|Here Comes the Sun: Japan and the World Photovoltaics Market
By Catherine Pawasarat
Since civilization’s inception, the sun’s energy-generating capabilities have awed humankind. Even by today’s techno-hip standards, those ancient cultures were onto something: Nowadays scientists know that in a single minute, the sun sheds enough energy on the earth’s surface to meet the entire planet’s energy consumption demand for a year.
With the supply of fossil fuels expected to dwindle within the next half-century, switching to renewable energy resources is not a question of “if,” but “when?” At this time, solar energy currently supplies less than one percent of the energy needs in Japan, the United States, and the European Community. But even so, this generates annual solar power-related business estimated at over US$2 billion. And you don’t have to be an environmentalist to appreciate solar energy’s fine points. In addition to reduced global warming and a cleaner energy source, the solar energy industry offers a potential wealth of high-tech jobs, and a diversified fuel supply that eases both energy and national security concerns.
Regarding solar power, Japan has some forward-looking administrative policies and an industrial sector keen to build market share in what is sure to be a high-growth industry, making it the world leader in bringing solar power out of the sky and onto the ground.
Any discussion about solar power revolves around photovoltaic (PV) cells, the units that comprise solar panels and actually convert the sun’s energy into electricity. In 1993 the Japanese government launched its major PV R&D subsidy program, the New Sunshine Project. The next year saw the administration offer additional big subsidies, this time for purchasing and installing PV systems (also known as solar power systems) on the roofs of private homes. This judicious two-pronged policy both spurred development of PV systems and helped create a demand for those systems. Though solar energy is often perceived as an environmental issue (and, historically, Japan’s Environment Agency does not have much clout), the Japanese government has taken an industrial outlook: The powerful Ministry for Economy, Trade and Industry (METI) is in charge of these subsidy programs.
“It’s obvious that the Japanese government subsidies for the home solar panel systems contributed greatly to their expansion. You can tell from just glancing at the growing figures on the number of homes that applied for the subsidies, and the number of homes that installed them,” remarks Haruhiko Kitagawa from corporate communications at Kyocera, the world’s second-largest PV manufacturer.
The U.S was the world leader in PV manufacturing until the late 1990s, but Japan overtook the U.S. in 1999. In 2001, Japan’s global PV shipments totaled 171megawatts’ worth, compared to 105 megawatts (mW) for the second-place U.S., followed by 88 mW for Europe and 32 mW for all other countries. Of the top ten global PV manufacturers, four -- Sharp, Kyocera, Sanyo and Mitsubishi Electric – are Japanese. Together they captured 34 percent of the world market share for PVs in 2000. Sanyo and Sharp are based in Osaka, and Kyocera in Kyoto (with Mitsubishi Electric headquartered in Tokyo). This makes Kansai the world PV center, the manufacturing and research hub of the global solar energy industry.
For Japan, moving ahead in the world photovoltaic market is not just a question of good future business. Since it imports 99 percent of its oil and relies heavily on industry and manufacturing, securing a stable energy supply is one of the country’s highest priorities.
Green consumers are the backbone of Japan’s blossoming PV industry, since the typical three-kilowatt (kW) household solar power system comprises 80 percent of all solar power systems in this country. This system supplies about 75 percent of the electricity needs for a family of four. Between 1994 and 2000, 52,352 households applied for and received government subsidies to install solar energy systems on their roofs.
The number of applicants has swelled steadily and significantly over time: In fiscal 2001 alone, there were 29,389 applications, according to Tsutomu Okudo, assistant head of METI’s New Energy Measures department. Though at the time of writing the number of successful 2001 applications was not yet tallied, he figures that around 27,000 will receive the aid. About 2,000 will probably drop out, he explains, upon realizing they can’t use or don’t want the systems.
The overall amount of subsidies available has also grown steadily. In 1998, \25.8 billion were available in solar power-related grants. This figure grew each year and reached \36.4 billion in 2002. The parties hoping for their share of the government aid pie have also bloomed, and so the per-household aid package is decreasing.
“In 2001 it cost \2.4 million for a three-kW system, and the subsidy was \120 thousand/kW, or \360 thousand total. This year the subsidies are only \100 thousand/kW,” laments Toshiyaki Hayashi, an engineer at EcoTech, a solar-power consultancy firm with branches in Kanto, Kyoto and Nagoya.
“These days government’s subsidies are designed for ‘broad but thin’ support, and I think the per-household aid will continue to go down. So the administration’s telling PV makers to bring our costs down,” says Koji Maekawa, in charge of PR for Sharp Corp., the world’s leading PV manufacturer. It might look as though solar power subsidies are falling victim to Japan’s ongoing economic woes, but analysis reveals that with the maturation of the industry, natural market mechanisms may be ready to take over.
The Yen for Solar
Costs are coming down. In 1993, before the home subsidies program was launched, a solar panel cost almost five times as much as it does today, METI’s Okudo remembers. But they are still out of financial reach for the average consumer.
“In order to make these systems available to the general public we need to bring the price closer to \1 million, around half of what they cost now,” argues Kitagawa at Kyocera. He estimates they will reach this level by 2010.
The solar-power expectations for the year 2010 are substantial. That’s a target year for greenhouse gas reduction goals set out in the Kyoto Protocol (forged at the COP3 meeting on global warming held in Kyoto in late 1997). The Japanese government is targeting production of 4,820 mW of solar-power energy by 2010, relates Okudo. By comparison, the country generated 317 mW of solar power in fiscal 2000. “So we need to generate 15 times that,” he adds, noting that Japan’s solar power generation is currently increasing at a rate of 150 percent year to year.
Lower PV prices remain as the biggest obstacle to be overcome in order to increase solar power generation and meet these targets.
Part of the issue is the materials PVs are made of. Most of today’s home-use commercial PVs are made with polysilicon crystals.
“If we continue to make PVs out of silicon, the price won’t come down, because silicon is expensive,” says Maekawa at Sharp. Sharp and other manufacturers are looking for a cheaper organic alternative that can maintain – or improve upon – silicon PVs’ energy conversion rates, the rate at which the PVs can convert the sun’s energy into electricity. These currently hover just above a modest 10 percent for home solar power systems.
While greater conversion efficiency and more PVs in use will help greenhouse gases come down, it will also clearly help profits go up for the industry. “According to the government’s trial calculations, in fiscal 2010 the global PV market will be worth \500 billion,” reported Kyocera’s Kitagawa. Greenpeace estimates clean-energy markets’ worth at more than $82 billion by 2010.
The Global Scene: A Sunny Future for Japan and Europe
According to Solarbuzz, a U.S.-based solar energy information center, Japan produces nearly 50 percent of the world’s PV cells, and consumes about 30 percent of them. Europe both produces and consumes around 20 percent. The U.S. manufactures approximately 25 percent of the world’s PVs but exports more than 70 percent of these, so that Americans account for less than 10 percent of the global PV demand. Of the U.S. exports, most end up in Japan and Germany.
In the bigger picture, Spain, France, Australia, India, Taiwan and China are also developing a solar PV manufacturing base.
In 1997 former President Clinton unveiled the Million Solar Roofs Initiative, a program to install solar energy systems in that many U.S. buildings by 2010. It also aimed to create 70,000 high-tech jobs in the same time frame. The program runs on the state and local levels, with the Department of Energy providing grants to promote collaborative efforts between business, community organizations, government and energy suppliers to install solar power systems. How this program will fare under President Bush remains unclear.
Meanwhile, in July 2001 the European Parliament passed a law to promote electricity from renewable energy sources. Europe also has an advantage in that environmental ideas are fairly mainstream. “European countries have a higher environmental awareness, and I think people there will fall in line more readily if the government implements laws about alternative energy,” suggests Isei Morita at the Daiwa Institute of Research.
To help make solar power part of Japan’s regular energy diet, last May [ed: 2002] the Diet passed a law that will require utility companies to purchase a certain percentage of their electricity from alternative energy sources, including solar, wind, biomass, and solar thermal power sources. The Cabinet is now working out the details, including what percentage the law will specify. But the law is due to take effect in April.
Germany produces about a third of the world’s wind power, but it has recently thrown down the solar gauntlet as well. In 1999 the German government started offering 10-year low-interest loans for the purchase and installation of PV systems, with repayment delayed for three years. The loan availability is expected to stimulate 500 mW of new PV capacity by 2005.
In addition, Germany passed a Renewable Energy Law in 2000, guaranteeing that solar-generated power can be sold to utilities at an extremely attractive price. Japanese law ensures that Japanese utilities purchase solar power users’ excess energy (produced at sunny mid-day) at the same price as electricity they buy back from the utilities at nighttime or on cloudy days.
“Kansai Electric buys solar energy at about \27/kW hour, but in Germany, utilities are now buying solar-generated energy at \60/kW hour! A person in Germany could recover their initial investment in a solar energy system within five years, and after that they would be making money selling their solar energy. In Japan it takes 20 years to recover one’s costs and start making a profit,” Sharp’s Maekawa says.
In the US, the central government is not providing such incentives, he adds, but individual states like California are. New York state, Nevada and Chicago have implemented programs requiring utilities to buy a percentage of their electricity from renewable sources. But in the U.S., PV-generated electricity actually decreased nationwide from 1999 to 2000.
Though Japan will not remain unchallenged in the PV industry, it is easy to imagine a familiar pattern repeating itself. Just as with autos and electronics equipment, Japanese companies are poised to hit critical mass with photovoltaics, as high-volume manufacturing and ongoing research breakthroughs continue to bring costs down. Whether this will happen as fast as the government and environmentalists are hoping is still anyone’s guess, but an abundance of inexpensive Japanese exports on the international market is already appearing.
With ecological and security issues on everyone’s mind, fossil fuels are becoming an increasingly unattractive energy option. Japan’s been cursed with a lack of natural resources since the Industrial Age began. But now the land of the rising sun is looking to that inexhaustible source to get ahead in the energy game.