pv magazine: There are numerous changes afoot in Japans solar market, leading some analysts to forecast 2016 to be a peak year for the country in terms of PV installations. Do you share that view?
Atsuhiko Hirano: I think it may not be this year alone; there could be a number of years you could class as peak, without huge growth or rapid decline. But certainly I dont think the market will go any higher than it was last year. Perhaps for a couple of years we may start dropping towards a 3-4 GW market, which will be very much driven by residential and commercial rooftop demand.
We are calling this The Big Carnival of the FIT non-residential market, and that is coming to an end. However, a positive result of this Carnival is that the system costs have been reduced; the overall value chain cost has been drastically reduced, so we are now getting very close to a grid parity market, strongly driven by this cost reduction and efficiency in the value chain. Therefore, although the FIT will most likely fade out, we will establish a new, self-consumption-driven grid parity market. This will be the shape of the market in a couple of years.
And how soon will this transition turn into a sustainable market?
I think by 2020 it will be around 3-4 GW. There will be a rapid decline between 2018-2020, but once the market has shrunk to this level, we will then probably see a steady increase in terms of rooftop installations.
New house builds in Japan will not be as abundant as in the past, but the percentage of new properties with solar installations on the roof will increase, driven by the ZEH Zero Emission House standard which will be introduced by the government in 2020.
In a way, do you welcome the FIT phase down, considering how markets such as Germany and the UK initially struggle but find or are finding a way to survive and maintain stability?
The government has set the scene very clearly. 2015 was a historic year for solar in Japan because it was the year that there was this 2030 target set for renewables to be 22-24% of the total energy supply. The government has committed to a 26% C02 reduction by 2030, against 2013 levels. Thats a good policy, but to reach that figure for renewable energy the government previously projected solar to be at around 7%, but the approved solar installations to date are already 80 GW, which is more than 8%. There is quite a strong view that, for the government to achieve 22-24%, certainly solar will have to contribute more than 8%, probably in the range of 12%.
That will not come through extended FIT schemes, but more via economically driven self-consumption models, that will be reinforced by policy like ZEH standards for example. So Japan is not going to be this big booming market, but a more steady and sustainable market because of grid parity. This is a period for the professional companies to survive. It is becoming clear only those that do business well, professionally, will survive in this market.
How is the Japanese mega solar sector shaping up, given the huge pipeline of FIT-approved projects yet to be built? Do you envisage that pipeline to be fully realized?
Government approved projects are about 80 GW, and around 25 GW has already come on stream. This leaves 55 GW that remains to be built. I think that widely, half of that figure will come on stream, and half will disappear. So that means around 25-27 GW to be deployed, and if its a 10 GW per year market, thats almost three years. So there could be something of a peak for another 2-3 years until 2018, but then it will fall off.
Government cannot directly deny projects. It is amending the FIT law in order to sort out projects that can be actualized from those that cannot.
So this is an example of what you mentioned earlier, about how only the most professional companies will survive?
Yes, exactly. We also see potential in re-crafting those 25 GW that will be relinquished. Some of them do have good land, or good proximity to grid connection, but because of the inability they had for financing or project execution, for whatever reason they were not realized. So if we are to submit for these as new projects, they will need to apply to the new, lower FIT, and so will be much more competitive than previously. But professional skills could revitalize some of these abandoned projects, even with the lower FIT.
Is Solar Frontiers partnership with Japan Renewable Energy the collaboration on 300 MW of PV development an example of how the large scale market is going to evolve?
We already have quite a pipeline of utility projects that we will be building, operating and transferring ourselves. We call it the BOT model. It is a project development business, and will add a further potential to that pipeline that the JRE wants. This is a way of adding another stream to our existing pipeline. But the desire is to have more of those BOT portions against the simple module and system sales, and this is how we are trying to capture value from the market.
How is Solar Frontier looking to re-strengthen its channels in Japans residential and commercial markets?
We have been very active in our efforts to conquer the housing market, We have built a network of over 400 dealers across the nation, and we have a total system package starting from modules to the entire rooftop system, including batteries, and I think the infrastructure is there, there is a competitive offering, and our product has been known to offer an economical advantage as well as from a power output perspective.
So we have been active, but because of Japans recent focus on the large-scale market, I dont think appropriate resources were steered towards the sector. So, the size of the sector has stagnated for years, but will grow from 1.1 GW in 2015 to meet the needs of the customers as demand grows. We are learning to capture that opportunity, and will not be so much distracted by other sectors in the future.
There were reports recently that Solar Frontier missed out on snapping up Sharps solar portfolio, which eventually went to Taiwans Foxconn. Can you tell pv magazine what happened there?
We were never involved in a concrete discussion with Sharp. Im afraid to say that with regards to Sharps restructuring, there were so many players involved that in order for them to be competitive, there were a lot of rumors and propaganda following them around. Apparently it seems that talk turned at some point towards restructuring the overall industry in not only display but white electrical goods, and then the discussion extended to energy solutions.
We are probably the only single notable Japanese solar manufacturer in terms of scale, so that may be the reason our name was plucked out of the air. But we were never in a serious discussion, and nor did we have any special interest in tapping into Sharps energy solutions business because we do not think that it is a technological synergy for us.
We are always open for positive offerings or opportunities, but there was nothing concrete in this, which is why we havent responded officially to the article and rumors.
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