With Sun on Roof, More Yen in the Pocket

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1 New York Times, Tuesday, July 29, 2003: Page C1 With Sun on Roof, More Yen in the Pocket By KEN BELSON YOSHIKAWA, Japan Yoshiko Takahashi is no environmental activist, but in the last year she has become an ardent fan of the solar panels that generate most of the electricity for her 1,100- square-foot home. Using solar power, which was included with the new house that she and her husband bought a little more than a year ago, has not only cut the family's electricity bill by 17 percent but also made her feel good about helping fight global warming. "We feel our roof panels are contributing to a great cause," she said, her 7-year-old daughter at her side. "And it's better to use the sunshine right above your head than depend on the electric company." Mrs. Takahashi is among 70 families who live in this compact neighborhood, the largest collection of solar-powered homes in Japan. The success of the development is part of the reason Japan has become the world's largest market for solar energy. Indeed, the builder, Hakushin, is constructing another complex, of 87 homes, nearby. Japan is almost completely dependent on imported fuel, which makes its prices for electricity among the highest in the world. In response, the Japanese have worked for a decade to build up their renewable energy resources, and the effort is starting to pay off. Japan now generates half the world's solar power, and the market here for solar technology is expected to grow fivefold, to about $4 billion by the end of the decade, according to the Japan Photovoltaic Energy Association. Fuminori Sato for The New York Times Houses in a complex of solar-powered residences in Yoshikawa, near Tokyo, the largest such community in Japan. With the price of imported fuels high, the demand for sustainable energy is increasing.

2 The government is also pushing to meet targets for reducing greenhouse gases, as set out in the Kyoto Protocol nearly six years ago. The Bush administration remains opposed to committing the United States to its goals, but Japan, as the host of the conference, is eager to honor its agreements. Japanese lawmakers and officials support alternative energy as a good homegrown business that can help cut energy costs; they also see it as a potentially strong export industry. To promote the use of solar power, the government funnels about three billion yen a year more than $25 million at current exchange rates to help companies develop more efficient solar technology. And since 1994, it has spent 116 billion yen ($971 million) on rebates for consumers who install photovoltaic panels on their roofs. With the demand expanding, Japan has overtaken the United States as the world's leading producer of solar panels. By 2010, the government wants solar power generation to be sharply increased, to 4.82 million kilowatts, 40 percent more than experts expect Americans to generate by then. To reach that target, one million homes will have to be outfitted with solar panels eight times more than now use solar power. Reaching these goals is far from assured. The makers of solar panels face competition from generators of wind power and other clean energy sources. Though solar panels are suited for homes and small buildings, wind power generates energy for as little as 20 percent the cost of photovoltaic panels. Some Americans oppose windmills as a blot on the landscape, but Japanese seem less concerned. Wind farms increasingly dot rural districts. Crucially, though, the government, burdened by budget deficits, is trying to phase out subsidy programs, which have typically covered one-third of the cost of panels for home use. The subsidies paid per kilowatt of installed solar-panel power have been gradually reduced and are to run out in two years. Unless manufacturers lower their prices to make up for the lost subsidies, consumers may turn against solar energy, which requires an initial investment of about 2.25 million yen ($18,845), or 25 percent more than what Americans pay. Some of the subsidies to be lost from Tokyo will be offset by grants from more than 200 local governments. But these programs vary widely. In Kobe, for instance, new schools and hospitals are being outfitted with solar panels so they can keep operating during an earthquake or other disaster. In other districts, few programs exist. The government is removing another big incentive by deregulating the country's electricity market. To reduce the cost of doing business in Japan, it is allowing companies to generate their own power a business that has been dominated for half a century by 10 regional utilities. Growing competition has forced the utilities to lower their prices, even if slowly, reducing the need for households to generate their own power. "Japan's energy policy is now at a turning point," said Toshihiko Nakata, a professor of science and technology management at Tohoku University. "If there are no subsidies, consumers won't buy

3 solar panels. And as the government deregulates the utilities, electricity prices will come down, so it will take longer for consumers to recoup the cost of installing the panels." But solar energy prices are falling, too, which is expected to help the industry fight back. The cost of residential solar power systems has dropped by about 80 percent in the last decade, to around $6,000 for each kilowatt of generating capacity. Most solar homes install three kilowatts of capacity, enough to meet half their total power needs. A big reason for the lower prices lies in cheaper inverters which help turn solar energy into electricity as well as other machinery. Installation costs have also dipped as the market has increased for home use of solar energy. The cost of the solar panels themselves is declining more slowly and now accounts for two-thirds of the systems' total price. Manufacturers, Mr. Nakata and others say, have been taking advantage of the public's forbearance, cutting panel prices only as fast as the government has reduced rebates. Part of the problem is that the manufacturers have had to compete with semiconductor makers for the silicon used to produce solar cells. Prices shot up in the technology boom of the 1990's, and solar cell manufacturers had to pay top dollar for what supplies they could get. But since the technology bubble burst, supplies of silicon have been ample and prices have fallen. Now, the material bottleneck is the specialized glass that houses the cells; most of it must be imported. As in many other industries, Japanese companies have worked continually to improve their technology. Sharp has developed panels that can convert 17.4 percent of the sunlight that hits them into electricity, the best in the industry so far. Sanyo, which uses different technology, says its cells can generate more electricity at higher temperatures, and require less energy to produce. Japanese makers also produce solar cells that are less than an inch thick, making them lighter, easier to install and less obtrusive in appearance. Mrs. Takahashi's roof, built at a 30.9-degree incline to capture as much light as possible, has horizontal ridges running across it to separate the 80 solar panels, but little else to distinguish it. The inverters and other machinery take up little space inside the house and require no maintenance. By making solar energy consumer-friendly, the companies have helped turn a niche product for the environmentally sensitive into something akin to a high-end household gadget. The companies are also getting a boost from those consumers who are rushing to buy solar power systems before the government subsidies run out. Sharp, the leading manufacturer with 19 percent of the world market, has doubled production in the last year, and Sanyo will double its output next year with a new factory. Kyocera plans to expand production by one-third this year. The solar cell makers are also finding allies in the depressed construction industry. With Japan's economy struggling and the population aging, starts of new homes have fallen to near 20-year lows. To revive sales, builders are cutting their prices for photovoltaic panels and roofing material as much as 25 percent.

4 "PV homes are selling well because a lot of people are concerned about the environment, and housewives are especially concerned about reducing their electricity bills," said Rie Abe, a saleswoman at Hakushin, the builder. Though Japan's market is growing, manufacturers are now also starting to look overseas. Sharp has begun making cells in Memphis, and Sanyo assembles solar panels in Monterrey, Mexico. Kyocera will begin making solar modules in China in October. Demand overseas has been spotty. Among the Europeans, Germany is promoting solar energy the most aggressively. In 2001, the European Parliament passed a law to promote renewable energy, but left each country to draw up its own targets. Demand in the United States seems even less predictable. In 1997, President Bill Clinton introduced a program to install one million residential solar power systems by But the subsidies that are needed to compete with relatively cheap fuels are uneven. California has the most generous program; other states offer few, if any incentives. In Japan, Hakushin is not the only home builder cashing in on solar power. Misawa Homes is building a 500-home solar town in Sapporo, on the northern island of Hokkaido. Eight hundred or so solar homes are being built in Gunma prefecture, north of Tokyo.

5 These homes appeal to the feel-good environmental streak found more and more in Japan. Hakushin says that the homes in its first solar village save the equivalent of 14,500 gallons of fuel and 154 tons of carbon dioxide emissions each year, compared with conventional houses. But the more immediate concern for most homeowners is saving money. Around the corner from Mrs. Takahashi's house, Hiroko Ohara happily discusses the solar effect on her household budget. When she, her husband and son lived in a Tokyo apartment, the family paid 16,000 yen ($135) a month for electricity. Now, their bill has fallen by half and they receive about 2,000 yen from Tokyo Electric Power in return for the surplus electricity they generate. This is because most homes have no batteries to store their electricity, so any power that exceeds the family's immediate needs is routed to the electric company. "I'm happy," Mrs. Ohara said, "when I see that it will be sunny on the weather report."