Japan's solar installations surged by 270% (in GW) in the first quarter of 2013, positioning the country to surpass Germany to become the world's largest solar market in terms of revenues in 2013, according to market research institute IHS.
Although Japan is forecast to install fewer GW than China (which is forecast to be the largest market in GW installation terms) in 2013, the high prices of solar PV systems in Japan will drive it to become the world's largest market in revenue terms.
A total of 1.5GW worth of solar PV systems were installed in Japan in the first quarter of 2013, up from 0.4GW during the same time in 2012, said IHS.
The growth that started the year is expected to continue throughout 2013 as demand for solar energy is forecast to double, making Japan the world's largest market for solar installations on a revenue basis for the first time in a decade. Japan's share of global solar PV system revenues will rise to 24% in 2013, up from 14% in 2012 and just 9% in 2011.
The former top-ranked country, Germany, which had held the number one spot from 2009-2012, will fall to third place in 2013, behind Japan.
"Following the earthquake and tsunami in 2011 that led to the shutdown of nuclear facilities and a shortage of electricity, Japan has aggressively moved to promote solar energy," said Sam Wilkinson, solar research manager at IHS. "Japan's government has introduced a highly attractive feed-in-tariff (FIT) to help stimulate solar growth. In contrast, the Europe market that historically has led global solar demand is slowing as regional market conditions become less attractive. The deceleration in Europe and the implementation of the FIT in Japan are combining to propel the country to the top of the global solar market this year."
Rising sun
Japan is forecast to install US$20 billion worth of solar PV systems in 2013, up 82% from US$11 billion in 2012. In contrast, the global market is set for tepid 4% growth. The strong revenue performance for Japan in 2013 is partly driven by the high solar prices in the country.
"High system prices in Japan have always resulted in the country accounting for a significant proportion of solar PV system revenues," Wilkinson said. "Now these high prices are making Japan the world's number one market-and attracting the attention of global suppliers in the process."
Interest now has shifted away from Europe toward Japan from global solar suppliers, who see the country as representing a huge opportunity. Given that prospects are evaporating in many of the markets where they had previously focused, Japan's boom comes at a good time.
Cloudy days for Europe's solar market
In contrast to solid expansion in Japan, installations in Europe declined by 34% on year in the first quarter. Europe previously had been the main focus of almost all solar suppliers and had provided the lion's share of global demand. But in the first quarter of 2013, Europe accounted for 40% of global demand, down from 70% just one year before, and its share is forecast to continue falling throughout 2013.
As Europe markets become less and less attractive, suppliers are seeking greener pastures elsewhere.
"Continued reductions in FIT rates and incentives, combined with the introduction of anti-dumping import tariffs, have resulted in many of the largest suppliers switching their focus to new opportunities," Wilkinson said.
Barriers to entry
The solar market in Japan is not without challenge. While huge growth opportunities exist in the country, capitalizing on them is not a straightforward task for international suppliers. Strict certification requirements, particularly for inverters, make it difficult for suppliers to release products. Furthermore, a strong preference for Japan-based brands – particularly in the residential market, which will account for nearly 40% of demand in 2013 – means that forging partnerships with local suppliers is essential.
"Although international suppliers have only been able to win limited business in the residential sector, mostly by supplying local suppliers through agreements with original equipment manufacturers, the situation for larger systems is quite different," Wilkinson said. "The fastest-growing market segment is forecast to be systems larger than 1MW, which is expected to grow by more than 500% in 2013. International solar module suppliers have been more successful in partnering with local project developers and have been able to ship large volumes to Japan to serve this market."
