Photovoltaic deployment strategy in Japan and the USA—an institutional appraisal

Abstract

Photovoltaic (PV) is a renewable energy technology, along side with other modular energy generation technologies such as micro-turbines, fuel cells, etc., which will enable the alternative distributed generation paradigm compared to the incumbent fossil fuel based centralized generation paradigm. Distributed generation utilizing renewable energy resources offers opportunities for significant carbon dioxide and emissions reductions thus contributing solutions to broader climate change issues. Yet, renewable energy technologies like PV face various barriers for their widespread adoption. Aside from technical and cost issues, renewable technologies have to overcome the so-called carbon lock-in effects. This refers to the techno-institutional complex associated with the fossil-fuel based centralized generation regime that currently dominates energy production and use. Governmental interventions to address these issues usually can be seen as composed of research, development, demonstration and deployment or RD3 [PCAST, 1999. Panel on International Cooperation in Energy Research, Development, Demonstration, and Deployment]. This paper focused on comparing the deployment aspect of PV technology in Japan and the USA. While both governments promoted PV as part of their larger strategies to address various environmental and energy security issues, Japan has built a PV installation capacity three times that of the USA as of December 2003 with over 90% of PV installation in the grid-connected small residential system category. This is in marked contrast to the case in the USA in which the cumulative installation is spilt among different types of applications involving the grid and off the grid. We put forward two models to explain these differences in deployment strategies and their possible consequences. The first deployment model leverages upon PV as a manufactured technology with minimal customization to achieve massive deployment. The second deployment model leverages upon PV as an information technology-like technology focusing upon user oriented customization to achieve deployment. Different models have different implications to the system engineering aspect of solar PV. A focus upon the standard grid-connected distributed category in the residential setting avoids the heavy customized engineering associated with many off-grid and one-off type projects. Japanese PV deployment strategy of concentrating upon a dominant category or niche with mass market potential also well matches the institutional structure of production [Coase, 1991. The Institutional Structure of Production, in Essays on Economics and Economists. The University of Chicago Press, Chicago] within the local PV technology suppliers industry. Major vertical integrated firms can facilitate system-related learning easier than a fragmented industry within the PV value chain with minimal transaction cost. This highly suggests that deployment strategy of PV or other renewable energy technologies must address the issues of adopting a globally developed technology to local (national) conditions and has strong institutional underpinnings in addition to financial subsidies, learning investment thinking.