Solar loans spur Solar PV boom in Japan

Japan is one of the world's largest residential PV markets in terms of cumulative installations. They   achieved with just two PV financing options: cash and loans. They have not yet offered leasing or power purchase agreements, which are common in the U.S.


Credit: Nango Credit Union

One of the largest residential solar PV installers in Japan said that about 40% of their customers buy PV systems with cash and the remaining 60% use solar loans.

The average purchase cost of a system of 3-4 kWp is approximately ¥1.5 million or US$12,600 (approximately RM44,700) and for those who don’t have enough cash, the company offers solar loans through three consumer credit financing companies. All three of them offer 10-year or 15-year unsecured loans with low, fixed interest rates.

Most of the PV module makers in Japan also offer solar loans for consumers who purchase their solar systems via their designated installers. This provides a convenient, one-stop shop for consumers — from system purchase, financing, design, installation, and warranty.

PV installers make patnership arrangement with national consumer credit companies to offer solar loan program with low interest rates to customers.


Low interest rate for solar loans in Japan

Banks currently offer solar loans with interest rates of approximately 2%, requiring no office visit, no down payment, and no collateral. One of the reasons why solar customers get easy and low-interest-rate loans is because of the net feed-in tariff (FIT) policy currently in place in Japan.

Japanese residential PV owners can sell any excess generated electricity at a premium rate - around ¥38/kWh (approximately RM1.136/kWh) - for a period of 10 years to their regional utilities. With the net FIT, homeowners can generate income, which can offset monthly solar loan payments, either in part or in full.

Thanks to the generous FIT, PV homeowners will end up having less monthly out-of-pocket expenses than pre-PV installations, even with the solar loan.

Shizuoka prefecture represents No. 4 in the nation in terms of cumulatively installed capacity of residential PV systems. Shizuoka prefecture is blessed with great solar insolation. For example, Omaezaki city has the highest solar radiation in Japan, with 2,497 sun-available hours a year.


Cumulative residential PV installed capacity. 

A case in point -- Shizuoka Bank, one of the largest local banks, provides solar loans combined with performance guarantees and disaster insurance for local homeowners. The maximum loan amount the bank offers is ¥10 million (approximately US$83,500) for up to 15 years and the bank requires no collateral from borrowers.

Currently, the banks offers a variable interest rate of 2.20% exclusively for solar customers via on-line applications.


Performance guarantee

These are few example of good support from the financial institutions and other utilities in Japan:-

1. Under its performance guarantees, Shizuoka Bank will reimburse up to ¥50,000 per year for three years in the even solar insolation falls below what it was originally forecasted. If a home with solar loan gets damaged by earthquakes or typhoons, the bank will provide up to ¥300,000 of solarium for damages.

2. Nango Credit Union, small regional credit union in Nichian city in Miyazaki prefecture, offers Eco-Solar Loans to residents in Nichian city and two other neighboring cities. The credit union currently offers 15-year solar loans with a 1.50% fixed interest rate.

3. Osaka Gas Company, a regional gas utility in the Kinki area, offers 15-year solar loan with a fixed rate of 2.35%, with no down payment, under the name “With Gas & Solar Loan” for its residential gas customers.


The Green Mechanics:
When Malaysia phases out the generous FiT in a couple of year's time (if not sooner), this may be a good example of how to keep the solar PV industry momentum going.


-- Further reading and reference: RE Magazine

Japan FIT changes could see the end of Residential PV Program

Japan will announce its new FIT rates sometime in March and it will become effective April 1, 2014.

And the policy change may affect the growth of the Japanese PV market, according to Renewable Energy World (REW). To re-cap, the current support from the government on residential in terms of rebate and feed-in tariff (FIT) programs, has made Japan one of the world's top markets.


End of residential PV program?

The national residential PV subsidy program which started 20 years ago will be ended. When the program closes its door in March 2014, it is expected to have solarized over 1.5 million residential roofs, or added about 6 GW-worth of PV capacity, in Japan.

Japan's residential PV installation from 1994 - 2013. Source: REW

Japan initiated solar technology R&D and field testing under the "Sun Shine Project" in the 1970s. The Project was to bring a safe, stable energy supply to the nation. As part of the Sun Shine Project, the government launched the Residential PV System Dissemination Program in 1994.

REW reported that during the first 10 years of Japan residential PV program, it dominated the world PV market in terms of both installation and production. The average residential PV system cost was greatly reduced to ¥661 per watt even with an incentive rate of just ¥20 per watt (or 3% of the system cost)

The residential incentive was stopped in 2005 and the domestic market declined. So, in 2009 the federal government brought back the residential PV incentive program with an incentive rate of ¥70 per watt. The domestic PV market was revitalized and Japan celebrated its one million solar-roof installations in April 2012.


Focus on large non-residential segment

Japan shifted its focus from the traditional residential segment to the non-residential segment with the launch of the national FIT program in July 2012. The national government believed that deploying the larger, non-residential segment was a quick way to expand the national PV market and to catch up with Germany and Italy.

The Ministry of Economy, Trade and Industry (METI) approved close to 25 GW worth of PV systems under the FIT program between July 2012 and October 2013. Systems sized over 1 MW represented about 60% of the approved systems.

The agency mandated project status reports to FIT applicants who reserved the FY2012 FIT rate (¥42/kWh) between April 2012 and March 2013 for a system sized over 400 kW. Out of 13.3 GW (or 4,699 systems), METI found that only 8% of the FIT-approved PV capacity has become operational as of this January. In fact, 4.7 GW worth of the approved projects have neither selected a site nor placed a purchase order for the equipment.

Project Status		No. of System	GW
Operational		1,049	1.1
Withdrawn		419	0.9
Not operational	Site decided and system purchased	1,588	3.9
	Either site decided or system purchased	784	2.6
	Neither site decided nor system purchased	758	4.7
Not responded		101	0.2
Total		4,699	13.3

Table: METI Fiscal Year 2012 FIT PV Project Survey

What about delayed projects?

METI announced that it will disqualify uncommitted projects from the FIT program. For example, the projects that are categorized as "neither site decided nor system purchased" will be delisted if they fail to show proof of valid millstones by this March and the projects categories as "either side decided or system purchased" will be disqualified unless they commit both site selection and system purchase by the end of this August.

Cost of system by size: The average installed cost of systems greater than 1 MW increased to ¥305 per watt in the fourth quarter of 2013 from ¥280 per watt in the same quarter in 2012


FIT for FY2014

METI will decide on new FIT rates, which would take effect April 1, 2014. There is a rumor circulating among PV project developers that projects can be disqualified unless a system purchase or installation order is placed within six months of the date of the FIT application approval notice.

Japan is also considering toughening the FIT application approval process and imposing time restrictions to weed out bad applicants.


TheGreenMechanics' two cents:

During a recent solar PV presentation session by one of the local PV project developers/implementers, we learnt that similar cases of delayed or cancelled projects are also happening in Malaysia. If that is the case, there should be a mechanism to eradicate non-genuine applicants from the electronic balloting system.

Genuine applicants with financial capability that sit low in the pecking order (Malaysia's balloting for quota is on first-come-first-served basis) should move up priority ladder automatically as soon as the 'returned' quota is released by SEDA.

Note: This is an excerpt from a long article in REW magazine published on Feb. 20, 2014 and if you want to read the full report, you can do so here.

Japan's largest solar PV plant goes online in Kagoshima

Although Japan has now passed the 10 GW in cumulative solar PV installation, more than half of the installed capacity  is on residential rooftops.

The largest single solar farm in Japan is currently the one in the southern city of Kagoshima. It has just been brought online this week according to pv-magazine.


Kagoshima Mega-solar power plant. Photo by SMA


Japan’s largest PV power plant  in Kagoshima

The 70 MW PV plant is run and owned by local utility provider, the Kagoshima Mega Solar Power Corporation, and relies on system technology provided by Germany’s SMA.

SMA has provided 140 Sunny Central 500CP-JP central inverters, and 1,260 Sunny String-Monitors for the plant, which is now the largest single solar farm in Japan.

SMA has established a keen presence in Japan in recent years, setting up a sales and service company in Tokyo and having its Sunny Boy inverters certified by the Japan Electrical Safety & Environment Technology Laboratories (JET) for use in rooftop arrays for the Japanese market.

Even though JET certification is not required for central inverters used on industrial-scale solar projects, SMA felt compelled to ensure that its Sunny Boy technology would be able to withstand the multitude of adverse weather conditions that panels in southern Japan can sometimes be subjected to – conditions including typhoons, high humidity and salty air.

Source: pv-magazine

TheGreenMechanics: With rapid growth of solar PV industry there, Japan is thought to be the new Germany in renewable energy sector, particularly solar.

It will come as no surprise if Japan can quickly fill the gap left behind by the subsequent shutting down of nuclear power plants in response to the Fukushima Daiichi nuclear disaster.

After Fukushima: Japan eyes clean energy revolution

Last year Japan was devastated by a massive earthquake, followed by tsunami and the failure of nuclear reactors at the Fukushima nuclear power plant. This was the second largest nuclear disaster after Chernobyl in 1986. As what happened during the WW2, Japan quickly get back on its feet and recovered.

Landscape of energy production has taken a relook and the Japanese government was quick to look at renewables to supplement the reduced amount of energy obtained from nuclear plants.

Large-scale solar PV plant in Kyoto. AFP photo through mysinchew.com

Like many other countries, including Malaysia, under the new policy utilities in Japan must buy all electricity produced from green sources such as, wind, geothermal, and solar at premium rates for the next twenty years. This should be good news as Japan, as a big economy, could spur the renewable energy industry particularly solar PV. The expected sudden increase demand could bring down the cost to produce renewable energy.


Look East Policy is still relevant

The look east policy during Dr Mahathir's premiership is still very much relevant. The work culture that brought Japan to where it is today must be emulated in order for Malaysia to achieve its high-income, developed nation goal.

Our Feed-in tariff under the Renewable Energy Act 2010 is 'older' than Japan's similar policy. But while we are still crawling in implementation, Japan is already gearing for massive investment in renewables, and in solar PV alone, there is already indication that Japan is poised to quickly overtake Germany and Italy to become the world's second-biggest market for solar power by creating an estimated $9.6 billion market.

So, don't just watch them. Take action!


For further readings:

Japan eyes clean energy revolution
-as reported by AFP in mysinchew.com, 5/7/2012

TOKYO, July 4, 2012 (AFP) - Even as Japan begins cranking up its nuclear reactors again, Tokyo has launched a scheme it hopes will spark a green-energy revolution and put the country at the leading edge of renewables.

The scheme comes as Japan debates its future energy policy, and is squarely aimed at forcing change in the way Japan's enormous -- and powerful -- utility companies operate. The tsunami-sparked meltdowns at the Fukushima nuclear plant in March last year led to the shuttering of Japan's entire stable of reactors.

They forced Tokyo to turn to expensive fossil fuels to replace the third of the country's electricity the atomic plants had produced. Analysts say despite public fears, nuclear is here to stay for the foreseeable future, but resource-poor Japan must rebalance its energy mix and make greater use of renewables.

The so-called feed-in tariff could spur a whopping 85-percent rise in solar cell demand in Japan this year alone, according to Nomura Securities, and "trigger a full-scale launch of large solar farms in Japan".

"New solar cell installation could expand further if the uptake of inexpensive, Chinese-made solar cells accelerates," Nomura analyst Kyoichiro Yokoyama said in a research note. The amount of new solar power capacity that Nomura predicts for Japan this year is equal to about two nuclear reactors.

"I want to use it as a trigger to fuel the use of renewable energy," Industry Minister Yukio Edano said recently.

"It is clear that additional cost is necessary to promote greater use of renewable energy and to end our reliance on nuclear plants as soon as possible," he added.

Japan gets less than two percent of its power from renewable sources, rising to about 10 percent including hydroelectric power, but still below other industrialised nations. As of 2010, Japan's solar power output was about one-fifth that of Germany, while Tokyo was in 12th place globally in terms of wind-power generation.

Some Japanese firms have already made their move, including electronics giant Toshiba, which said it would build a huge solar plant on the country's disaster-struck northeastern coastline.

Rival Panasonic said it expected a boost in its solar-power system sales on the back of the new programme, which puts Japan on track to leapfrog Italy as the world's fourth-largest solar market by 2014, behind China, the United States and India, according to Nomura.

Mobile phone operator Softbank opened a plant in Kyoto at the weekend and has plans to build Japan's biggest solar plant -- in the northern island of Hokkaido.

"If we keep building solar panels and invest in solar energy, within 20 years it will not only become the safest and the cleanest source of electricity but also the cheapest," Softbank chief Masayoshi Son told reporters.

A group of Japanese firms led by trading house Marubeni plan to build a large floating experimental wind farm that could supply power for over 100,000 households, Jiji Press has reported. Under the scheme, premiums for different forms of renewable energy vary, but utilities must pay 42 yen (53 cents) per kilowatt hour for solar power, over twice the rate paid to operators in Germany, with generation costs in Japan less than 30 yen per kilowatt hour, Nomura said.

Those costs are at least three times those of nuclear and fossil-fuel energy, according to government estimates. However nuclear power costs are expected to spike amid heavy compensation and clean-up bills after Fukushima, the world's worst atomic accident in a generation. 


Critics have opinion of their own

Critics of the scheme, which came into effect Sunday, say it is too expensive, with most of the extra costs heaped on businesses and households. They say the new contracts are too generous and benefit a small number of green power operators, with few guarantees that they can make it a profitable enterprise and usher in a massive shift for Japan's energy mix. 


"The 20-year guarantee seems a bit too sweet a deal", said Yasuchika Hasegawa, chairman of the Japan Association of Corporate Executives.

"The initial incentive is necessary. But five to 10 years should suffice... I hope they will review this plan."

Japan solar creating $9.6 billion market?

With a 'very attractive' solar power tariff, Japan is poised to quickly overtake Germany and Italy to become the world's second-biggest market for solar power as incentives starting July 1 drive sales for equipment makers from Yingli Green Energy Holdings Co. to Kyocera Corp.

Solar electricity rate is about three times the rate of conventional power. According to Bloomberg New Energy Finance forecast, that may spur at least $9.6 billion in new installations with 3.2 GW of capacity.

Image: freeworldmaps.net

While solar industry is suffering incentive cuts across Europe, Japanese Prime Minister Yoshihiko Noda is making effort to cut dependence on atomic energy and as a result solar industry will benefit. Currently nuclear energy provides about 30% of Japan’s power requirement.

The high solar tariff rate is not without opposition though. Business lobbyists questioned the effectiveness of such a scheme whereby the high cost of electricity is shouldered by users.


Japan Power Tariff

Power utilities will pay ¥42 (US 53 cents) per kWh for 20 years to solar power producers, almost twice the rate in Germany, the world’s biggest market by installations. The ¥42 solar rate, targeted for 10-kW or bigger plants, is above the ¥38 price for 15 years the industry earlier expected.

Malaysia's rate is RM1.75 max. (US 55 cents), subject to usage of local products, installation size, and building-integration of installation. This is still higher than Japan and Germany.

In Germany, after the proposed subsidy cuts, it is planning to offer €0.135 to €0.195 (17 to 24.6 U.S. cents) per kWh, depending on size. Italy’s rate is €0.128 to €0.237. Analyst estimates that residential solar systems are being sold in Japan for $6.28/Watt, more than double the $2.70/Watt price in Germany.


Installed capacity

Last year, Japan ranked 6th worldwide by new installation when it added 1.3GW of solar to bring its installed capacity to 5GW. It is expected  nearly triple that amount, or 3.2GW to 4.7GW. Wist this huge investment, Japan will come second only to China and its solar capacity growth will surpass those of Italy and Germany.

1 GW is sufficient to supply about 243,000 homes in Japan.

In 2011, Japan got about 1.6% of its energy from renewables making it the smallest percentage among G-7 countries after Canada. Japan has got a lot of catching up to do, but with such an attractive solar tariff, it will be able to do that in a short span of time.


Green surcharge to consumers

As what is being practiced in other countries, Japanese consumers will help to fund the program by paying surcharges in their monthly electricity bills. The average surcharges is about ¥87 per household per month, lower than the earlier estimate of ¥100.

In Malaysia, only consumers with monthly energy usage of 350kWh and above are being levied with 1% of the total electricity bills, to fund the Feed-in Tariff program.


TheGreenMechanics' two cents:

We once had this 'Look East Policy' which refers to learning lesson from the industry standard of Japan. Let's see if we can benchmark our Renewable Energy Policy with what Japan is implementing. Our FIT model was largely drawn in comparison to Germany's subsidy model, and Germany is currently facing difficulty in sustaining such a highly subsidised renewable energy, particularly solar power.


Copyright 2012 Bloomberg - via Renewable Energy World.

200MW Solar plant planned in Hokkaido, Japan

The Japan Times reported recently that telecommunications pioneer Softbank is planning to build 200MW solar power plant on the Northern island of Hokkaido. This, when realised, will dwarf all previous photovoltaic installations in Japan. Softbank is reported to be negotiating with the Hokkaido Electric Power Company over prices for the electricity.

Image by Solar Frontier in pv magazine

Just a couple of months before the new Renewable Energy feed-in tariff (FIT) system comes into effect on July 1, it has been reported that Softbank subsidiary SB Energy plans to build a 200 MW plant, over 480 hectares, near an industrial district in the city of Tomakomai, on the south of Hokkaido.

SB Energy has announced that it will establish solar power plants in other parts of Japan, but the Hokkaido plant will dwarf the others. The Japan Times reports that a plant near Kyoto is set to have a capacity of 4.2 MW, Gunma (2.4MW) and in Tokushima (5.6MW).

FiT rates out in July 2012

The final rates for the FIT has yet to be established but initial figures indicate that they may be at levels which could make installations quite profitable. Bloomberg New Energy Finance (BNEF) reported that returns for photovoltaic investments could be as high as 44% to 51%.

Softbank and Hokkaido Electric are expected to announce a construction schedule and the final capacity of the facility when FIT rates are finalized.

What to learn from this?

As at end-March 2012, Japan's Tokyo Electric Power Company, Tepco, has shut down its last operating nuclear reactor. PV Magazine reported that Tepco shut down the number six reactor at the Kashiwazaki Kariwa plant, the world's biggest nuclear power plant. Since the Fukushima disaster, Japan's 54 reactors have been still, due to public safety concerns. Tepco owns 17 reactors and provides approximately 45 million people with electricity. 

Japan is moving towards cleaner sources of energy while trying to minimise its dependance on nuclear power, if not totally eliminating it. Japan may be rich and our resources will never be able to match theirs. 

But if we plan and focus on our goal of reducing carbon emissions by 40% comes 2020, we may be rewarded with more percentage of RE in our national power generation mix.