Solar developers have failed to deliver on projects the Japanese government was counting on to meet energy shortfalls after the 2011 Fukushima disaster. Making up for the deficit will cost the country’s utilities $3.5 billion annually in additional coal and gas imports to generate power, according to Reuters.
Japan slashed its CO2 emissions reduction goal from 25% to a new goal of 3.8 percent by 2020 versus 2005 levels. The announcement was made on Nov 15 during the U.N. climate conference in Warsaw.
Tokyo’s generous solar subsidies sparked a rush from developers last year, who forwarded ambitious plans to supply the equivalent of 21 nuclear reactors which were being retired. Unfortunately, Japanese law doesn’t require any eligibility requirements so almost anyone was able to come in with a plan – and get a contract and a subsidy.
“There is no connection between obtaining the facility approval…and a project’s feasibility, in terms of cost, design and (other) government approvals,” said Seth Sulkin, President & CEO of Pacifica Capital K.K., a Tokyo-based solar developer.
As a result, less than a fifth of the projects to get a government green light are supplying power to the grid. Meanwhile, developers struggle with lack of funds, grid capacity limitations, land permit issues, wait lists for Japanese brand equipment, and a shortage of qualified technicians. More than half of the approved projects may never be built.
The underperformance is having a ripple effect in the market. Solar panel makers including China’s JinkoSolar Holding Co, Canadian Solar Inc, Sharp Corp, and Showa Shell Sekiyu, and solar equipment suppliers such as Ulvac and Ishii Hyoki Coare are suffering from lower than expected demand.
Tokyo is already reducing solar subsidies as it aims to encourage investment in other renewables, such as offshore wind and geothermal, according to local media reports.
However, Japan is not giving up its solar ambitions entirely. According to Bloomberg, Japan announced that it added 4,086 megawatts of clean energy capacity since the country began an incentive program in July 2012. It approved 23,607 megawatts of clean energy projects through July 31. And solar power provided up to 90% of newly installed renewable energy generation capacity since mid-2012, according the announcement.
And First Solar, Inc. recently announced plans to invest $100 million to develop solar power plants with Japanese companies. It established a Japan operating subsidiary, First Solar Japan GK, and opened an office in Tokyo.
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