I'm so bad I didn't even see this article coming in my crystal ball.
Sharp, Kyocera Set to Gain From DPJ Emissions Plan (Update1)
By Shigeru Sato and Kiyori Ueno
Sept. 2 (Bloomberg) -- The new Japanese government’s pledge to accelerate cuts in greenhouse gas emissions may lead to higher subsidies for makers of solar cells such as Sharp Corp. and Kyocera Corp. while forcing utilities to pay premium prices for solar power generated by consumers.
The Democratic Party of Japan’s proposal to double the emissions cuts outlined by the ousted Liberal Democratic Party could lead to a carbon tax that has a severe impact on automakers, oil refiners and power producers, analysts and industry groups say.
The DPJ, which defeated the LDP in a landslide election win Aug. 30, may boost incentives for renewable energy and penalize polluting industries to achieve its goal, analysts at Goldman Sachs Group Inc. and Deutsche Securities Inc. said.
“The DPJ’s target is far more ambitious than the one set by the LDP,” Tomohiro Jikihara, an energy analyst at Deutsche Securities, said Aug. 31 in Tokyo. “They will more proactively consider levying a carbon tax on use of fossil fuels when Japan’s economy gets back in a recovery phase.”
Utilities and automakers fear “severe impact” from the DPJ’s plan to slash emissions 25 percent by 2020 from the 1990 level and claim it would hurt economic growth and jobs, groups including Tokyo Electric Power Co., Toyota Motor Corp. and Honda Motor Co. said in separate statements Aug. 31. Refiners, grappling with falling domestic demand, called the goal “a very high hurdle” and sought details on how it will be implemented.
Toyota, Honda Upset
“The DPJ’s policies are unrealistic and place a burden on those industries,” Yuuki Sakurai, chief executive officer of Fukoku Capital Management Inc., which manages about 800 billion yen ($8.6 billion) in assets, said Aug. 31 in Tokyo. “It would cost a huge amount of money to switch all cars into electric vehicles or put solar panels on homes.”
Toyota, Honda, Nissan Motor Co. and the other members of the Japan Automobile Manufacturers Association said the government should take the opinions of industry groups and consider the impact on the economy before implementing policies.
Tomiko Okazaki, a DPJ member of the Upper House and shadow environment minister until a new Cabinet is appointed, didn’t return three calls this week seeking comment.
The DPJ’s emissions target is inline with the EU’s goal of a 30 percent cut by rich countries as a whole. If the new government makes good on its promise, Japan could help break an international deadlock over climate change, the European Union said yesterday.
Japan’s 17-member Topix Electric Power & Gas Index slipped 1.2 percent at the morning break in Tokyo trading today while the 62-member transport subindex dropped 2.3 percent and the 11- member oil and coal subindex fell 2.2 percent.
Kyocera declined 1.9 percent to 7,590 yen while Sharp retreated 2.3 percent to 1,065 yen.
50 Percent Subsidies
Incentives for the industry may result in a 20-fold surge in Japan’s solar-cell sales by 2020, Goldman analysts Hiroyuki Sakaida and Ikuo Matsuhashi said in an Aug. 17 report. To meet its goal of supplying 10 percent of the country’s needs with renewable energy, the DPJ government needs to add another 4,500 megawatts of solar capacity a year until 2020, equivalent to 80 percent of global demand, the analysts said.
Japan supplied 3.2 percent of its needs from renewables in 2006, according to the International Energy Agency. President Barack Obama wants 25 percent of U.S. electricity to come from renewable sources by 2025, the Energy Department says.
Though the DPJ’s manifesto is unclear about what steps it will take to increase solar generation, a party policy paper in April called for 50 percent subsidies to customers for installing solar panels, compared with the LDP’s 10 percent, the Goldman report said.
Sharp, Kyocera ‘Boon’
The recovery in domestic solar demand is “a potential boon” for solar-cell makers such as Sharp and Kyocera and will help them ride out a likely shake-out in the industry in 2010 and 2011 brought about by global oversupply, Goldman said.
The DPJ paper also called for expanding the so-called feed- in tariff system, due to start in November, which requires utilities to buy surplus solar power generated by households and businesses, and pay as much as double the rate they usually pay for solar. The DPJ manifesto calls for utilities to buy all power, not just the surplus, according to Goldman analysts.
The DPJ likely will extend the feed-in tariff system to cover all forms of renewable energy, benefiting wind-power developers such as Japan Wind Development. Meeting the stricter emissions target would require an extra 10,000 megawatts of wind generation capacity by 2020 -- an increase of 680 megawatts a year, Goldman said. That’s 445 megawatts more than the average increase over the last five years.
Relax Nuclear Standards
Utilities, led by Tokyo Electric, could see earnings per share shrink by more than half by 2020 as a carbon tax curbs demand, the analysts wrote. Builders of thermal power plants, including Toshiba Corp. and Hitachi Corp., could see sales decline if less oil and coal is used to produce electricity and utilities are urged to ramp up nuclear generation.
Japan’s 10 regional utilities need to raise their nuclear operating rates, and regulations currently requiring frequent inspections and extended shutdowns after earthquakes may be amended to attain that goal, Jikihara of Deutsche Securities said.
Nobuo Tanaka, executive director of the International Energy Agency, urged Japan last year to relax its “hyper cautious” atomic safety standards to increase output. The country’s operating rate averaged 59 percent in 2008, compared with 90 percent in the U.S. and 76 percent in France, according to industry group the Japan Atomic Industrial Forum Inc.
Japan produced 25 percent of its electricity from nuclear power in 2008, according to the International Atomic Energy Agency. France, the biggest atomic generator, produced 76 percent and the U.S. 20 percent.
To contact the reporter on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net; Kiyori Ueno in Tokyo at kueno2@bloomberg.net
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