EU companies attend renewable energy trade shows in Yokohama
When it comes to renewable energies such as solar, wind and biomass, Europe has often led the way. In 2009 Japan reintroduced subsidies for solar cell installation and followed the European example with a feed-in tariff allowing homeowners to sell surplus electricity back to power companies.
After some years of lacklustre growth, the solar cell market in Japan is now expanding 50% a year – third in size after the United States and world-leader Germany. And, as indicated by the twin trade fairs “PVJapan” and “Renewable Energy” held from June 30 to July 2 in Yokohama indicated, a big future is also predicted for wind and biomass energy.
Foreign companies aiming for growth in the budding green energy market had a strong presence at the fairs. But while entrepreneurs from China, Taiwan and South Korea were energetically courting Japanese customers with solar modules and parts, European companies were largely pushed to the sidelines.
Steffen Studeny, representative director of Q-Cells Japan, notes the discrepancy between Europe’s huge renewable energies sector and its small footprint at the fair. The reason, he says, is the Japanese market’s poor image abroad. The local subsidiary of Germany’s leading solar cell manufacturer was one of few European companies with a booth at PVJapan.
“Many companies believe from hearsay or experience in other fields that doing business in Japan is difficult or impossible,” says Studeny. “They probably believe the same is true in the solar industry, but the opportunities are bigger than most people think.” The young executive learned the nuts and bolts of doing business in Japan during seven years at Bosch Group in Japan, the local arm of the big German car supplier. To be able to sell its own modules in Japan, Q-Cells turned its local representative office into a limited company at the start of 2010.
Studeny is tight-lipped on how Q-Cells plans to crack the solar market. But Yutaka Yamamoto, president of Suntech Power, the local subsidiary of the China-based solar cell manufacturer, is less restrained. His company, the largest maker in the world, is already well established in Japan and shooting for a 10% share of the market this year.
According to Yamamoto, a former IBM Japan employee and one-time Silicon Valley entrepreneur, foreign makers must dramatically change their sales strategy to overcome “a big invisible entry barrier” – the unique structure of the Japanese market.
In Europe and the rest of the world manufacturers usually sell solar modules to other companies, known as system integrators, that combine the cells with cables and inverters into small solar power plants. In Japan, however, the module manufacturer usually fulfils this role, selling ready-to-use systems direct to the customer.
It can cost a lot of time and money to build up the required sales and service network. Manufacturers must also provide a warranty, not only for the module but for the whole system. Suntech Power solved these problems by taking over MKS, a Japanese solar module integrator. The alternative was a partnership with another system integrator or electronic retail chain. “But the beauty of the system is that we don’t suffer price wars to the same extent as the rest of the world,” says Yamamoto. “Solar modules have already become a commodity. By offering value-added services we can keep a healthy profit,” he enthuses.
Some companies are attracted by another feature of the Japanese market. “Japan is a very interesting market for us, because the Japanese demand high quality and like innovation,” says Giorgio Aguglia, owner of S.I.E.M., an Italian manufacturer of water-cooled solar modules. (Cooling prevents a drop in efficiency as cells heat up.) Aguglia was at PVJapan for the first time to learn about the market and find potential partners.
Biomass and wind way behind
In biomass and wind energy, however, development in Japan is lagging years behind Europe, and foreign companies can only dream of healthy profits. Take the Austrian company BioDiesel International, a leading manufacturer and operator of plants that turn waste oil into biodiesel. For 10 years the company cultivated the Japanese market. It dispatched an engineer to Japan for 18 months to learn the language and business culture, and even advised the Ministry of Economy, Trade and Industry on biodiesel standards, all in the hope of tapping into an officially forecast 400,000-ton-a-year market for biodiesel – all to no avail.
No [BioDiesel International] plant has been sold to Japan because, due to a lack of regulation and pressure on the oil companies to use biodiesel, there is no sizeable market.
“Like Europe 20 years ago, the trend in Japan is midget plants where every farmer produces his own biodiesel,” says BioDiesel International CEO Wilhelm Hammer. “In Europe we invest in plants with a capacity of up to 200,000 tons-per-year because only industrial plants can deliver the high-quality bio-diesel that is needed.”
To jump-start the market the government would have to force citizens and companies to collect waste oil and use biodiesel. Hammer remains hopeful that this will eventually happen. “When the spark jumps the gap and the market takes off, we want to be present,” he says. Japan’s ambitious CO2 reduction goal might help, but so far the government has proved reluctant to act.
Sceptics see a familiar mechanism at work: only after Japanese companies can compete with foreign makers does Japan start to open up or to promote an industry. And home-grown makers are far from competitive yet. CDM Consulting, one of the local leaders in this field, has just one 10,000-ton pilot plant.
Wind power is another market-in-waiting. It is often pointed out that Japan’s mountainous terrain has few suitable areas for wind turbines, unlike many European countries, explains Hatsuo Sunada, who represents the Danish wind-turbine manufacturer Vestas Japan. “But more importantly, government regulation is not supportive,” he adds. The new feed-in-tariff, for example, applies only to solar and not to wind power. Another industry insider, however, noted that this might soon change.
Another issue is the regional fragmentation of Japanese power distribution, making it difficult to manage the fluctuations that often come with renewable energies. And reform of the energy sector proceeds at a glacial pace in Japan. In July, Japan’s chief cabinet secretary, Yoshito Sengoku, nonchalantly included nuclear power amongst renewable energies. That explains a lot, say critics.
“That’s why many European companies are convinced the Japanese government does not really stand behind renewable energies,” says Martin Seissler, who was helping staff the German national booth at the trade fairs. “Japan has to give the impression that the country is ready to rock and roll. Then European companies will flock to the market – regardless of difficulties.”