Japan re-instates solar subsidy

Having withdrawn all solar subsidies in March 2006, Japan rushed through legislation in the final days of 2008 to provide funding of 70,000 yen per kilowatt of equipment installed in 2009. IT expects 35,000 installations by the end of the tax year on Marcxh 31st. After that, the budget proposal for the next fiscal period includes a further 20 billion yen of subsidies.

Domestic solar demand was curbed drastically by the removal of subsidies, and its solar panel makers struggled to invest in R&D, and to compete with more aggressive purchasers of silicon, leaving them ill-equipped to cope with even remaining demand. As a result, Sanyo has been overtaken as number 1 producer in the World by Germany's Q-Cells AG, while China's Suntech Power Holdings Co Ltd has pushed out Kyocera Corp for third place in the market.

Japan is the World's fifth biggest emitter of greenhouse gases and has set a goal of 60-80% reduction by 2050, and aims to have more than 70 percent of newly built houses equipped with solar panels by 2020. Japan's emissions hit a record high in the year ended March 2008, putting it at risk of missing its Kyoto Protocol target over the next four years of cutting emissions to 6 percent below 1990 levels.

Whether this move is enough to kick-start Japan's ailing solar industry remains to be seen - with the price of panels predicted to fall by up to 50% in the next 3-5 years while energy to power ratios rise, people may be reluctant to invest now in a technology that still carries a lengthy pay back period.