Japan aims to restart solar subsidies next year

TOKYO (Reuters) - Japan aims to reintroduce subsidies on solar power equipment next year to help generate demand until technological innovation brings prices down.

The Ministry of Economy, Trade and Industry will draw up plans for new residential and commercial subsidies by August, in time to put them in their budget requests for next year, ministry officials said on Tuesday.

Japan, the world's biggest supplier of solar cells, has watched domestic solar power demand dry up after it pulled the plug on subsidies in March 2006, hurting solar equipment firms' ability to invest in research and expansion abroad.

"We don't want to depend on subsidies. We are hopeful that technology would eventually 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.

"Until then, subsidies or other state support, such as tax breaks, are necessary."

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, a ministry panel said earlier on Tuesday.

The METI panel on new energy sources estimated that it now costs 2.3 million yen ($21,330) to install a 3 kilowatt solar power system for a home.

In the year that ended in March 2006, a household with such a system would have received 60,000 yen from the state.

But METI may end up in a fight with the Finance Ministry, whose officials have said they would not approve restarting the same subsidies as those scrapped just two years ago.

The panel did not look into how much it would cost the state to offer subsidies again, saying that much depends on technological innovation.

"Household solar power use has fallen dramatically since the country ended subsidies," said METI panel head Takao Kashiwagi, a professor at Tokyo Institute of Technology.

"If Japan really wants to be the global leader in green energy, it should consider subsidies."

The panel, which includes academics, executives and public officials, also said Japan should "strongly support" commercial solar energy use and the construction of large-scale solar power generators.

Tokyo's 2006 move to scrap subsidies helped Germany's Q-Cells AG overtake Japan's Sharp Corp as the No. 1 supplier of solar cells in 2007, while China's Suntech Power Holdings Co Ltd nudged Kyocera Corp out of third place.

Prime Minister Yasuo Fukuda on June 9 announced a long-term goal to cut greenhouse gas emissions by 60-80 percent from current levels by 2050.

The initiative includes a target to have more than 70 percent of newly built houses equipped with solar panels by 2020.

(Reporting by Mayumi Negishi; Editing by Hugh Lawson)