July 28, 2009
Japan Plans to Make Solar Energy Cheap
Motivated in part by its loss of dominance in the solar energy
industry, Japan has recently announced a new national project for the
widespread deployment of solar PV technologies in order to drive the
price of solar energy toward that of conventional energy sources. In
short, Japan plans to make solar energy cheap.
In a speech laying out the his strategy for Japan to lead the world
in a "low carbon revolution", Japanese Prime Minister Taro Aso announced
his vision for Japan to be "the number one solar power in the world."
He also recognized that the principle barrier to widespread adoption of
solar energy was its high price:
In order to cut this vicious cycle, Japan has proposed to make solar energy cheap through a combination of energy innovation and government policies to spur demand-a straightforward and effective approach to drive both economies of scale and potentially transformative innovation. Prime Minister Aso has set a goal of increasing installed solar capacity by 20 times its current level by 2020, and 40 times by 2030.
How do we become number one in the world in terms of solar power generation? In order to achieve this, we must put an end to the following vicious cycle: costs are high because of lack of demand, and demand remains stagnant due to high costs. Above all else, I think a strong political will to create 'demand through policies,' is necessary.
The government is investing
$30 billion over 5 years in energy research and development in order to
develop new, innovative technologies and to improve existing
technologies over the short-term. This includes using new materials
and structures that may significantly improve solar cell efficiencies,
with a goal of improving generating efficiency by over 40 percent and
achieving a generating cost of only ¥7/kWh (7 cents/kWh) by 2030, close
to the cost of conventional energy sources.
On the demand side, Japan will enact three particular policies that
could substantially reduce the costs of solar energy by driving demand,
which in turn gives private firms the confidence to capture economies
of scale and invest their own funds in additional R&D and
innovation. First, the government has reinstated
a solar PV installation subsidy that it suspended in 2005, causing it
to lose solar market dominance to Germany and Spain. The new subsidy
of 70,000 ¥/kW ($749/kW) of equipment is expected to enlist 84,000 new
applications for PV systems over the next year. Second, the government
is providing a $980 million subsidy
to deploy solar photovoltaic systems on the roofs of all 32,000 public
elementary, junior high, and high schools nationwide by 2020. Lastly,
the government has proposed a new feed-in tariff
for solar electricity production that, if enacted, is expected to
dramatically increase solar energy adoption. The "new purchasing
system", announced by Prime Minister Aso, would require electric
companies to purchase solar power at about twice the current
(voluntary) price, or close to ¥50/kWh (50 cents/kWh). The feed-in
tariff will likely be designed to gradually decrease as the cost of PV
systems falls, in order to provide pressure for continued private
sector innovation and cost reductions.
As the U.S. Congress debates cap and trade legislation to slightly
increase the price of fossil fuel energy, the government of Japan has
focused its efforts, as energy experts have argued is necessary, on
making solar energy cheaper, in real, absolute terms.
Japan's ambitious plans for solar energy are yet another indication
that without a more vigorous commitment to innovation and direct
investment in clean energy deployment, the U.S. may lose the clean energy race to its East Asian competitors, as the Breakthrough Institute and others have recently warned.