The Skies are Brightening as Manufacturers Resume Spending to Improve Efficiency
Almost one decade ago, Japanese PV makers dominated global PV production Sharp (SHCAY), Kyocera (KYO), Sanyo (now part of Panasonic) and Mitsubishi Electric represented about 50 percent of global production in 2005. When German and other European markets expanded quickly, a great number of companies in Europe and Asia, specifically China, jumped into the “potentially” profitable PV industry. They rapidly ramped up their production and brought down costs, leaving Japanese companies behind.
When the Japanese government decided to pump life into the lagging domestic PV market, it created a generous feed-in tariff (FIT) program. Japanese manufacturers began enjoying full access to the lucrative domestic market and started to see the improvements in their bottom lines.
Taking advantage of the uptick in business, Japanese manufacturers have put all of their resources into the domestic market. They have increased shipment and production, improved cost structure, and moved beyond the “module only provider” phase through horizontal and vertical expansion into the downstream solar value chain.
Domestic Market Focus
Japanese manufacturers were export-oriented due to the better profit margin they could earn in German and other European markets. However, that trend is now over. At 1Q’13, Japanese PV makers kept 90 percent of what they produced in the domestic market, compared to just about 30 percent at 1Q’09 (Figure 1).
Figure 1: Japan PV Domestic Production: Exports vs. Domestic Shipment
Japanese solar manufacturers have taken a “Japan shift,” said Nobuyuki Nakajima, Solar Frontier’s manager of communications. A few years back, Solar Frontier was export-focused, but since 2012 its domestic shipments have exceeded exports about 80 percent of its modules will serve the growing domestic market in 2013, explained Nakajima.
Solar Frontier, a CIS (copper, indium, selenium) thin-film PV manufacturer, made its first-ever operating profit in the first quarter of 2013, two quarters ahead of plan. The company successfully reduced its material costs by 25 percent through the first half of 2012, bumped up its production capacity utilization to 100 percent at its 900-megawatt (MW) Kunitomi plant in January, and will resume production at its previously suspended 60-MW Miyazaki No. 2 PV plant in July to keep up with demand.
Kyocera, a vertically integrated poly-crystalline silicon PV manufacturer, has also been improving sales and profits by shifting its focus largely to Japan. According to Ichiro Ikeda, Kyocera’s general manager of solar energy marketing division, its domestic shipment accounted for about 80 percent of the company’s global shipment in FY2013 (April 2012 – March 2013), compared to about 50 percent in FY2010. It has been meeting the growing domestic demand by re-importing modules from its overseas production facilities in Czech Republic, China and Mexico. Ikeda said that Kyocera is planning to boost its shipment to over 1 gigawatt (GW) for this fiscal year (April 2013 – March 2014), up from 800 MW in FY2013.
PV Module Technology
The PV technology mix in Japan has also been changing. Domestic manufacturers largely produced poly-crystalline silicon (poly-si) technology, so it dominated the market. However, the Net FIT for the residential market revitalized the domestic market. Since then, the demand for high-efficiency or mono-crystalline silicon (mono-si) modules has gained popularity among homeowners who want to maximize energy production on their space-limited roofs.
SunPower (SPWR) and Panasonic, providers of world-leading, high-efficiency modules, are currently neck and neck, chasing the largest market share in the residential segment in Japan. Sharp and Mitsubishi Electric, previously poly-si module focused producers, started offering mono-si modules specifically for residential customers. Last year, Mitsubishi Electric announced the termination of poly-si modules production to focus on mono-si sales. Sharp, Japan’s largest PV producer, but deeply financially troubled, announced its very first outsourcing contract deal with SunPower to sell SunPower’s high efficiency modules under Sharp’s brand (“Black Solar”) for the domestic residential segment.
Although demand for mono-si modules is expected to grow, the launch of the full FIT program has ignited the large-scale, non-residential system market. Since its launch, the demand on more price-competitive poly-si modules has started to pick up again.
Sharp’s sales manager stated that Sharp’s current tactic is to ship mono-si modules to the efficiency-focused residential segment, and ship poly-si to the cost-conscious, non-residential segment.
The residential segment has been bread-and-butter for the Japanese module makers, providing a steady market with good profit margins; however, the module makers cannot ignore the potential growth of the non-residential segment, which is expected to grow much larger by volume than the residential segment in the next few years.
According to the Japan Photovoltaic Energy Association (JPEA), the non-residential segment grew by close to 900 percent in FY2012 (April 2012 – March 2013) from FY2011 (April 2011 – March 2012) while the residential segment grew by 55 percent. For the first-time ever, the non-residential segment exceeded the size of the residential segment.
Panasonic, a long-time producer of HIT (premium, high-efficiency modules) has even started offering OEM poly-si modules to capture the piece of the growing non-residential segment. In April, the company shipped 8,784 240-W poly-si modules, 2 MW in capacity, to a FIT non-residential project in Tokushima Prefecture – its biggest poly-si project in Japan.
The thin-film market is also making headway in Japan against silicon counterparts. A recent report states that thin-film PV lost more ground globally to silicon PV in 2012; however, the thin-film share in Japan is, in fact, increasing (Figure 2). Data released by JPEA shows that thin-film took 21 percent of Japanese PV technology market share in Q4’12, up from a 4 percent share in Q1’10. Solar Frontier is the biggest contributor to the growth of this segment.
Figure 2: Japan Domestic PV Market by Module Technology
tical and Horizontal Expansion
To protect its turf and profitability, Japan PV manufacturers are expanding their product and service offerings and strengthening their domestic networks against foreign PV markets, which now accounts for more than 30 percent of the domestic market.
Kyocera, Sharp and Solar Frontier have moved beyond “module only provider,” by vertically expanding into the downstream solar value chain, as an EPC contractor, project developer and independent power producer.
Solar Frontier has created an investment company, SF Solar Power, with the Development Bank of Japan (DBJ) to fund around 100 MW worth of medium-scale PV in Japan. These projects serve as a “sweet spot” since they are easier to acquire and interconnect than projects over 2 MW.
Last year, Kyocera joined forces with IHI Corp. and Mizuho Corporate Bank to construct one of a 70-MW PV project, the nation’s largest, in Kagoshima Prefecture. Kyocera will not only supply its modules but also undertake part of its construction, operation, and maintenance. The project is expected to be completed by this fall.
In terms of the horizontal integration, Kyocera, Sharp and Panasonic all have starting selling lithium-ion storage batteries with PV systems for the residential segment in order to offer the complete packaged solution to “create, store and control energy.” Kyocera will also add Home Energy Management System (HEMS) to its PV and lithium-ion battery system offerings.
To the World
The Fukushima Disasters in March 2011 certainly created a keen interest and demand for safe and clean renewable energy sources, including solar, but a solar revitalization plan had already been in the works.
In 2010, JPEA released “JPEA PV Outlook 2030,” which spells out JPEA’s vision to create ¥10-trillion (about $100 billion) Japanese PV industry and increase the share of Japanese PV makers or “Japan Brand” to 33 percent of the world PV supply by 2030, up from 8.5 percent in 2011. “Japan Brand” means modules marketed and produced by Japanese companies not only in Japan but also in other parts of world.
According to the Outlook, the domestic market will be saturated by 2020.
After that period, the survival of Japanese PV manufacturers will depend on how much they can expand outside the domestic market. The current revitalization of the domestic market is providing them with a chance to regain the strength required technology, innovation, and production capacity to last in this turbulent PV industry.
Junko Movellan is a Solar Industry journalist who writes and analyzes the US and Japan PV downstream markets. She has more than 10 years of experience in the PV industry, analyzing and developing business strategies for global companies. She previously worked as a Senior Analyst at Solarbuzz and as a Market Development Analyst at Kyocera. She is based in California, USA.
This article was first published on RenewableEnergyWorld.com, and is reprinted with permission.