Saturday, May 2, 2015

Solar loans spur Solar PV boom in Japan

Japan is one of the world's largest residential PV markets in terms of cumulative installations. They   achieved with just two PV financing options: cash and loans. They have not yet offered leasing or power purchase agreements, which are common in the U.S.

Credit: Nango Credit Union

One of the largest residential solar PV installers in Japan said that about 40% of their customers buy PV systems with cash and the remaining 60% use solar loans.

The average purchase cost of a system of 3-4 kWp is approximately ¥1.5 million or US$12,600 (approximately RM44,700) and for those who don’t have enough cash, the company offers solar loans through three consumer credit financing companies. All three of them offer 10-year or 15-year unsecured loans with low, fixed interest rates.

Most of the PV module makers in Japan also offer solar loans for consumers who purchase their solar systems via their designated installers. This provides a convenient, one-stop shop for consumers — from system purchase, financing, design, installation, and warranty.

PV installers make patnership arrangement with national consumer credit companies to offer solar loan program with low interest rates to customers.

Low interest rate for solar loans in Japan

Banks currently offer solar loans with interest rates of approximately 2%, requiring no office visit, no down payment, and no collateral. One of the reasons why solar customers get easy and low-interest-rate loans is because of the net feed-in tariff (FIT) policy currently in place in Japan.

Japanese residential PV owners can sell any excess generated electricity at a premium rate - around ¥38/kWh (approximately RM1.136/kWh) - for a period of 10 years to their regional utilities. With the net FIT, homeowners can generate income, which can offset monthly solar loan payments, either in part or in full.

Thanks to the generous FIT, PV homeowners will end up having less monthly out-of-pocket expenses than pre-PV installations, even with the solar loan.

Shizuoka prefecture represents No. 4 in the nation in terms of cumulatively installed capacity of residential PV systems. Shizuoka prefecture is blessed with great solar insolation. For example, Omaezaki city has the highest solar radiation in Japan, with 2,497 sun-available hours a year.

Cumulative residential PV installed capacity. 

A case in point -- Shizuoka Bank, one of the largest local banks, provides solar loans combined with performance guarantees and disaster insurance for local homeowners. The maximum loan amount the bank offers is ¥10 million (approximately US$83,500) for up to 15 years and the bank requires no collateral from borrowers.

Currently, the banks offers a variable interest rate of 2.20% exclusively for solar customers via on-line applications.

Performance guarantee

These are few example of good support from the financial institutions and other utilities in Japan:-

1. Under its performance guarantees, Shizuoka Bank will reimburse up to ¥50,000 per year for three years in the even solar insolation falls below what it was originally forecasted. If a home with solar loan gets damaged by earthquakes or typhoons, the bank will provide up to ¥300,000 of solarium for damages.

2. Nango Credit Union, small regional credit union in Nichian city in Miyazaki prefecture, offers Eco-Solar Loans to residents in Nichian city and two other neighboring cities. The credit union currently offers 15-year solar loans with a 1.50% fixed interest rate.

3. Osaka Gas Company, a regional gas utility in the Kinki area, offers 15-year solar loan with a fixed rate of 2.35%, with no down payment, under the name “With Gas & Solar Loan” for its residential gas customers.

The Green Mechanics:
When Malaysia phases out the generous FiT in a couple of year's time (if not sooner), this may be a good example of how to keep the solar PV industry momentum going.

-- Further reading and reference: RE Magazine

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