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Japan could witness demand slump for Solar Energy

, February 25, 2015, 0 Comments

global clean energy solar energy-MarketExpress-inJapan could be the biggest risk to solar demand in 2015, as the country is facing grid connection issues and changes in FIT. Japan has seen a massive boom in solar demand in 2013 and 2014 with generous FIT leading to a huge ramp up in solar capacity installations in the country, as developers managed to earn high returns on their solar investments.

Japan is going to reduce FITs in 2015 to reduce the returns which might affect the pace of demand increase. There is also the problem of grid connection of large PV power plants. A number of utilities are going slow in approving large solar farms and 5 out of 10 utilities have announced temporary stoppage of new permits to connect large PV farms. Read more about Japanese Solar Industry here.

While the Japanese government has intervened to allow large scale solar farms to continue development, many developers are becoming uneasy. I think that the Japanese government should reduce FITs and use the subsidy money to strengthen the power grid infrastructure. This will also help the developers as it will reduce risk for them. The country should create a long term plan for solar energy development in a sustainable manner, instead of a boom and bust scenario like Spain or Italy.

Taiwanese solar players are already predicting a slowdown in Japanese demand from 9 GW in 2014 to 7 GW in 2015 and 5.8 GW in 2016. It should be remembered that Japanese electricity capacity is 1/8th the total capacity of China and Japan. This means that Japan will saturate with solar much faster like Germany. While China and USA can continue to grow and show 10 GW plus solar energy demand annually for many years, it will not be possible for Japan to do so.

Japan I think is the biggest risk now as any sharp FIT reduction or stoppage in grid connections could lead to panel oversupply and price cuts. USA should grow rapidly and should meet its 6 GW target by 2014, given that USA still has a very low share of solar energy and the returns are not at any risk. China too should easily manage 10+ GW, given it is a growing economy and needs to replace hundreds of gigawatts of dirty thermal coal power.


As the Japan government is set to reduce feed-in tariffs for PV power-generating stations with installation capacities of at least 10KWp from JYP32 (US$0.27)/kWh currently to JPY25-29/kWh in 2015, the total installation capacity for newly established PV systems and power-generating stations in Japan is likely to decrease from 9.0GWp in 2014 to 7.0GWp in 2015 and 5.8GWp in 2016, according to industry sources in Taiwan.