The solar power boom in Japan accelerated dramatically last year, according to new data published last week by Japan’s Renewable Energy Institute.
Solar photovoltaics (PV) share of electricity production in Japan rose from only 2.7% in 2015 to a whopping 4.3% in 2016, according to the data, which was originally collected by the Ministry of Economy, Trade and Industry. Solar’s contribution to Japan’s energy mix soared during the second half of 2016, when solar PV accounted for more than 5% of all electricity generation. Together, all renewable energy sources together represented 14.2% of production during 2016. Hydroelectric power represented the largest share of renewable energy, followed by solar and smaller amounts of biomass, wind and geothermal.
According to Mercom Capital Group, a market intelligence firm based in Austin, Texas, Japan is forecasted to have 8 gigawatts (GW) of solar installations in 2017. To put this in perspective, Japan had more solar installed capacity in 2015 than any country other than Germany and China.
The staggering expansion of solar in Japan is beginning to pose challenges to the nation’s fragmented electric power grid, which encompasses a system of relatively isolated grids controlled by local utility monopolies.
In the wake of the Fukushima nuclear crisis, Japan has implemented a series of measures to reform the nation’s electricity system, including liberalization of retail supply and legal unbundling of power generation and transmission and distribution planned for April 2020. The Feed-in Tariff system implemented in 2012 to promote renewable energy deployment is also one of the measures designed to change the shape of the electricity market.
The volumes of electricity traded on the wholesale market remains fairly low level. For example, in June 2016, traded electricity accounting for only around 2.6% of the total electricity demand. Similarly, only about 3.3% of all retail customers have switched their suppliers from major utilities to new power suppliers since the implementation of retail liberalization. By contrast, renewable energy such as solar PV has rapidly increased. In areas of specific utilities, there are some days when the share of renewable energy provides as much as 80% of the electricity demand.
Japan’s solar feed-in tariff is currently capped at the regional level. As a result of recent growth trends, deployment levels are currently approaching the caps in several regions, including Hokkaido, Kyushu, Okinawa and Shikoku. The rise in community solar schemes is also contributing to recent growth trends. The Fujisawa Sustainable Smart Town, a project sponsored by Panasonic, relies primarily on community-owned solar panels and small-scale fuel cells for heat and power.
