June 30, 2008


The Spread of Solar Power Generation in Japan

Keywords: Newsletter 

JFS Newsletter No.70 (June 2008)

This newsletter introduces the history, measures, and the current status of photovoltaic (PV) power generation in Japan, which carries high expectations with it as a clean energy source to help realize a more sustainable society.

History of PV Power Generation in Japan

The first solar cell was invented in the United States in 1954, and a prototype model of a solar cell was made in Japan in 1955. The nation's first PV system with a generating capacity of 70 watts was installed in 1958 at a radio relay station of the Tohoku Electric Power Co. located on top of Mount Shinobuyama in Fukushima Prefecture. The Sharp Corp. started researching and developing PV power generation in 1959, began commercial production in 1963, and launched its line of solar-powered calculators in 1976.

In 1978, researchers began connecting PV systems to the existing power grid. From 1990 to 1992, a compact PV generation system was developed for easy installation on houses, and legislation was improved to allow power companies to buy surplus electricity back from homeowners. In 1992, Sanyo Electric Co. started the practical application of installing PV generation systems on individual houses. With this system, which includes reverse power flow, surplus electricity generated at individual houses is sent to electric companies. Japan became the world leader in the total production of solar cells in 1999.

The total installed amount of PV power generation in Japan by 2004 was 1.13 million kilowatts (kW), the largest in the world. Germany was on the same track, and its cumulative installed capacity reached 1.43 million kW in 2005, moving Japan, with 1.42 million kW, into second place. Nevertheless, the annual world production of solar cells in 2005 was 820,000 kW, with Japanese companies producing almost 50 percent.

Reducing production costs is essential to the expansion of PV power generation, and technical development has contributed the most in this regard. For example, in 1994 the installation cost per kilowatt and generating cost per kilowatt-hour (kWh) were 2 million yen (U.S.$20,200) and 140 yen ($1.40), respectively, and in 2005 these fell to 665,000 yen ($6,700) and 45 yen ($0.45).

The New Energy and Industrial Technology Development Organization (NEDO) released a report titled PV Roadmap 2030 (PV2030) in 2004, which laid out targets for power generation costs of (1) the equivalent to the electricity charge for residential use by 2010, which is 23 yen ($0.23) per kWh; (2) equivalent to that for business use by 2020, which is 14 yen ($0.14) per kWh; and (3) equivalent to that for industrial use by 2030, which is 7 yen ($0.07) per kWh. NEDO also expects that PV power generation will be competitive with other energy resources by 2030.

This road map sets a goal of achieving cumulative introduced capacity in the range of 100 gigawatts (GW) by 2030, at which time PV power generation could supply about 50 percent of residential electricity consumption (about 10 percent of total electricity consumption). The share of PV power generation compared to all electricity generated was below 0.1 percent in 2002 in Japan.

Support for Solar Power Generation

In Japan, solar power is one of the "new energy sources" designated by the Act on the Promotion of New Energy Usage, and the government supports research and development activities, including research on the wider use of PV systems. The law defines new energy sources as renewables that are essential as alternatives to petroleum and that are technically viable but not widely used due to present cost inefficiency. It designates a total of 14 kinds of sources, including solar, wind and biomass, as new energy sources.

In 2003, the Renewables Portfolio Standard Law came into force, which requires electric companies to use a specified amount of electricity from new energy sources such as solar and wind.

From 1994 to 2006 the New Energy Foundation (NEF) provided subsidies for the installation of residential PV systems. Although subsidies from the NEF are no longer being provided, there are some kinds of support -- such as subsidies, loans, mediation and interest subsidies -- still available from local governments. The number of local governments that provided at least one type of support amounted to 303 in fiscal 2007, a drop from 319 the previous year, presumably because the NEF discontinued its subsidy program.

New Energy Foundation

After the NEF's subsidy program ended, the Ministry of the Environment engaged in a solar power campaign, starting in 2006, to promote the installation of large-scale PV systems. Many PV systems installed in Japan are often small-scale systems for home use. With its focus on larger systems, the ministry has been supporting the installation of PV systems for joint use in communities or condominiums, and providing subsidies to businesses that introduce PV systems with a generating capacity of about 1,000 kilowatts, which are called megawatt-class PV systems.

Solar power systems are also expected to play a significant role during a disaster, because they can provide backup electricity in the event of power failure. When the Great Hanshin-Awaji Earthquake occurred in 1995, disruption of lifeline services, such as electricity, water and gas, made rescue operations more difficult, thus resulting in more serious damage. Learning from this, the government launched a program in 1996 to increase the number of gas stations equipped with disaster-response facilities, such as private generators using solar power. Under this program, installation costs of these facilities are partly covered by government subsidies.

Also in the private sector, various initiatives to support renewable energy are gradually gaining momentum. For example, companies and municipalities are paying more attention to the Green Power Certification System, in which the environmental value of renewable energy, such as PV and wind power, is traded through Green Power Certificates. There is also an increase in the number of carbon-offset products coming onto the market. Besides these initiatives, the construction of some PV plants has been citizen-funded.

The Reality of Introducing Solar Power Systems for Homes

Mochizuki Industries Co., which was introduced in our September 2007 newsletter, entered into an exclusive dealer contract with Sharp Corp. to sell and install the company's residential PV system named Sunvista. We had an opportunity to interview a representative of Mochizuki Industries about the process of installing a home PV system.

Mochizuki Industries Co., Ltd.

A homeowner first asks a dealer or an exclusive subcontractor such as Mochizuki Industries to design and provide an estimate on the installation of a solar power system. If the homeowner approves the estimate, he or she has a meeting to get more information related to the installation such as the price that power companies will pay for the electricity generated. After signing a contract with a power company, a PV system is installed. Upon completion of the installation, the surplus electricity generated by the PV system is sold to the contracted power company.

In most cases, the dealer takes care of the meeting and contract processes with the power companies. Furthermore, they also periodically visit the installation sites to provide follow-up services. The cost for installing a photovoltaic system varies according to the area, direction and angles in which the system is installed, as well as the number of the solar panels. Under the standard proposal of Mochizuki Industries, the initial investment is around 2 million yen ($20,200), and they estimate homeowners can recover the cost in about 15 years.

Mochizuki Industries says that many homeowners who decide to have a residential solar power system installed do so because they are environmentally conscious, but because the NEF's incentive program was ended in 2006, there is concern that the number of home PV systems installed might decrease as a result.

The company also said that what prevents the expansion of solar power system installations is the economic disadvantages, such as insufficient national incentives and the low price the power companies pay for surplus electricity.

According to the results of a questionnaire conducted by the NEF in 2005, the largest number of respondents answered that one of the major reasons they bought a residential solar power system was "because the power company buys the surplus electricity." It is certain that this economic benefit boosted the growth of solar power installations.

In 2007 Tokyo Electric Power Co. bought surplus electricity from solar and wind power generation at the same price as its retail price for electricity, around 20 yen per kWh, although the price varies according to the details of the contract with each home. In contrast, Germany, an environmentally advanced country, set the price of electricity from solar power generation at four times as high as the retail price of electricity.

The European Union has set a goal to have 12 percent of the EU's overall energy supply coming from renewables by 2010, and 20 percent by 2020. Japan's target for renewable energy including solar power in 2010, however, is only 3 percent of overall energy supply.

EU strategy and instruments for promoting renewable energy sources

Although Japan has leading solar cell technologies and is renowned for its amount of production in the world, the country still lags behind in its national target and support programs for the nation-wide promotion of renewable energy. As well, Japan's self-sufficiency rate of energy supply is only 4 percent, and it needs to improve its national system to increase the use of solar power generation for a more sustainable society.

On June 9, 2008, Japanese Prime Minister Yasuo Fukuda said in his speech at the Japan Press Club that Japan plans to increase the introduction of solar power generation by ten-fold by 2020, and forty-fold in 2030. To achieve the target, the country aims to have 70 percent of new houses installed with residential photovoltaic systems. Many look forward to seeing Japan's initiative to promote solar power generation becoming more proactive.

(Written by Yuriko Yoneda)