1. Economy Specific Research and Introduction of Successful Results of New / Renewable Energy Technology Development and Demonstration Toru Usami International Projects Department The 23 rd Meeting of the Expert Group on New and Renewable Energy Technologies 10-13 November 2004 Christchurch, New Zealand

2. 1 Outline of NEDO History 1980 ： Established for new energy/energy conservation technology development under 1988 ： Commenced R&D on industrial technologies (nanotechnology/biotechnology) 1990 ： Commenced R&D on environmental technologies (recycling technology) Present ： A core organization of Japan ’ s R&D 1992 ： Commenced installation support activities for new energy/energy conservation FY2004 budget Industrial/environment technology development ： New energy/energy conservation technology development ： New energy/energy conservation installation support ： Alcohol manufacturing/sales ： Others ： Industrial/ environment technology developmen t New energy/energy conservation technology development New energy/energy conservation installation support Alcohol manufacturin g/sales Others Total ： 2.83billion US$ 1.24billion US$ （ 44% ） 290million US$(10%) 560million US$(20%) 530million US$(19%) 220million US$(8%) jurisdiction of the Ministry of Economy, Trade and Industry technologies

3. 2 Outline 1 ． Significance of Renewable Energy Introduction in Japan 2 ． Outline of Government Policies and Measures 3 ． Research and Development Activities 4 ． Installation Support Activities 5 ． Results of R&D/installation support activities 6 ． Lessons Learned

4. 3 Further introduction of renewable energies is a high priority in Japan Significance of Renewable Energy Introduction in Japan ・ Population increase Current global scenario Current scenario in Japan ・ Economic growth Increase of fossil fuel consumption ・ Depletion of fossil fuel ・ Global warming ・ Almost 80% of Japan ’ s energy supply is imported ・ Commitment to reducing GHG to 6% below the 1990 level Successful results ： systematic promotion of the introduction and ・ Solar cell production / cumulative installed dissemination of PV power generation systems capacity in 2003 ： ranked first in the world

5. 4 NEDO Established Outline of Government Policies and Measures 1975198019851990199520002005 Sunshine Program New Sunshine Program 19741993 1990 R& D Installation support The Renewable Portfolio Standard Long-term Energy PV installation subsidy system The Law concerning Promotion of The Electricity Utilities Industry Law revised 1992 Purchase of surplus PV generated power by 1992 199 3 1994 2003 PV installation subsidy system for public utilities PV installation subsidy system for 1994 The Basic Guidelines for New Energy 1997 1998 The Grid Connection Guidelines including R&DCost reduction Creation and expansion of initial market Increase of production level Focus on two aspects: R&D and installation support activities Commenced based on the fruitful results of the Sunshine Project Installati on support electric companies adverse currents residential consumers Introduction the Use of New Energy for industrial facilities Supply/Demand Outlook

6. 5 Installation support (public facilities ） R&D Installation support （ industrial facilities ） Installation support （ residential ） Started in 1992 ： Started in 1997 ： Started in 1993 ： （ Stage Ⅰ first-half ） （ Stage Ⅰ second- half ） The New Sunshine Project The Sunshine Project （ 1974 ～） METI ’ s budget for R&D and PV power generation systems installation support activities ・ R&D ： approx. 60 million US$ allocated since the 1980s ・ Installation support ： focused since the 1990s on initial market creation Source ： NEDO document ※ 1US$=107JPY Outline of Government Policies and Measures

7. 6 Targets ： ・ Crystalline silicon solar cells Solar cell manufacturing technology development System technology development Items for development ： ・ Low cost manufacturing process technologies Targets ： inverters, peripheral equipment such as storage batteries Significant reduction of solar cell module manufacturing cost Significant reduction of peripheral equipment installation price NEDO ： Central role in development of PV cell manufacturing technology and ・ Greater manufacturing efficiency ・ Stable material supply ・ Thin-film solar cells ・ Compound semiconductor solar cells (Particularly during the Sunshine Project) R&D Activities （ Cell Manufacturing Technology) development of system technologies

8. 7 The Electricity Utilities Industry Law revised 1990 ： The Sunshine Project （ 1974- 1992 ） ・ More than 90% cost reduction during the Sunshine Project Based on this result, installation support activities commenced for initial demand creation in 1990s Source ： New Energy Manual （ Agency of Natural Resources and Energy ） 20,000JPY/W （ ’ 74 ） 5,000yen/W （ ’ 80 ） 2,000yen/W （ ’ 82 ） 1,200yen/W （ ’ 85 ） 600yen/W （ ’ 92 ） Solar cell module manufacturing cost reduction （ achieved by the Sunshine Project) Installation support (public facilities) 1992 ： 1990 ～： Installation support commenced R&D Activities （ Cell Manufacturing Technology)

9. 8 Targets ： ・ Crystalline silicon solar cells Solar cell manufacturing technology development System technology development Items for development ： ・ Low cost manufacturing process technologies Targets ： inverters, peripheral equipment such as storage batteries Significant reduction of solar cell module manufacturing cost Significant reduction of peripheral equipment installation price ・ Greater manufacturing efficiency ・ Stable material supply ・ Thin-film solar cells ・ Compound semiconductor solar cells (Particularly during the Sunshine Project) R&D Activities （ System Technology) NEDO ： Central role in development of PV cell manufacturing technology and development of system technologies

10. 9 ・ 1993→2002 ： installation cost of inverters and other equipment decreased 1993→2002 ： general system installation price decreased more than 80% Inverters and peripheral equipment Installation price reduction of PV power generation systems for residential use Module price Standard construction cost 3.67mln yen/kW 1.43mln yen/kW 1.17mln yen/kW 1.03mln yen/kW 1.02mln/kW 0.96mln/kW 0.87mln/kW 2mln yen/kW 0.79mln/kW 0.73mln/k W Source ： Resources Total System Co., Ltd. R&D Activities （ System Technology) more than 90%

11. 10 Introduction The Basic Guidelines for New Energy PV installation subsidy system for public utilities The Electricity Utilities Industry Law revised Long-term Energy Supply/Demand Outlook PV installation subsidy system PV installation subsidy system for Installation Support Activities 198019851990199520002005 1990 Installation support The Renewable Portfolio Standard The Law concerning Promotion of 1992 Purchase of surplus PV generated power by 1992 199 3 1994 2003 1994 1997 1998 The Grid Connection Guidelines including electric companies adverse currents residential consumers the Use of New Energy for industrial facilities ・ Establishing various guidelines, laws and regulations ・ Setting national targets of PV power introduction ・ Subsiding PV system installation Effective installation support activities are a systematic combination of following procedures : Guidelines, laws and National targets Subsidy system regulations

12. 11 ・ Installation price reduced through installation support activities in addition Source ： METI Installation Support Activities (Subsidy Systems) Installation price reduction of PV power generation systems for residential use 1993→2002 ： residential use system installation cost decreased more than 80% to the favorable results of R&D activities

13. 12 ・ Subsidy rate covering up to one-half during initial expensive price phase Subsidy Effective installation price ・ As installation cost decreases, subsidy rates are scaled back Installation Support Activities (Subsidy Systems) Effective installation price reduction of PV power generation systems for residential use Source ： METI →Actively promote creation of initial demand →Subsidy rates are scaled back, creating a transition to an unsubsidized market

14. 13 Results of R&D/installation support activities （ Annual Installation Volume ） ・ Annual installation volume of PV power generation systems, PV power generation system annual installation volume Source ： Current status and outlook of the PV power generation industry, 2003 edition (NEDO) Public/industrial facilities （ subsidized ） General market （ not subsidized ） Residential （ subsidized ） residential volume in particular, is increasing

15. 14 ・ Japan ’ s cumulative installation volume ranks first in the world: approx. 860MW Cumulative PV power generation installed capacity in 2003 Source ： IEA-PVPS T1-13: 2004 ・ Japan 860MW ・ Germany 410MW ・ USA 275MW ・ India 83MW ・ China 58MW ・ Holland 46MW Results of R&D/installation support activities （ Cumulative Installed Capacity ）

16. 15 Annual solar cell production volume ・ Japan ’ s production volume has rapidly increased since 1998: 331MW in 2003 ・ Accounted for approx. 45% of the world production volume in 2003 Source ： PV news Japan U.S.A. Europe Other Japan Europe U.S.A. Other (2003) Results of R&D/installation support activities （ Production Volume ）

17. 16 Lessons Learned Lessons learned Future focus →Prevents unsubsidized market expansion ・ Establishment of laws, guidelines and regulations ・ Creation of national introduction targets ・ Establishment of subsidy systems Renewable energies with less advantageous economic aspect: ・ Combination of R&D and installation support activities is effective ・ Government ’ s involvement is important at the initial stage of introduction ＜ Government ’ s involvement ＞ METI and NEDO continue active implementation of R&D Cost reduction Creation and expansion of initial market Increase of production level Installation support to promote introduction The higher cost relative to conventional energy sources still persists R&D and installation support activities

18. 17 Thank you