In the late-1990s, Japan introduced the PV world to strong demand by implementing a successful subsidy programme and by supporting its manufacturing sector along with installations. As a result, Japan led the world in both demand and shipments until Germany followed suit, implementing its successful 100,000 roofs programme in 1998.
In 2003, following the cessation of the countries' founding programme, the German Parliament approved its feed-in tariff law (the EEG), and the rest is history. Germany now consumes more solar PV modules than any other country in the world, and with other European countries beginning programmes of their own, Europe is on its way to being the global solar PV technology leader ahead of Japan on its own – though behind the entire Asia region.
Since the mid-1990s, and even before its successful subsidy programme, Japan led Asia (and the world) in supply, and for a time in demand. Japan accomplished early on a connection between the market and the technology by working at creating a demand pull for PV products. This Government programme to stimulate demand worked in large part because Japan is an energy importer; and independence – a primary driver for solar worldwide – is a clear motivating factor for the citizens of Japan.
Without high electricity rates, Japan would likely have needed to implement a feed-in tariff model to stimulate demand, whereby it is profitable to own a PV system. But in 2007, 21% of residential installations in Japan were unsubsidised. Therefore a good case can be made that Japan succeeded in its goals to create demand pull without subsidies. Unfortunately, as building has slowed in Japan, so has its domestic market for PV systems. In 2007, demand in Japan for systems was estimated at 9% of the worldwide total, behind even the US region.
In terms of building a domestic solar PV market, the rest of Asia has not followed Japan's example, though other countries (notably China) have begun aggressively supporting PV manufacturing. There is one good reason for this hesitation on the part of other Governments in the region to implement domestic subsidy programmes – programmes such as those in Japan, the US and Europe are expensive. These programmes must be funded, and it is not rational to assume that consumers and Governments will continue to do so without a personal stake in system ownership. Global warming has finally become a crucial international concern – as it always should have been – but personal economics such as affording bread and milk are also crucial issues.
Figure 1 provides estimates for 2007, for both supply and demand. In 2007, Japan was responsible for 10% of worldwide demand and 32% of supply on shipments to the first point of sale of 2948.9 MWp.
Asia, West Asia and Southeast Asia, taken together, accounted for 30% of global solar PV demand in 2006, and are estimated to account for 19% of demand in 2007. Demand from the Asia region is expected to continue to decrease as the region's manufacturers continue shipping outside of the area, specifically to Europe. Observing figure 1, shipments from manufacturers in Asia (Japan and the ROW region), shipped 61% of global product in 2007 – again, primarily into Europe.
Where are China and India in the demand supply equation? China is focused on building its PV manufacturing industry, but has not been (thus far) as focused on supporting its market. The same can be true for India, which is also concentrating on building an industry without supporting a robust market. Both countries have a strong need for the clean energy provided by solar technologies. India and China have vast areas of each country where it is not economically viable to extend the grid. As solar is the best distributed generation energy source, (power at the point of need), and as solar is already economically feasible in rural areas (off grid applications), the implementation of rural electrification programmes in both countries would seem to have an easy answer – yes. However, off grid solar programmes are not only expensive, but difficult to administer.
Who's who in PV product sales?
The PV industry is global in scope, and Japan was the shipment leader for several years, taking the leadership position from the US in 1999. Since 2002, four manufacturers from Japan have ranked in the top 10 in terms of shipments of PV modules or cells to the first point of sale in the market. In 2006, 7 of the top manufacturers were located in Asia. As BP Solar has manufacturing facilities in India, we can call this 7.5 manufacturers with facilities located in Asia. As a significant percentage of product is shipped from the top 10 manufacturers in any given year (over 70%), this ranking is an important indicator of manufacturing strength.
Japan has a strong manufacturing base, including Sharp Solar, Sanyo, Mitsubishi Electric and Kyocera for crystalline product, with Kaneka and Mitsubishi Heavy producing commercial volumes of amorphous silicon. This is not – by any means – an exhaustive list of the manufacturers and universities in Japan currently engaged in research.
In 2007, however, manufacturers in the Europe region moved slightly ahead of those in Japan, shipping one percentage more in product – though Europe is not ahead of the entire Asia region. Asia will need to support its market as well as its manufacturing sector to continue to lead in this regard.
Table 1 presents the top 10 manufacturers from 2001 through 2006, with an estimate for 2007.
China, at over 1.3 billion citizens, has the largest population in the world and has replaced the USA as the largest producer of CO2. China's air is so dirty that breathing in some cities has become a health hazard.
The country continues to contribute to its poor air quality by emphasising domestic investment in coal plants. Despite being one of the world's largest producers of coal, 30 million of China's citizens still have no access to electricity. The primary focus of China's renewable goals for internal use is less expensive renewable energy (RE) technologies i.e. wind and biomass. Though the use of PV is encouraged, until recently it was illegal to connect a PV system to the grid, and systems remain extremely expensive – with the feed-in tariff provided by the Government not significant enough to offset the high upfront cost of PV systems.
China is strongly supporting its PV manufacturing sector. There are countless module assembly facilities, and many technology start ups. However, Suntech and Yingli currently remain the technology leaders, though this will likely change as the silicon supply constraint eases, and more raw material becomes available.
In Taiwan, the market remains modest for solar products, with Motech taking the lead in that country's manufacturing. Motech develops and manufacturers crystalline product.
Sinonar, an amorphous silicon manufacturer previously focused on consumer indoor applications like watches and calculators, is now increasing its capacity for the manufacture of modules for consumer power and grid-connected applications.
The Philippines remains a small and primarily off-grid market for PV products. However, with the location of SunPower's manufacturing facility there, the country now has a strong global manufacturing presence.
SunPower develops and manufactures high efficiency back contact crystalline product. It currently has a run rate capacity of 200 MWp. The Philippine Energy Plan (PEP) that runs from 2004 through 2013 calls for 100% electrification of the barangays (villages) by 2006, and 90% of all households by 2017. It also calls for country-wide 55% energy self-sufficiency by 2013 and encourages private investment in its energy industry; US companies, such as SunPower have invested in local manufacturing facilities.
By 2013, the Philippine Government and the US DoE want 25% of the country's projected electricity needs to be met by PV, wind, and biomass. The 25% relates to an estimated 130-250 MWp in installed capacity.
Energy starved South Korea, which imports over 90% of its energy resources, has a commitment to exploring both renewable and nuclear energy options.
The country has a goal of over 1 GW of installed PV by 2012; a 100,000 roofs programme with a 70% of system cost rebate for residential systems; and a feed-in tariff of KRW716.40 (~US$0.72) for large commercial systems. Residential system rebates are based on standard installation rates set by the Government. Currently these rates are KRW6.3m (~US$6404). Korea has aggressive goals for its domestic market, and consumed 80 MWp in 2007.
South Korea has an interesting electricity history that is useful to understand as the international PV industry explores the country as a promising market. In 1961 the South Korean Government established its electricity distribution monopoly, KEPCO, which was responsible for the generation, transmission, distribution, planning, construction and financing of the country's energy needs.
Power plants were constructed, with large companies (chaebols) such as Hyundai and Daewoo given responsibility for these efforts. Nuclear power became a key energy solution in South Korea's energy stabilisation and growth plans. The Government carried out its energy expansion in two-year power development plans. Unfortunately, to continue building and growing, over time KEPCO also took on a significant amount of debt.
In 1997 it was discovered that the state owned Electricity Company had the largest level of debt of all Government agencies, partly because electricity up to that point had been sold at or below cost to support the country's economic growth. In 1999, the South Korean Government signed a letter of intent with the IMF to begin privatising its Government owned monopolies (primarily the banks and the utility, KEPCO).
In 2000, two legislative initiatives defined the steps that were needed to break KEPCO into several companies, and hence privatise electricity distribution. To realise electricity reform, KEPCO's generation assets were divided into six subsidiaries, Korea South-East Power Company Ltd (KOSEPCO); Korea Midland Power Company Ltd (KOMIPO); Korea Western Power Company Ltd (KOWEPCO); Korea Southern Power Company Ltd (KOSPO); Korea East-West Power Company Ltd (KEWESPO); and Korea Hydro and Nuclear Power Company Ltd (KHNP).
In 2003, the Government suspended the privatisation process and by 2004 the South Korean Government, no longer convinced that privatisation was the proper course, halted the process. South Korea's generation market is a one way bidding system, with all facilities above 20 megawatts required to sell through the Korea Power Exchange (KPX), and with KEPCO the largest and one of the only customers.
South Korea's PV manufacturing sector is not commercial as of yet, but with industry names such as Samsung and Hyundai, it is likely a matter of time – though, as with all new entrants, companies in South Korea will find that the road from R&D through pilot stage to commercial production is a long and bumpy one.
India has a population of over 1.12 billion, with around 30% living in urban areas. Most of the population is extremely poor. Approximately 80% of India's urban population has access to electricity, and the Government is committed to extending the grid wherever feasible. Unfortunately, the quality of India's utility power is not good and blackouts are a common occurrence. The Government is committed to an aggressive rural electrification effort. The national renewable energy policy is strongly focused on wind, as it is viewed as a less expensive option to PV.
PV village grids of 10- 50 kWp are planned for extremely remote areas where grid extension is not feasible and there is not a good wind resource. The desire for uninterrupted electricity in India is driven in part by a national commitment to television viewing. In India, average television viewing time is 8-10 hours a day. The Government in India has recently become significantly more serious about renewable energy in general and PV in particular as a method of securing reliable energy sources, to take part in, and profit from, a worldwide interest in PV, and to increase access to electricity for its citizens.
India intends to support the research and development of solar electric technologies in India, and to provide financial support for its scheme – Development of Solar Photovoltaic Technologies in India. India has a strong manufacturing sector led by BP Solar's commitment to manufacturing in the country.
Can the sleeping giant wake up?
Japan remains the most developed market in the region, and a global leader in the manufacturing of cells (technology). The country is also investing heavily in its thin-film manufacturing. However, manufacturing follows the market, low cost manufacturing areas, or, in a perfect world, an area that provides both the market and manufacturing incentives. It is pretty clear that today Europe is the region of the world that provides both (albeit not without funding and administration problems). Taking the region as a whole, Europe is unlikely any time soon to surpass Japan, China, Taiwan, India and the Philippines, given the combined manufacturing strength of these countries.
Table 2 provides data for Japanese demand and supply from 2002 to 2007, along with global demand and supply. Note that Japan's share of global supply appears to have peaked in 2003 and 2004, and is now slowly declining.
Japan supply and demand share 2002–2007
So, we come back to the original question: sleeping giant or just sleeping?
Manufacturers in the entire Asia region are not sleeping, and the region as a whole is still a giant. There is motivation to develop an industry in Asia, but it must be followed up by a financial commitment to developing its markets in order to become the global market and technology leader. This will require, as previously stated, a significant long term financial commitment to subsidies that encourage market development. And this commitment, as many countries including the US have discovered, requires political will to change the status quo.
The reward is a home industry that provides jobs and revenue, along with mitigation of the human climate crisis that fast approaches. There is no way around the fact that the reward comes with a high price, but realistically the alternative, only in terms of the approaching environmental catastrophe, puts that high price to rest. The world needs the sleeping giant to wake up and take its regional place as a manufacturing and market leader.
About the author
Paula Mints works for Navigant Consulting. She is the Principal Analyst for its PV Service Market Research Program, Executive Editor of the Solar Outlook Newsletter, and Associate Director in the Energy Division.
Ms. Mints is widely recognised as an industry expert on photovoltaic (PV) technologies and markets. She has 10 years' experience providing research products about the PV industry and has expertise in the industry's raw materials, manufacturing capabilities, growth drivers and value chain, through to the end user. She provides clients with objective, comprehensive analysis based on extensive primary research, including her forward-looking understanding of market and technology trends.