Japan's solar growth predicted to slow down under auctions mechanism

Strong growth can only last until 2020.

Japan's solar power sector will expand at robust rates through to 2020 as a large backlog of projects supported by feed-in tariffs come online, according to BMI Research.

After 2020, the country's transition to a reverse auctions system will slow growth, as the Japanese government looks to regulate capacity additions in order to reduce subsidy costs and support grid stability.

Here's more from BMI Research:

We expect Japan to register robust solar capacity growth through to 2020 as a result of the implementation of a substantial pipeline of projects that benefit from a generous feed-in tariff (FiT) support scheme. Our forecast for the sector reflects our view that out of a 50GW backlog of such projects, only 20GW will actually come online, as most will not be able to take advantage of the FiT subsidies amid stringent government requirements and delays in development.

Despite the only partial implementation of this project pipeline, Japan will still emerge as one of the largest solar power markets in the world over the next three years.

After 2020, we expect growth in solar capacity to slow substantially as reverse auctions become the main driver of solar capacity growth in the market. This policy shift will be the result of the government's efforts to ensure that new projects are competitively priced, and can be feasibly integrated to the grid.

As such, we forecast Japan's installed solar power capacity to expand by an annual average of 11% between 2017 and 2020, before growth slows to 2.7% between 2021 and 2026 under the new auctions system. By 2026 we expect the solar sector to account for about 7.3% of total power generation in Japan, up from 4.6% in 2016.