Japan Solar Boom Spurred by Low-Interest Loans from Local Banks, Credit Unions, Utilities

The U.S. residential solar photovoltaic (PV) market is on the rise. According to SEIA/GTM Research, in 2014 the residential market surpassed the non-residential market for the first time. “The past three years have now seen the residential market grow by at least 50 percent on an annual basis, buoyed by major strides to lower soft costs, in tandem with increased penetration of third party financing solutions,” commented Cory Honeyman, Solar Analyst at GTM Research.

While the third-party ownership (TPO) financing option has been the strong driver for the last several years, solar loans, which provide ownerships to homeowners, are now moving into the mainstream.   

Japan, which installed almost twice as many residential PV installations as the U.S. in 2014, is one of the world’s largest residential PV markets in terms of cumulative installations. The country’s residential PV market has achieved this with only two PV financing options: cash and loans. It has not offered leasing or power purchase agreements, which are common in the U.S.

Credit: Nango Credit Union

“About forty percent of our customers buy PV systems with cash and the remaining 60 percent of our customers use solar loans,” said a manager of one of the largest residential PV installers in Japan.

According to the manager, the average purchase cost of a system (3-4 kW-DC) the company sells is approximately ¥1.5 million ($12,600), and for those who don’t have bundles of cash stashed away in the home, the company offers solar loans through three consumer credit financing companies.  All three of them offer 10- or 15-year unsecured loans with low, fixed interest rates.

Like PV installers teaming up with financial institutions, 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.

“Most of our customers use solar loans, which we offer through our financing partner,” commented a manager at a leading Japanese PV module company. The company has partnered with a national consumer credit company to offer a solar loan program with low interest rates to customers who install the company’s PV systems. The loan program is available nationwide.

“Instead of the loan we offer, some our customers get their own loans through regional banks, which offer lower interest rates than consumer credit companies,” the manager commented. 

In Japan regional banks currently offer solar loans with interest rates of approximately 2 percent, 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 (~¥38/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. Furthermore, with a solar system generating electricity, homeowners’ monthly utility bills will be significantly reduced.

Japan Solar Loan Economics with Net FIT

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. This makes them great loan candidates for financial institutions.

According to the Ministry of Economy, Trade, and Industry (METI), 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.  Many other cities in Shizuoka also rank highly in the national list.

To take advantage of the great solar insolation and keep the prefecture’s top solar installation ranking, 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 (~ 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 percent exclusively for solar customers via on-line applications.

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.

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 percent fixed interest rate.

The credit union also offers loans for electric vehicles, energy efficient appliances, and mortgages specifically for energy efficient, new homes to support the local clean energy initiatives.

Besides banks, a regional gas utility also offers solar loans in Japan. Osaka Gas Company, a regional gas utility in the Kinki area, offers solar loans under the name “With Gas & Solar Loan” for its residential gas customers at a very competitive rate. The gas utility has been listed as the No. 1 PV system seller in the Kinki area for the last three years.    

Why does a gas utility sell solar electric systems?

In California and other states in the U.S., homeowners purchase both electricity and gas from the same utility, such as Pacific Gas & Electric Company or San Diego Gas & Electric. In Japan homeowners buy electricity from electric companies and gas from gas companies, independently. Gas companies promote the benefits of natural gas appliances for cooking, heating, and drying to convert more electricity users to gas users. 

Like electric companies promoting all-electric homes to eliminate gas usage at home, gas utilities promote PV systems so that customers can generate electricity to offset electricity consumption at home, reducing or eliminating electricity purchased from electric companies.

The utility currently offers a 15-year solar loan with a fixed interest rate of 2.35 percent, with no down payment. Osaka Gas Company claims that “gas with PV” is much more economical than an all-electric home with PV and can generate more income under the net FIT program.

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Junko Movellan is a Solar Industry expert who writes and analyzes the US and Japan PV downstream markets. She has more than 15 years of experience in the PV industry, analyzing industry trends and developing business strategies for global companies. She previously worked as a Senior Analyst at Solarbuzz and as a Market Development Analyst at Kyocera. She is based in California, USA.

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