Japanese Banks Dive into Solar Market

Japan’s largest banks are entering the solar power market, as they expect investment in the sector to jump 800%. So reports Bloomberg.

Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. foresee 1.8 trillion ($19 billion) being invested in solar installations by 2016. That’s eight times more than the 223 billion yen invested last year, according to Bloomberg.

Japan is expected to become the third largest market for solar power this year, largely because of a subsidy program started last July. China and either the U.S. or Italy are first and second, says Bloomberg New Energy Finance. There were $2.8 billion in solar projects in Japan in 2012, the first year subsidies were offered, according to New Energy Finance, a London-based research group. Prior to the subsidy, few projects were completed.

It’s unusual to see so many banks lining up to lend to an industry, says Koji Shiroishi, senior vice president at the structured finance division of the corporate lending unit at Mizuho. Capital is important in the industry as solar developers typically borrow at least 70% of all project costs.

The generous lending pipeline comes at a time when banks are pulling back from other industries. Loans to manufacturers wanting to make investments in their plants, for instance, dropped 30% between March 2009 and March 2012, according to data from the Bank of Japan.

Banks readily acknowledge they are competing for market share, which Mizuho estimates at construction costs of 1.8 trillion over the next three years. Bank of Tokyo- Mitsubishi UFJ Ltd. has publicly said it wants the biggest share of the business, while Sumitomo Mitsui says it wants more than a third of the market, according to Bloomberg.

Sumitomo Mitsui has already boosted its staff working on solar projects from just a few employees to about 110, to deal with what it hopes will be large lending volumes to the sector.

Politics could impact the market in Japan, though. Shinzo Abe and his Liberal Democratic Party, which reclaimed power in December, may overturn or water down policies currently in place. Japan’s new trade minister, Toshimitsu Motegi, said last month that subsidies known as feed-in tariffs will continue. But the incentive for solar energy for the year beginning April 1 may be cut from 42 yen per kilowatt-hour to between 35 yen and 39 yen a kilowatt-hour.

The subsidies have already had a marketable effect on the solar market. From last July to September, right after the subsidy took effect, domestic shipments of solar cells and modules ratcheted up to 627 megawatts, an 80% hike in shipments over the comparable period the prior year, according to the Japan Photovoltaic Energy Association said.

To read the full Bloomberg article cited in this story, click here

Tags: Solar

Post Comment

Your email address will not be published. Required fields are marked *

Featured News Topics