CEO Interview: Solar Frontier – Japan boom to continue

On the back of this profitability and success, Solar Frontier is reorganizing, and has appointed a president and CEO who is fully independent of parent company Showa Shell. Atsuhiko Hirano has resigned his post as a Showa Shell executive to take the reigns at Solar Frontier and he remains confident that the Japanese market will remain strong for some years. He spoke to pv magazine in Tokyo the week he took control of the company.

Is your appointment a new direction for the company?

No it’s not a new direction, it is a reinforcement of what we have been saying in the past. So far the top management of Solar Frontier has also doubled as Showa Shell management. But I am the first CEO to be dedicated fully to Solar Frontier. So this is just a demonstration of the need to be really dedicated in our work and to bring our growth strategy into execution. It’s just a matter of bringing more energy and effort into our plans.

You were at METI [the government department that administers the FIT] only today, what are you hearing in terms of a short and middle term outlook for the Japanese market?

METI has now approved about 70 GW of projects opportunities, but it’s anyone’s real guess to see how much of that will be realized. We will probably see a high percentage of those GWs being realized. With only the back log that METI has approved, it will give another six to seven GW for at least another three or four years – with the given FIT.

With respect to what could happen after the 32 Yen FIT, there are abundant opportunities for at least another three or four years. Before that time comes, it is really up to us to come up with another creative solution to see how we can reduce system cost and provide value to the end customer, so that the FIT will no longer be a necessity for PV to be fully exploited in the Japanese market.

So I think this 70 GW does give us some time to work ourselves towards a more competitive market where an FIT will not be required.

So you expect a high percentage of the 70 GW to be realized. How high?

I think 20% may fall off.

Why would those projects fall away?

Some of the projects have too aggressive planning. The METI approval was given without the full guarantee that land will be procured. A portion [of the unsuccessful projects] will come from that while others will be because of grid connection issues. The cost of grid connection was sometimes not fully assumed and for some applications, the assumed grid connection cost was too low. So, once the grid company comes back with the fully assessed cost sharing, some of the projects may not fly.

What do you see with the utility landscape in Japan? Is deregulation coming and what will that mean for PV?

That will take place in line with the announced roadmap from METI, which is from about 2018. Until then, there won’t be any real deregulation. One of the keys is to split transmission from power generation. Until that is done, grid connection remains a big black box: until you make a full application for an FIT, you don’t know whether there is capacity available or how much of an investment you will need to make to realize the grid connection. Because of this, the deregulation of the utility business needs to be fully enforced to make the best use of the opportunities coming up from PV. Grid connection is a bottle-neck for sure.

We’ve seen significant reductions of the FIT in Germany and the dynamics of a solar installation and the PV market has changed dramatically. My impression of the Japanese market is that things are more stable, more gradual and that there is more foresight provided to companies operating within this space. Is this because some major Japanese firms are doing well out of the PV boom?

In Germany there was a drastic drop in the FIT, but that is after accomplishing quite a high percentage of renewable energy in the overall energy supply. Even in 2013, total renewable energy [installed capacity] was only a little over 2% in Japan, excluding hydro. And it’s clear that there is now a big discussion about to what extent nuclear power could come back in Japan – and I am sure that some of the existing nuclear power will come back. But at the same time there is a very strong groundswell of public opinion in opposition to nuclear.

So for the government, there is a mandate to make the best use of renewable energy, which would allow for a smaller percentage of nuclear power to return. That means there is quite a bit of room [for renewable to grow], from a few percent to the level we see in Germany. So, despite some argument that the FIT for PV is too lucrative, against those opinions is our opinion that the government will continue with a more gradual process to ensure that solar will be encouraged to grow in the best way so that it can represent a larger proportion of Japan’s energy supply.

The full interview with Solar Frontier’s Hirano will appear in the September print edition of pv magazine. Subscribe here.