Bankruptcies of companies involved in solar power generation are paced to hit a record in 2016 as a falling government subsidy squeezes profits and discourages new entrants into the sector, a research firm said.
There were 31 bankruptcies at companies dealing with solar power generation for the six months through June, a 24 percent jump from the same period a year ago, according to Tokyo Shoko Research, which specializes in bankruptcy data.
That’s on pace to break a record, although slowing from a near-50 percent increase in 2015 to 54 solar power-related bankruptcies from 28 in the previous year. In 2013 there were also 28 bankruptcies.
Japan’s solar industry growth accelerated in 2012 when utilities were ordered to buy a portion of their electricity from renewable power plants to help meet a shortfall in supply after the country shutdown all its nuclear reactors following the meltdown at the Fukushima nuclear power plant.
The government had offered a 20-year subsidy to developers of new renewable energy plants, called a “feed-in-tariff” (FIT) but that value has fallen every year, squeezing solar power’s profitability. This year the feed-in price has been almost halved from the initial 40 yen per kilowatt-hour.
“There were a series of new entries of solar power-related companies, which included sales of systems and construction works, when the subsidy was introduced,” Tokyo Shoko Research said in a statement.
“But weaker companies started disappearing as FIT fell and competition increased.”
Japan’s solar power generation capacity was expected to be about 7.2 gigawatt (GW) in the year to March 31, 2016, based on the number of panels sold, down from 9.2 GW in the previous fiscal year, according to the latest data from the Japan Photovoltaic Energy Association (JPEA).
“This year is going to be tough for the industry,” said Masaaki Kameda, secretary general at JPEA.
Solar power generation in Japan will start increasing again from around 2020 due to falling facility costs, Kameda said.