donaldson via Flikr (CC BY-SA 2.0 license)
Photo Credit: Prime MInister Shinzō Abe by Day Donaldson via Flikr (CC BY-SA 2.0 license)

The nation’s solar development can be traced back to 1992, but assumed new important in the wake of the 2011 meltdown at Fukushima. One by one, all 48 of the nation’s nuclear plants were taken offline. To kick the solar industry into gear fast, Prime Minister Shinzo Abe’s administration set up the most expensive feed-in-tariff system in the World. The trade ministry has approved 72 GW of renewable projects since July 2012.

Now, backed by at least five of Japan’s utilities, Abe wants to slow this transition down. His government approved a new energy last April. They  identified nuclear as a key baseload power source, gave a prominent role, but did not set any renewable targets. In December, the government cancelled 17.3 GW of approved FIT solar PV projects. The announcement came after a meeting of the Japanese Grid Issues Working Group, which is composed of representatives of the nation’s utilities and the Ministry of Economy, Trade and Industry. The explanation was that there is “insufficient grid capacity.”

This announcement would seem to herald the end of a frantic two year growth spurt. When the final figures for 2014 are in, Japan may surpass surpass China in terms of new installations. 

Photo Credit: Setting solar panel on the lift P1000634 by Bernd via Flickr (CC BY-SA 2.0 license)
Photo Credit: Setting solar panel on the lift P1000634 by Bernd via Flickr (CC BY-SA 2.0 license)

It has been three months since Kyushu Electric Power announced it will not process further applications until they can determine how much more intermittent energy the grid can handle.  Shikoku Electric Power Co, Tohoku Electric Power Co, Hokkaido Electric Power Co and Okinawa Electric Power Co have all followed suit.

Japan is not yet ready to fully cash in on its’ renewable potential. Prior to 2011, solar energy was primarily used in the residential sector. It is the utility sector that is most vulnerable. There are still about 51 GW approved under the FIT program, but it is no longer certain they will all be completed.

Invested in Renewables

The growth of the PV solar FIT program is reflected in the amount this nation invested in renewables. In 2012, the year this program was launched, $15.9 billion was invested. This figure grew to $28.6 billion, in 2013, and $41.3 billion in 2014.

It was this explosive growth that resulted in Japan being ranked #4 for attractiveness. There are other sectors besides solar of course, but for the most part renewables meant solar in Japan. As the pace of development slows, the nation’s RECAI rating will drop.

Japan still has the World’s third largest economy. This is primarily reflected in overseas investments. Inward FDI was only $2.3 billion in 2013, but outward FDI reached $135 billion with the principal recipients Asia, North America and Europe, respectively.

(Click on this link to see the entire 7 Most Attractive Nations For Renewable Investments series.) 

Top of page Photo Credit: IAEA experts depart Unit 4 of TEPCO’s Fukushima Daiichi Nuclear Power Station on 17 April 2013 as part of a mission to review Japan’s plans to decommission the facility from IAEA Imagebank via Flikr (CC BY-SA 2.0 license)

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