Energy & Resources

Rising sun

Can Japan’s solar boom help Chinese firms?

Kagoshima Nanatsujima w

Bright outlook: Kyocera’s plant

When it comes to the construction of mindblowingly large infrastructure projects we tend to think these days of China, not Japan.

However, Kyocera sought to rectify that last year when the tech giant opened Japan’s biggest solar power plant, locating it just below the Sakurajima volcano. If you visit the area you’re not likely to miss it: its 290,000 photovoltaic panels stretch into the salt waters of the East China Sea, covering a space equivalent to 175 soccer pitches, according to the website Energy Post. The panels have been designed by Kyocera to withstand the unusual conditions of exposure to volcanic ash, and at a cost of ¥27 billion ($252 million) the plant is able to generate 70 MW of power.

But Energy Post reckons Kyocera’s Kagoshima Nanatsujima Mega-Solar Power Plant won’t necessarily have bragging rights for long – an even bigger facility backed by Marubeni is in the works and will be capable of generating 81 MW. Softbank has also opened a large solar farm in western Japan.

They account for just a handful of the many new solar power stations that have been built in the past couple of years. The trigger for this Japanese solar boom was the meltdown at Fukushima, which saw the government in Tokyo shut down nuclear reactors over safety concerns. In 2012 it ordered the country’s big utilities to buy solar (and other renewable) power, and announced a generous feed-in-tariff scheme that suddenly made new solar schemes financially attractive.

All of this new demand proved to be good news for China’s solar panel makers – especially since they faced more moribund sales in Europe and anti-dumping actions in the US. Chinese panelmakers such as Yingli have capitalised as Japanese sales of solar cell modules doubled last year.

Indeed, in its most recent presentation to investors Shunfeng Photovoltaic – which last year bought the operations of the bankrupt Chinese solar panel heavyweight Suntech –categorised the US and Europe as its second tier markets and Japan in its first (“low, risk, high return, explosively growing market”). Shunfeng estimates Japanese photovoltaic module demand at 8 GW this year, versus just 2.1 GW in 2012.

And based on Japanese government plans, solar installed capacity is set to reach 28 GW by 2020 – a figure that Chinese magazine Global Entrepreneur says is the equivalent of 28 nuclear reactors.

That’s why Shunfeng sees its module sales to Japan this year increasing by 54%. Meanwhile another big player in the renewables field, Hanergy said it will build its own large-scale solar plant in Japan – due for completion next year, and using its own China-made panels. Its boss Li Hejun told Global Entrepreneur that owing to prices being paid for solar-generated power, an investment in Japan could see “huge gains”.

Last year overseas panel firms captured around 29% of the Japanese market – a big increase on 2011 when their presence was virtually nil. Of this share, Chinese manufacturers hold about half of the foreign sales. Indeed, according to Business Week, in the first two months of this year China’s panel exports to Japan accounted for 34% of their total solar sales overseas.

Some firms have focused more attention on the residential sector i.e. consumers fitting panels to their homes. JinkoSolar has been among the most successful in this regard, and recently released a new design in Japan that it says makes residential systems 20% more efficient.

However, it is not all good news for the Chinese firms. Rampant competition – among themselves and others – has seen discounting, which has hurt margins (then again, JinkoSolar told Business Week its margins in Japan are still higher than in China).

There is also the fear that the current price war might lead Japan to follow the US and Europe and take regulatory action to protect its domestic producers. Global Entrepreneur has a sense that after a couple of good years the trend for Chinese panel makers in Japan is “not good”.

The other worry is that the Japanese government has begun reducing the feed-in tariff for new solar power projects. Canadian Solar – a Toronto-based solar power firm founded and run by Chinese engineer Shawn Qu – reckons the investment return for new plant could fall to 8% from 15%, and that this could cool enthusiasm in the sector.

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