Market Overview

Axiom Capital Sees Solar Demand In Japan Taking A 'Drubbing'


Axiom Capital Research issued a research note Tuesday on changes to Japan’s solar policy which “implies demand is set to take a drubbing.” The firm was amazed that the Street "seems oblivious to this dynamic."

Analyst Gordon L. Johnson II commented that “two of the key changes to Japan’s solar policy will be allowing utilities to: (1.) curtail power for ~360 hours vs. 30 days prior, and (2.) give solar power plants just a 1 hour-to-2 hour warning before curtailing the solar power being produced (vs. a mandatory 24 hour notice prior).”

According to Johnson, utilities “are now allowed to curtail 360 hours of sunlight each year, this equates to 97.333 days/year of curtailment annually, vs. just 30 days/year prior.”

In Johnson’s view, “as well as the view of the solar-project-developers we’ve spoken to who operate in Japan, given curtailment essentially compromises solar project financiers ability to determine the return is on projects, as well as the fact that the utilities ability to curtail power has been increased...demand in Japan could fall considerably in 2015.”

Johnson concluded, “When you add to this dynamic that in some cases renewable power has caused negative power prices for utilities, we believe it is in the fundamental interest of the utilities in Japan to curtail as much solar power as possible.

“Thus, with the Japanese government essentially providing the “keys to the gate” to the utilities with respect to how much solar power they can curtail, we would argue that solar demand in Japan in 2015 appears, at risk of stating the obvious, on shaky ground.”


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