Japan after the Fukushima disaster had set out on a plan to increase the share of renewable energy in the electricity mix which is abysmally low. Japan has very low capacity in wind and solar energy compared to the more environmentally conscious developed countries like Germany. Japan which had led the solar market in the period till 2005 abruptly stopped its support. Though that time period had led to the birth of the Japanese solar industry (which is second to the Chinese even today), the industry had faltered as domestic demand went into decline.
Sharp, Kyocera, Panasonic-Sanyo, Mitsubishi are the top solar panel producers in the world. Solar Energy in Japan has a long future dating back to 1994 when the government introduced capital subsidies to boost solar energy installations on rooftops. Till 2004, Japan was the largest solar market in the world after which it was overtaken by Germany. After 2004, the growth in the solar industry tapered off as the government reduced the subsidies for solar panels to almost zero. However the low cost Chinese solar module producers have pushed back most of the Japanese companies. The Japanese government grants generous solar subsidies and feed in tariff to boost the renewable energy production in the country which remains far off targets. This has led Japan to become the top non-European market after USA and the growth seems set to continue in the future as well. Japan has relatively low installations costs and is much nearer to grid parity. Also lack of wind energy makes solar energy more attractive as a renewable energy choice. While large scale solar installations in Japan are almost absent, there remain large numbers of rooftop solar installations.
However with the setting of a crazily high Feed in Tariff of 52c/KwH, solar demand is set to increase exponentially in Japan. Note Japan is already one of the biggest markets globally and has a large solar manufacturing industry. This is ideal grounds for a subsidy led solar boom like what happened in Spain in 2008 and Czech in 2010 with pernicious results. Japanese solar companies like Sharp, Solar Frontier, Mitsubishi will benefit the most. This is despite their much higher solar panel costs and prices compared to the global leaders like Trina. The reason is because of implicit barriers that Japan erects. Non-Japanese companies like First Solar, Sunpower have not been able to penetrate the Japanese market in a significant way because of these implicit hurdles. Note this is common to other markets and industries as well like LCD, computers, mobiles, rice etc.
Czech Solar Boom
Czech despite its small size has become the 3rd largest market for Solar Energy in Europe driven by high Feed in Tariffs. These guaranteed electricity rates have led to a Boom in the country due to IRRs in excess of 30%. The Parliament, overwhelmingly voted to overhaul the country’s Solar FITs. In the new plan submitted by the Czech Government to the EU, there are limits imposed on each type of renewables – biomass, solar, wind etc with emphasis given to Biomass Energy. Czech Republic has a EU set target of 13% Energy generated from Renewables. Wind and Solar Industry Groups have already started crying blue murder as the proposed FIT in 2011 for Solar will be cut by almost 50%. This made it uneconomical for a solar installer to put solar panels in the country.
The whole story of Czech Boom and future Bust is predictable and has already been played out in countries like Spain and Greece earlier. Like Spain, Czech electricity customers might see a 10-15% rise in electricity prices due to the high guaranteed payments to mushrooming solar installations. With the Czech Republic, implementing a Fiscal Austerity program involving pay cuts to public workers and other severe cuts in public expenditure, such huge payments to Renewable Energy seems an unnecessary luxury. Some more thought and preparation by the authorities would have avoided such a Failure.
Spain’s Solar Feed in Tariff Policy
Spain too had been in the media spotlight for its proposed retroactive solar subsidy cuts which were strongly opposed by the Solar Industry Association in Spain in 2008. These Feed in Tariff Cuts would come on guaranteed electricity payments to solar plants installed during the Solar boom in 2007 and 2008. Pension funds and other financial investors in these renewable energy projects had also strongly criticized the Spanish government as it would lead to 100% losses for equity investors. There were also suggestions that the government would be mired in legal tangles and have trouble in raising money for Green Energy in the Future. Spain had already come to agreements over the subsidy cuts with the Solar Thermal and Wind Energy companies. There had been speculation that the Solar PV cuts would be much more harsher than those dealt out to the Solar Thermal and Wind industries. However Sanity seems to have prevailed, with the Spanish government mode. New FIT cuts shifted the market almost completely towards small residential installations.