Published on October 12th, 2018 | by Joshua S Hill0
Japan To Add 17 Gigawatts Of New Solar By End Of 2020
October 12th, 2018 by Joshua S Hill
Growth in Japan’s solar power sector is predicted to slow over the coming decade, according to a new analysis from the Fitch Group, but not before the industry adds 17 gigawatts (GW) worth of new solar capacity between the end of 2017 and the end of 2020.
US credit, macro, and industry solutions firm Fitch Solutions Macro Research, part of the Fitch Group, published a new Industry Trend Analysis for Japan’s solar sector this week, in which it forecast growth in Japan’s solar power sector to slow over the coming decade. The slowdown comes in the wake of the company’s transition to competitive auctions for utility-scale solar power capacity procurement in 2017. Another catalyst for this slowdown is the September announcement from the Japanese Government which sees the country’s feed-in tariffs (FiT) for solar installations reduced at the household- and company-levels by half by the mid-2020s.
This transition away from feed-in tariffs to competitive auctions, as well as FiT reductions, are intended to address the high costs of subsidizing the country’s solar power industry which has nevertheless resulted in explosive growth, with the Japanese solar sector growing from 13.6 GW at the end of 2013 to 48.6 GW by the end of 2017, making it one of the fastest growing solar sectors in the world.
However, while the long-term outlook expects a slowdown, Japan’s project backlog stemming from the successful and attractive FiT will continue to support robust growth, and Fitch expects another 17 GW worth of solar capacity to be brought online between 2018 and the end of 2020.
The transition to competitive auctions for utility-scale procurement comes as the Japanese government begins to prioritize reducing retail electricity prices rather than simply prioritizing solar growth. Unfortunately, the second competitive auction held this year failed to attract any successful bidders, leaving the transition treading water for the time being. According to Fitch, this failure “was a result of a gap in the prices offered by the government under the mechanism, and the prices required to attract project developers to bid in the auction.”
Things are expected to go more smoothly for the country’s third auction which is scheduled for the second half of this year, but Fitch nevertheless believes “limited investor appetitive registered in the second auction” is a tell-tale sign of a slowing solar sector. Specifically, while Fitch expects Japan’s solar sector to add 17 GW in the next few years, it conversely expects Japan will only see 14 GW of new solar brought online between 2021 and 2027.