Japan's Sharp Expects Boost From Solar Energy
Jul 21 - Business Week
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In late 2007, not long after stepping in as president of Sharp, Mikio
Katayama learned an important lesson about the energy industry. Katayama was
meeting with diplomats in Japan and government officials overseas to discuss
Sharp's business producing photovoltaic solar panels. He had figured
mounting evidence about global warming would be a wake-up call for countries
to invest more in clean energy technologies. But instead, officials talked
about solar energy in terms of national security. "That's when we realized
that it wasn't just about saving the environment," he recalled in a recent
interview.
Katayama ordered his management team to rethink Sharp's solar business. In
the past the Osaka company would rush factories into service when building a
new business. But Katayama felt that wouldn't work with solar panels. Among
his fears: Countries might not want to reduce their dependence on imported
oil only to replace that with a dependence on imported solar panels.
Today, Katayama hopes to avert such a scenario by building more local solar
panel factories through joint ventures. The decision could help the company
access new markets with fewer resources than it would need to put up a new
factory at home. Sharp's announcement last November that it was discussing a
deal with Italian utility Enel marks the first such deal. The two are
expected to set up a new solar-panel-making plant in Italy and recruit
another investor to share the cost. They could extend their tieup to several
solar-power-generating facilities they would run jointly.
Freeze in Private-Sector Investments Sharp executives say they aren't
abandoning their manufacturing base in Japan. By next spring the company
plans to open a $700 million plant in Sakai near Osaka. The facility, built
on the same premises as Sharp's newest factory for liquid-crystal display
panels that go into flat-screen TVs, will initially produce 480 megawatts'
worth of so-called thin-film solar cells annually, mainly for Japan, the
U.S., and Western Europe.
For now, Sharp is in no hurry to ramp up output. Researcher iSuppli predicts
that worldwide installations of solar panel systems will drop 32% to 3.5
gigawatts this year, from 5.2 gigawatts last year. Revenue declines could be
even sharper -- by 40%, to $18.2 billion -- as the price per watt in a solar
cell falls. Cutbacks in Spain are mainly to blame. What's more, the recent
financial turmoil has put a freeze on private-sector investments in
renewable energy. But the market could bounce back by 2010, iSuppli says.
Sharp's solar business accounts for less than 7%, or $1.6 billion, of its
$30 billion in annual revenues. This fiscal year, Macquarie Securities
expects Sharp's solar division to swing to a profit of $52 million thanks to
a 21% gain in revenues, to $2 billion. Next year revenues could be up
another 40%. [Sharp's not just making panels for rooftops and utility
projects: In June, it released a clamshell cell phone with a built-in solar
panel.]
Japan's big hopes for solar could help Sharp and other domestic producers.
As part of a plan announced in June to cut the country's greenhouse gas
emissions by 15% from 2005 levels by 2020, the government aims to raise its
solar power output twentyfold, initially by investing in solar panels for
schools. In January, Japan introduced a subsidy for solar panel equipment;
by the end of the year the government is expected to launch a 10-year
program to let consumers who have solar panels sell surplus electricity to
utility companies at double the price that companies do. The goal, say
officials, is to have renewable sources supplying 11% of the country's
energy by 2020, up from 5.9% in 2005.
Gunning for Overseas Rivals But the bigger opportunities are overseas. The
key for Sharp, analysts say, will be to improve its technology to stay ahead
of low-cost producers in Asia. Sharp is shifting to so-called thin-film
photovoltaic cells where it's an industry leader. They aren't as efficient
at converting sunlight into energy as the conventional crystalline-silicon
type; however, they can be made faster using a fraction of the silicon, and
are more suitable for power facilities where Sharp is angling to make an
impact.
Of course, technology hasn't prevented Sharp from losing ground against
rivals. Germany's Q-Cell passed Sharp as the world's top solar cell producer
three years ago. The key to Q-Cell's surge was Germany's introduction of a
feed-in tariff system that let consumers sell any excess electricity from
their solar panels to the local utility company, which helped consumers
recoup the cost of the panels quicker. These days, Suntech Power (STP) has
put China on the map as the emerging global powerhouse in solar panels. A
similar thing happened in flat-panel TVs. Sharp was the world's dominant
producer of LCD sets in 2000, but it now trails rivals Samsung Electronics
and Sony (SNE).
Katayama's worry that governments could treat solar energy like oil might
never materialize. Currently, solar energy makes up a mere 0.4% of global
electricity capacity. The International Energy Agency predicts that all
renewable energy technologies will account for just 10% of global energy
demand by 2030. Still, Katayama isn't taking any chances. "Every country
will have a different approach to energy security and the environment," he
says. "We have to adapt."
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