Analyzing the Factors Influencing the Demand and Supply of Solar Modules in Japan

Ever since the first oil shock, which struck the Japanese economy in 1973, Japan has made efforts to increase its energy efficiency, reduce its energy intensity, decrease its dependence on fossil fuels, and diversify its energy basket by introducing alternative energy sources, such as renewable energy, to raise the energy security level. One key technology that has partially supported this change is solar photovoltaic technology. Japan was one of the leading countries in the solar photovoltaic market, with the third-highest number of solar modules installed in the world. However, its development in the solar module sector in recent years, since the tremendous increase in solar module installation after the feed-in tariff policy, has become sluggish. For Japan to put itself back on track, it must find a new strategy to increase its solar module installation and raise its self-sufficiency ratio in the primary energy supply. We analyze the influence of certain factors on the demand and supply of solar modules by employing the fully modified ordinary least squares method using Japanese data. We conclude that finance is a key issue in solar module development and that the country needs to put effort into green financing to maintain its progress in solar photovoltaic technology.

WORKING PAPER NO: 1084