* Solar power firms to get boost from feed-in tariff
* Foreign players looking to grab slice of Japan's solar
* Companies say FIT will encourage economies of scale
* Public faith in nuclear power still in tatters after
By Shinichi Saoshiro
TOKYO, June 5 Solar power firms are betting that
the nuclear crisis in Japan will become a game-changer for
renewable energy in the world's third largest economy, with new
foreign entrants such as Canadian Solar looking to go
toe-to-toe there with some of the biggest utilities in Asia.
They will be given a big helping hand next month when the
government introduces a generous subsidy for renewable energy
via a so-called feed-in tariff (FIT), in a bid to encourage
alternative energy sources, which currently only generate about
1 percent of power in Japan.
The FIT, which excludes large hydro-electric schemes, will
require utilities to buy electricity generated by renewable
sources such as solar, wind and geothermal heat at a premium for
20 years. Costs will be passed on to consumers through higher
After dallying for years, lawmakers in Japan hastily turned
FIT into law last summer, with the Fukushima nuclear disaster in
March 2011 severely shaking the public's faith in atomic energy.
With the introduction of FIT, Japan's Yano Research
Institute expects investment in the country's solar power sector
to grow to 1.4797 trillion yen ($18.9 billion) in fiscal 2015
from 655.3 billion yen in the 2010 financial year.
Critics have already warned that a generous FIT could lead
to a bubble that will burst when the government eventually
lowers purchase prices.
But businesses say FIT is necessary to prompt the economies
of scale that would come from an increase in the number of
entrants into the market, lowering equipment costs and
eventually allowing the industry to stand on its own without
"FIT is going to create a bubble without a doubt. That
always happens with these kinds of schemes, but it will really
kick off solar (in Japan)," said Yu Kaname, vice president of
Canadian Solar Japan, which began business in the country in
2009 and was the first foreign company to take part in building
a large-scale solar plant there.
The purchase price of solar-generated electricity is
expected to be set at 42 yen per kilowatt hour (kwh),
significantly higher than the roughly 15 yen per kwh charged to
industrial consumers and the 25 yen kwh residential users have
to pay for power.
But Kaname said the cost of producing solar-generated
electricity would come down with the introduction of FIT,
enabling it to reach "grid parity", when the cost of generating
electricity from renewable sources is equal to or lower than
that sold on the common power grid.
"We are almost at grid parity here. Think of what would
happen if Japan allows things to run their natural course and
solar reaches grid parity. We will be playing with the big
boys," Kaname said, referring to the Japanese utilities that
have long dominated the industry. These include Tokyo Electric
Power, the operator of the Fukushima Daiichi nuclear
facility and one of Asia's largest energy companies.
Faced with losses in once-booming solar markets in Germany,
Spain and elsewhere, foreign entrants are rushing to grab a
piece of the new solar power pie, driving down prices and
squeezing domestic players.
"The market is finally moving now that the FIT has been set,
and we are being bombarded by enquiries," said Yutaka Yamamoto,
president of Suntech Power's Japan unit.
"Foreign firms will now be able to fight on an equal footing
in the non-residential solar panel market, which is the area
that will see the fastest growth," said Yamamoto.
The recent rush by home owners to cover their roofs with
panels and companies to build "mega solar" farms have made solar
cells a hot commodity.
Sales of solar cells rose 30 percent in 2011 from the
previous year to just under 1.3 gigawatts, topping 1 gigawatt
for the first time. They could rise above 2.5 gigawatts in the
year through March 2013 with FIT, Sharp Corp Chairman
Mikio Katayama said in May.
That all of Japan's 50 nuclear reactors lie dormant amid
public concern in the wake of Fukushima is an added boost for
Swimming against the tide of public opinion the government
is trying to convince sceptical local authorities to restart
some nuclear reactors in a bid avert a power crunch before the
But considering the fierce opposition the government is
facing, few expect nuclear energy - which provided a third of
Japan's electricity before Fukushima - to play a key role again
A number of solar makers may fall by the wayside if the FIT
bubble bursts in a few years, but foreign companies are
confident that their cost effective global production network
will help them stay abreast of the competition, especially
"Japanese makers can survive in the residential segment. But
the price competition in the commercial segment will be far more
brutal," said Yamamoto at Suntech.
"Domestic manufacturers have nobody to blame but themselves.
They knew about the price differential, but were unable to take
action - it was just a matter of building factories abroad. Even
now, only Panasonic has said it will build a plant overseas,
which is unthinkable."
Panasonic Corp said last year that it would invest
$580 million to build a solar cell plant in Malaysia, as a
strong yen makes domestic production more expensive.