Japan Ministry Aims to Restart Solar Subsidies in 2009
Date: 25-Jun-08
Country: JAPAN
Author: Mayumi Negishi
The move could give a boost to Japan's Sharp Corp which fell behind Germany's Q-Cells AG as the No. 1 supplier of solar cells in 2007, when China's Suntech Power Holdings Co Ltd also nudged Kyocera Corp back into fourth place, analysts said.
Officials at the Ministry of Economy, Trade and Industry (METI) said on Tuesday they would draw up plans for new subsidies by August, in time to put them in budget requests for next year.
The move is likely to go ahead, said Nomura analyst Tetsuya Wadaki, as it follows Prime Minister Yasuo Fukuda's announcement this month that Japan will cut greenhouse gas emissions by 60-80 percent from current levels by 2050 and install solar panels in 70 percent of newly built houses by 2020.
Sharp shares jumped 2.9 percent on Tuesday and Kyocera rose 1.0 percent, while the benchmark Nikkei average was flat.
But while subsidies will help Japan's solar market and bring new business to Japanese solar power firms, it will take time to reduce the momentum now held by foreign rivals, one analyst said.
"The next window in the solar race in terms of the next 12 to 24 months should be dominated by the German and Chinese firms," because they have secured ample supplies of silicon, said Ronan Wolfsdorf, an independent renewables analyst at Macroenergy Advisors in Cambridge, Massachussetts.
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Japanese firms lost market share after the government scrapped solar subsidies in March 2006, hurting the domestic solar market. Japanese firms also failed to procure enough silicon, capping growth in a red-hot industry, analysts said.
The loss of market share was an embarrassment to resource-poor Japan, which sees itself as a pioneer in green technology, said Takao Kashiwagi, a professor at Tokyo Institute of Technology and head of a METI panel on new energy.
With the help of company cost-cutting efforts, the Japanese government should aim to halve the price of residential solar panels in three to five years, he said, reading from a draft proposal by the panel released on Tuesday.
It now costs 2.3 million yen (US$21,330) to install a 3 kilowatt solar power system for a home, the panel said.
"If conventional electricity prices go up 20 percent, and solar costs come down 30 percent, Japan would become very cost competitive with solar," said Wolfsdorf.
METI officials declined to comment on how much they thought the subsidies should be next year, prior to negotiations with the Finance Ministry.
"We don't want a market that depends on subsidies. We are hopeful that technology would lower solar energy prices far enough that people will have an incentive to use it," Shoji Watanabe, who heads the ministry's new energy policy team, told Reuters.
In the year that ended in March 2006, a household with a 3 kilowatt solar power system would have received 60,000 yen from the state.
Germany, the world's biggest solar power market, plans to cut subsidies to the solar sector by 8 percent for each of the next two years, and by 9 percent in 2011. Attention is also on the United States, to see if Congress will renew solar tax incentives that expire at the end of this year.
(Additional reporting by Nathan Layne; Editing by Hugh Lawson)
