Monday, 25 June 2012

Solar boom heads to Japan creating $9.6 billion market
19 Jun 2012

Japan is poised to 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. (6971) Industry Minister Yukio Edano set today a premium price for solar electricity that's about triple what industrial users now pay for conventional power. That may spur at least $9.6 billion in new installations with 3.2 GWs of capacity, Bloomberg New Energy Finance forecast. The total is about equal to the output of three atomic reactors. Solar stocks rallied.

"The tariff is very attractive", said Mina Sekiguchi, associate partner and head of energy and infrastructure at KPMG in Japan. "The rate reflects the government's intention to set up many solar power stations very quickly". Prime Minister Yoshihiko Noda's effort to cut dependence on atomic energy that provided about 30% of Japan's power before the Fukushima nuclear meltdown in 2011 will help a solar industry suffering incentive cuts across Europe. It's also raising concern among Japanese business groups that clean power aid will raise bills and slow Japan's economic recovery.

"This is a mechanism with a high degree of market intervention by setting tariffs artificially high and making users shoulder the cost", said Masami Hasegawa, senior manager of the environmental policy bureau of Keidanren, Japan's most powerful business lobby, which counts Toyota Motor Corp, and Nippon Steel Corp (5401) among its members. "We question the effectiveness of such a scheme".

Twice German Rate
Utilities will pay 42 yen (53¢) a kilowatt-hour for 20 years to solar power producers, almost twice the rate in Germany, the world's biggest market by installations. The solar tariff was among incentive rates for clean energy announced today by the Ministry of Economy, Trade and Industry and foreshadowed by a ministry official June 15. Solar stocks rallied for a second day. The Bloomberg Global Large Solar Energy index added 1.8% at 12:13 p.m., bringing its two-day gain to 8.5%, the largest two-session intraday advance since February.

Developers are counting on the subsidies and have accelerated solar-park construction plans this year. "We hear every day a new announcement of a MW-scale project", Izumi Kaizuka, a solar industry analyst at RTS Corp., said in Munich, referring to projects 1 MW or bigger. Japan ranked sixth worldwide by new installations last year, when it added 1.3 GWs of solar to bring its installed base to 5 GWs. Next year builders will erect roughly triple that level, or another 3.2 GWs to 4.7 GWs, New Energy Finance forecasts. A GW is enough to supply about 243,000 homes in Japan.

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