VZCZCXRO3742
OO RUEHAST RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD RUEHTM RUEHTRO
DE RUEHOK #0034/01 0480222
ZNR UUUUU ZZH
O 170222Z FEB 09
FM AMCONSUL OSAKA KOBE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1292
INFO RUEHKO/AMEMBASSY TOKYO PRIORITY 8414
RUEHKSO/AMCONSUL SAPPORO PRIORITY 0245
RUEHNAG/AMCONSUL NAGOYA PRIORITY 2370
RUEHFK/AMCONSUL FUKUOKA PRIORITY 0237
RUEHNH/AMCONSUL NAHA PRIORITY 0264
RUEHBJ/AMEMBASSY BEIJING 0435
RUEHUL/AMEMBASSY SEOUL 1133
RUEHSH/AMCONSUL SHENYANG 0057
RUEHGH/AMCONSUL SHANGHAI 0027
RUEHGZ/AMCONSUL GUANGZHOU 0003
RUEHHK/AMCONSUL HONG KONG 0198
RUEHZN/EST COLLECTIVE
RUCPDOC/USDOC WASHDC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 02 OSAKA KOBE 000034 
 
SENSITIVE 
 
SIPDIS 
 
COMMERCE FOR ITA BRICKMAN AND SANTILLO 
 
DOE FOR PI BISCONTI AND EE CHALK AND KIMBIS 
 
E.O. 12958: N/A 
TAGS: BEXP EINV ENRG JA
SUBJECT:  Kaneka Seeks FIT to be Tied to Green New Deal 
 
REF: 09OSAKA KOBE00024 
 
OSAKA KOBE 00000034  001.2 OF 002 
 
 
¶1. (SBU) Summary: Kaneka Corporation, a leading innovator 
in thin-film solar cell production remains focused on the 
European market and has no immediate plans to make green 
energy investments in the United States.  While its much 
larger Japanese solar rivals such as Sharp and 
Panasonic/Sanyo are accelerating U.S. bound solar 
investments (reftel), Kaneka is waiting to see whether the 
United States will introduce a feed-in-tariff (FIT) or 
similar incentives that the company believes are necessary 
to assure long-term viability for a large solar cell 
production facility investment. 
 
¶2. (SBU) In exploring Japanese companiesQ willingness to 
invest in green energy sectors in the United States, we met 
with Mikio Hatta, Managing Executive Officer, Solar Energy 
Division at Kaneka Corporation. Hatta says that Kaneka is 
closely watching the rollout of alternative energy policies 
under the Obama Administration, but for now, his company is 
focused on the EU photo-voltaic (PV) market where it is 
nearing a final decision on whether to build a new USD200 
million thin-film solar cell production facility at its 
existing complex in Belgium.  Kaneka does plan to boost its 
PV production capacity from 70MW to 1000MW a year by 2015 
to meet anticipated demand, and the company plans to invest 
an estimated USD1 billion to meet this goal.  The yenQs 
recent appreciation against the dollar makes establishing 
PV production in the United States more costly for a 
Japanese company like Kaneka, but assuming domestic demand 
increases under the Obama Administrations New Green Deal, 
Hatta says the US possesses the supply chain management 
(SCM) and access to raw materials Kaneka needs for the PV 
production. 
 
----------------------------------------- 
U.S. and Japan Need Feed-in-Tariffs (FIT) 
----------------------------------------- 
¶3.  (SBU) The PV industry is very competitive, and only 
companies capable of lowering production costs to USD1/watt 
will be successful, says Hatta.  To date, only Kaneka and 
US-based First Solar have achieved this level, both by 
using thin-film solar cells which use less silicon to cut 
production costs, but at lower electricity conversion rates. 
Hatta believes that the establishment of a feed-in-tariff 
(FIT) system is likely a pre-requisite to assure 
development of the PV industry in the United States and 
Japan.  The GOJQs recent decision to reinitiate a tax 
subsidy for installing PV panels on residences will likely 
boost domestic consumption from the current 20 to 30 
percent to closer to 50 percent of the 1000MW (2007 figure) 
of domestically produced PV capacity, says Hatta.  The USG, 
too, he says, needs to come up with similar policies to 
expand domestic demand for solar cells if it hopes to meet 
the goals for alternative energy production outlined in the 
Obama AdministrationQs campaign proposals.  The best way to 
do this, says Hatta, is to follow EuropeQs FIT model. 
 
¶4.  (SBU) In Japan, electric products manufacturers such as 
Sharp, Sanyo, and Kyocera have led the establishment of the 
PV industry.  By contrast, in Europe, the FIT incentive 
structure has encouraged oil and energy companies such as 
British Petroleum and Shell to lead the way, says Hatta. 
In the United States, the PV business was launched by small 
venture capital financed companies, but recently large 
companies, such as the major oil companies and General 
Electric have become active as well, and the timing is good 
for a shift in the US incentive structure to establish a 
sustainable PV industry.  While the GOJ has not adopted a 
European-style FIT system, it does require domestic 
electricity producers to meet Renewable Portfolio Standards 
(RPS), which effectively mandate that at least 1.65 percent 
 
OSAKA KOBE 00000034  002.2 OF 002 
 
 
of total energy comes from solar cells, says Hatta.  To 
date, the RPS requirements have applied only to electric 
power companies, but he believes the GOJ should apply the 
requirement to other energy related companies such as gas 
and oil companies to assure stable development of the PV 
industry. 
 
¶5.  (SBU) Hatta views the GOJ target of increasing PV 
production in Japan to 10GW by 2010 as overly ambitious 
given current PV production levels and conversion 
efficiencies.  Kaneka has launched a GOJ backed joint 
project with a group of academics to enhance thin-film PVs 
with hybrid gas technologies to achieve its goal of 
improving the conversion efficiency of its thin-film cells 
from the current 14 percent to 18 percent.  In December 
2008, Kaneka announced plans to build a new 150 MW, Y10 
billion (USD111 million) facility for thin-film PV 
incorporating this hybrid technology. 
 
----------------------------------------- 
China, Korea and Taiwan Export Only Focus 
----------------------------------------- 
¶6. (SBU) Hatta says that although the Chinese Government 
has budgeted RMB4 trillion (USD586 billion) for 
infrastructure projects including solar projects over the 
next two years, the domestic demand for solar power in 
China is still low and ChinaQs PV industry is primarily 
export focused.  The quality of ChinaQs PV products is 
improving, says Hatta, but Japanese, German and U.S. PV 
companies will maintain price, quality and efficiency 
advantages for the foreseeable future.  Even SunTech Power, 
ChinaQs top PV producer and ranked among the top five PV 
producers worldwide is not competitive on price, he 
believes.  Similarly, many companies in Korea and Taiwan 
have expressed interest in KanekaQs PV technology, but 
Hatta says Kaneka is reluctant to do business in these 
markets because it believes the PV industry will not 
develop in these countries due to a lack of domestic demand. 
Even in Japan, Hatta notes, the GOJ still prefers 
developing nuclear energy to solar energy due to cost 
concerns. 
 
DONG