IHS Markit Technology analysts attended PV Expo in Tokyo last week. Numerous new technology trends were on show across all parts of the supply chain and the show floor was still as busy as ever driven by interest in hot topics such as energy storage, battery technologies and new module and inverter technology releases. The Japanese solar market will be the fourth largest market globally in 2017 and will continue to be a key target market for global supply chain players.
Below are some key takeaways from the show.
Solar policy changes to impact Japanese residential and megasolar markets
In February, the Japanese government decided to lower its PV feed-in tariff rate for PV power-generating stations to JPY21 (US$0.19)/kWh and that for residential rooftop PV systems to JPY28 (US$0.25)/kWh for fiscal year 2017 (April 2017-March 2018). At the same time, the government announced that large solar projects must now have a connection certificate before the end of March in order to receive the pre-assigned FiT. This measure was implemented in order to reduce the huge pipeline for megasolar projects and to stop current price speculation from the developer side. Another major policy change was the announcement that, from April 1st, reverse auctions will be the main driver for megasolar projects. No details have been released as of yet. It is clear, however, that this tender structure intends to become a more cost effective process for completing large scale solar projects but may lead to short-term price pressure for major solar components such as modules and inverters.
Japanese PV market installations to decrease in 2017 but Japan to remain the fourth largest market globally
IHS Markit PV Demand Market Tracker forecasts that Japan will install 8.4GW of installations in 2017, which represents a 4% y-o-y decline of solar installations in this market. There are several reasons accounting for forecast slowdown of the Japanese market from 2017-2021, the most important being the gradual lowering of the FiT and grid saturation of solar in key prefectures. In contrast, the Governmental program Zero Energy Homes (ZEH) is expected to continue being a major catalyst for solar installation growth in the residential market due to its ambitious schedule. The ZEH program was launched in the beginning of 2016, in order to minimize energy consumption and improve the energy efficiency of residential homes with a target of 50% of all new homes to be ZEH by 2020.
Zero Energy Homes (ZEH) to become new sales channels to protect Japanese suppliers business
For many years, selling into the Japanese market was extremely challenging for most Chinese module producers focused on polycrystalline technology. The Japanese market was dominated by local module manufacturers producing high-end monocrystalline modules, which were in high-demand for a market dominated by roof-top installations. The expansion of Megasolar projects changed the rules of the game and the traditional sales channels and opened the door for Chinese and South Korean suppliers that now dominate the utility and large-commercial segments.
Last week, the module pavilion was dominated by Chinese and other Asian suppliers which was a clear example of the current market retraction of Japanese brands with the important exemption being the residential and the ZEH channels. In Japan, a few handful of large homebuilders such as PanoHome and Daiwa account for a large market share of the new home-build market in Japan. Leading domestic module and inverter suppliers are partnering with these major homebuilders in order to develop a new sales channel in order to protect their business. IHS Markit forecasts that given that Japanese home owners have a large preference for domestic brands in their homes; this will be a relatively protected market for domestic PV suppliers.
Technology innovations at the module level dwell around the concept of improving the cell-to-module conversion while prioritizing production cost control
IHS Markit forecasted back in 2015 that concepts that boost performance of solar cells independently from module level were expected to widespread in coming years. This is now a big trend within the module manufacturing industry. In this vein, most companies exhibited half-cell monocrystalline modules (p-type and PERC). Module manufacturers also exhibited modules with an increasing the number of busbars as well as multi busbars (up to 12) and shingling modules that can increase module output by 10-15 Wp in comparison to standard modules. We do anticipate both types of modules will be key products at SNEC next month in Shanghai due to its improvements in cell-to-module conversion, that is higher module efficiency, without incurring higher $/Wp costs.
Energy storage forecast to grow in both behind-the-meter and utility-side-of-meter applications in Japan.
Following the Ministry Of Economy, Trade and Industry (METI) ambitious targets for ZEH, the market for energy storage in behind-the-meter applications is forecast to remain strong in 2017 with many of the leading module and inverter suppliers such as Panasonic and Sharp partnering with domestic battery suppliers. In utility-side-of-meter applications domestic utility companies like TEPCO (Tokyo Electric Power Company) and HEPCO (Hokkaido Electric Power Company) are facing challenges to absorb increasing amounts of PV and as a result, they are supportive of adding energy storage with PV in order to smooth energy production from PV.
With continued ZEH subsidy from METI, strong promotion from house builders, and output control requirement from regional utility companies, IHS Markit forecasts more energy storage systems will be paired with residential and mega solar systems with annual installation to reach 0.7MW/1.8MWh in 2020.
Japanese PV inverter suppliers continuing to expand internationally and seeking new revenue streams by releasing new energy storage inverters
The Japanese grid-connected PV inverter market is forecast to become increasingly competitive in 2017 due to the continued expansion of Chinese and Western suppliers such as SMA, Delta, Sungrow and Huawei. As a result, the leading domestic suppliers such as Omron, Tabuchi, Yaskawa and TMEIC are rapidly expanding into new markets geographically as well as into new market segments.
While the key international target market for these suppliers will remain the United States, increasingly Japanese suppliers are looking to Southeast Asia and India as new market opportunities. Additionally, the majority of Japanese suppliers have released an energy storage inverter targeted at either behind-the-meter or utility-side-of-the-meter which will allow them to grow their revenues.