The Fukushima cloud's (green, not silver) lining
The ongoing tragedy of Japan's Daichi Fukshima nuclear complex will prove to be a boon for renewable energy in Japan, and astute investors should begin carefully to follow Tokyo's new priorities.
Before the March 11 twin disasters of a massive earthquake followed by a devastating tsunami, about 30 percent of Japan's electricity was generated by nuclear power, and Tokyo had ambitious plans to raise its market share to 50 percent over the next two decades, with renewable accounting for 20 percent, Japanese Prime Minister Naoto Kan told journalists earlier last month.
That optimistic policy is now in tatters, and Kan added, "However (following Fukushima), we now have to go back to the drawing board and conduct a fundamental review of the nation's basic energy policy."
Kan is now touting the government's "Sunrise Project," which has been moribund for the last seven years. The goal of the Sunrise Project is to reduce the cost of solar power over the decade to a third of current levels and to one-sixth by 2030 as an incentive for more people to install it.
At the 50th anniversary of the Organization for Economic Cooperation and Development in Paris Kan told reporters, "Japan will now review its basic energy plan from scratch and is set to address new challenges."
The scale of the government's turn away from nuclear and fossil fuel power is extraordinary, as currently renewable energy resources, such as solar and wind, only make up about 1 percent of Japan's total power supply. Even with hydropower, the ratio is about only 9 percent.
According to China Business the earthquake and tsunami halted production at most of Japan's giant solar power companies, including Kyocera (KYO), Sharp Corp ADR (SHCAY.PK) and Sanyo Electric (SANYY.PK) because of the subsequent lack of electricity. Prior to the earthquake China and Japan essentially shared the European photovoltaic (PV) market; since the earthquake analysts predict that Japan will lose one quarter of its market share.
The shift has already started, as The Nikkei business daily reported on Wednesday that Softbank Corp, Japan's third-largest mobile phone operator, has announced plans to assist in the construction of about ten 20-megawatt facilities, costing about 8 billion yen ($100 million) each. But, as in many Western countries dominated by the nuclear and oil industries, solar energy policies have up to now enjoyed fitful support in Japan, where pioneers such as Sharp Corp and Kyocera Corp have lost their lead to overseas rivals that received larger subsidies and lower production costs. Furthermore, the cost of solar panel installation in Japan is double that in Germany.
So, who will be one of the major beneficiaries of this policy shift towards reducing solar costs?
China, surprise surprise.
China now has over 400 PV companies and now produces approximately 23 percent of photovoltaic products used worldwide. Three years ago China produced 1,700 megawatts of solar panels, nearly half of the world production of 3,800 MW, of which 99 percent were exported. According to Huang Xinming, head of a research institute at JA Solar (JASO), a large Chinese solar power company, JA Solar has just developed a new technology that could cut the cost of producing silicon, an important material in manufacturing solar panels, by 60 percent.
Expect to see a flood of yen into China's PV industries; smart Western investors will head east as well, where the sun always rises.
By. Dr. John C.K. Daly for OilPrice.com. For more information on oil prices and other commodity related topics please visit www.oilprice.com