Japanese Solar Bubble
Solar Energy in Japan is seeing a huge boom in solar installations as the generous subsidy announced by the Government sees the entry of newer players each day. The growth is driven by assured returns in excess of 30% which is attracting all sorts of investors from Japan where the interest rates are as low as 1%. The Solar Bubble is growing bigger and bigger each day as the surge in solar installations refuses to stop. The Government in Japan has refused to learn from the solar bubble bursting in Spain, Italy, Czech and Bulgaria.
The bureaucrats are blind to the bubble forming in front of them. Instead Kazuhiro Ueta, the head of the five member solar panel thinks they have a late mover advantage. But they are not using the advantage by setting the solar feed in tariffs so that the rate of return is around 5-8%. Instead they have kept it at the highest rate in the world.
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. You know there is a bubble when Gamblers and Goldman Sachs start investing massive amounts to reap the early mover advantage of the Solar Bubble.
Solar Booms always end up in Spectacular Busts
Note Solar Booms are generally followed by a Bust after a couple of years as the massive subsidies forces the Government to stop the incentives abruptly and even apply retroactive taxes. This story has been completed in a number of countries like Spain, Italy Czech and Bulgaria already and Japan is in the first phase.
Mitsui, Japan’s second-biggest trading company, and Tokio Marine Asset Management, are working on a project to construct 10 solar power stations across Japan at a total cost of 9 billion yen ($114 million).
The Ministry of Economy, Trade and Industry in Japan approved clean energy projects totaling 1,780 megawatts of capacity, with solar accounting for 83 percent, as of the end of September under a government incentive program. “Several large-scale solar power plants are scheduled to start operations toward the end of this fiscal year so the non- residential solar sector is expected to expand,” it said.
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