VZCZCXRO6910
PP RUEHAST RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD RUEHTM
DE RUEHKO #1948/01 1970426
ZNR UUUUU ZZH
P 150426Z JUL 08
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC PRIORITY 5830
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 4365
RUEHRL/AMEMBASSY BERLIN PRIORITY 1456
RUEHBY/AMEMBASSY CANBERRA PRIORITY 2691
RUEHLO/AMEMBASSY LONDON PRIORITY 2106
RUEHMO/AMEMBASSY MOSCOW PRIORITY 2419
RUEHOT/AMEMBASSY OTTAWA PRIORITY 9705
RUEHFR/AMEMBASSY PARIS PRIORITY 6185
RUEHRO/AMEMBASSY ROME PRIORITY 2137
RUEHUL/AMEMBASSY SEOUL PRIORITY 0355
RUEHFK/AMCONSUL FUKUOKA PRIORITY 8851
RUEHNAG/AMCONSUL NAGOYA PRIORITY 7072
RUEHNH/AMCONSUL NAHA PRIORITY 1225
RUEHOK/AMCONSUL OSAKA KOBE PRIORITY 2583
RUEHKSO/AMCONSUL SAPPORO PRIORITY 9434
RUEAIIA/CIA WASHDC PRIORITY
RHMCSUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEHBS/USEU BRUSSELS PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 TOKYO 001948 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR OES, EEB, AND EAP/J HEATHER DRESSER 
USTR FOR M.BEAMAN 
DOE FOR EERE A/S KARSNER 
 
E.O. 12958: N/A 
TAGS: ENRG SENV TRGY SOCI JA
SUBJECT: SOLAR POWER IN JAPAN 
 
REF: TOKYO 1690 
 
TOKYO 00001948  001.2 OF 003 
 
 
This message is Sensitive But Unclassified.  Please handle 
accordingly. 
 
¶1.  (SBU) Summary.  Solar photovoltaic (PV) power is poised 
to become a centerpiece of Japanese Government renewable 
energy initiatives aimed at cutting greenhouse gases and 
meeting energy needs.  Increased PV use figures prominently 
both in the vision PM Fukuda publicly announced June 9 (ref) 
and in METI's "Cool Earth Innovative Technology Program." 
Japan's geographic situation, commercial interests, and 
national pride have led government and industry officials to 
call for renewed investment in PV power.  A June 24 proposal 
to METI singles out solar as Japan's most promising renewable 
energy source and calls for new subsidies, tax incentives, 
and R&D investment to revitalize the domestic PV market. 
Germany recently overtook Japan as the country with the 
largest installed PV base, due in part to the end of Japanese 
subsidies for home installation of PV systems.  Japanese 
firms remain among the world leaders in PV sales and 
technology development, but face increasing global 
competition.  Japan's solar industry is looking to the GOJ to 
make long term commitments to support PV development and 
market penetration.  End Summary. 
 
Solar's Role in PM Fukuda's Vision 
----------------------------------- 
¶2.  (SBU)  Prime Minister Fukuda's vision for dealing with 
climate change and Japan's energy needs includes a goal to 
reduce domestic greenhouse gas emissions 14 percent by 2020 
and 60-80 percent by 2050 (ref).  To help achieve these cuts 
and regain world leadership in PV power, the Fukuda Vision 
announced June 9 spells out domestic goals for a ten-fold 
increase in solar power generation by 2020 and a forty-fold 
increase by 2030.  To reach these goals, the PM's statement 
calls for constructing large-scale solar power generation 
plants and employing solar power in 70 percent of newly built 
housing.  However, the challenges involved in meeting these 
goals are extensive, according to officials at METI's Agency 
for Natural Resources and Energy.  The high cost of PV cells 
and installation -- around 2.3 million yen (roughly 22,000 
USD) for an average 3.5 kilowatt (kW) residential system -- 
discourages many homeowners, particularly since residential 
subsidies ended in 2005. 
 
METI's Strategy 
--------------- 
¶3.  (SBU)  METI's March 2008 Cool Earth-Innovative Energy 
Technology Program includes "supply-side innovative 
photovoltaic (PV) power generation" among 21 priority 
technologies that are expected to deliver substantial 
reductions in global greenhouse gas emissions by 2050.  METI 
estimates successful diffusion of the 21 technologies could 
provide 60 percent of the emissions reductions necessary to 
meet Japan's "Cool Earth 50" goal of halving total global 
greenhouse gas emissions by 2050.  Seven percent would be met 
by supply-side PV power generation, according to METI. 
 
¶4.  (SBU)  Responding to PM Fukuda's ambitious goal for 
increased residential PV use, an advisory group to METI 
Minister Amari made "urgent recommendations" on June 24 to 
increase renewable energy's share of overall energy supply 
from 5.9 percent in 2005, to 8.2 percent in 2020, and then up 
to 11.1 percent in 2030.  The proposal calls for the 
realization of a "solar power society" with PV power 
providing most of the targeted increase in renewable energy. 
 
TOKYO 00001948  002.2 OF 003 
 
 
Commenting on the proposal, METI officials said Japan already 
exploits most of its best wind, biomass, waste, and 
hydroelectric power resources, while its PV potential has 
barely been tapped.  The proposal calls for halving the price 
of current PV systems in 3-5 years through subsidies and tax 
incentives to households and businesses, including PV cells 
in new home design, and promoting large-scale PV plants among 
electric utilities. 
 
Subsidies, Then... 
----------------- 
¶5.  (SBU)  The GOJ began a solar power subsidy program to 
local governments and private businesses in 1992, followed by 
a "roof top" subsidy scheme for homeowners in 1994.  The 
residential subsidies initially ranged from 33 to 50 percent 
of total purchase and installation costs, but were gradually 
reduced to less than four percent (on average about 70,000 
yen for a 2,000,000 yen system that generates 3.5kW).  The 
program ended in 2005 under the assumption that the market 
was "mature enough," according to a METI representative.  The 
subsidies were a good selling point for installation 
companies, but ultimately did not make PV cheap enough to 
sustain the market, according to METI officials.  METI 
officials state Germany's program of feed-in tariffs enabled 
that country to surpass Japan as the country with the most 
installed PV capacity, a position Japan had held from 1997 to 
¶2005.  (Note: METI documents show the U.S. ranks third.  End 
note.)  Eighty percent of Japan's installed PV capacity is in 
home systems.  However PV power accounted for less than 0.25 
percent of Japan's total electricity output in 2005, 
according to METI sources.  Although production costs have 
declined somewhat, PV power generation costs remain around 46 
yen per kWh in Japan, several times that of conventional and 
other renewable power sources.  METI expects advances in 
technology and manufacturing volume to drive down the cost to 
7 yen per kWh by 2030. 
 
...And in the Future? 
-------------------- 
¶6.  (SBU)  METI officials acknowledge the GOJ is considering 
various types of support for PV power for FY2009.  However, 
GOJ officials appear to lean toward subsidies over other 
types of support for priority clean energy technologies. 
(Note: The GOJ is also considering subsidy schemes for 
residential fuel cells and plug-in hybrid vehicles, according 
to METI officials. End Note).  METI officials said Germany's 
feed-in tariff model would not be appropriate for Japan, as 
German electricity costs are nearly 30 percent higher than 
Japan's.  According to a Ministry of Environment (MOE) 
official, many Diet members in the Environmental Committee 
argue for resuming subsidies. 
 
¶7.   (SBU)  Since residential system subsides ended in 2005, 
government support has focused on R&D investment projects, 
mainly through METI's New Energy and Industrial Technology 
Development Organization (NEDO).  Subsidies worth 33-50 
percent of installation costs have also been provided to 
local and prefectural governments to support PV systems on 
commercial and public property.  Electric utilities are also 
eyeing PV projects.  Under the Renewable Portfolio Standard 
(RPS), they need to obtain at least 0.5 percent of their 
supply from renewable sources, excluding large hydropower. 
This quota is set to double to one percent by 2010 and double 
again to two percent by 2014, according to METI officials. 
 
Industry's Perspective 
---------------------- 
 
TOKYO 00001948  003.2 OF 003 
 
 
¶8.  (SBU)  Speaking to Embassy officers at a gathering of the 
Japan Photovoltaic Energy Association (JPEA), industry 
officials said Japan is now at a crossroads on its solar 
policy.  As domestic demand for PV waned, exports, primarily 
to Europe, have come to total 70 percent of Japan's total PV 
production, according to industry reps.  They see expanded 
GOJ assistance as critical, not only for PV R&D, but also for 
expanding the market.  Industry officials said it is unclear 
whether a new subsidy regime will resemble the earlier "roof 
top" program or a Germany-style feed-in tariff scheme. 
However, an official at PV cell maker Kyocera noted feed-in 
tariffs may not be best suited to Japan.  JPEA reps stressed 
residential PV power is still the most promising application 
for PV in Japan, adding they would wait and see how the 
large-scale Sharp-KEPCO project in Osaka unfolds.  In 
separate meetings, Sharp officials lamented that 
Germany-based Q-Cells AG recently overtook the company to 
become the world's largest PV producer.  Sharp and Kansai 
Electric Power Company (KEPCO) recently announced plans to 
spend five billion yen to build Japan's largest solar power 
generating plant in Osaka Prefecture beginning in 2009. 
Counting on long-term government support for the PV market, 
Sharp representatives said the company expects PV energy to 
account for 25 percent of all global power generation by 2040. 
Cekuta