Since the early 1990s, over 130 billion yen ($1.6 billion) in subsidies has been given to promote the domestic installation of solar power systems.

Calculations performed by the Advisory Committee for Natural Resources and Energy, a panel advising the minister of trade, economy and industry, indicated if solar power generators were installed on the roof of every Japanese house an estimated 72.7 million kW of power would be produced, the equivalent of 18 nuclear reactors, if sunlight and usage conditions were taken into account.

Such an enormous power output led many Japanese to explore solar energy, but with the removal of subsidies set to occur in the 2005 fiscal year, only 1% of Japanese houses had so far installed solar power generators.

The system of power companies paying extra for surplus energy produced from solar power might also falter, with Japanese energy companies looking to cut costs in a marketplace the Agency for Natural Resources and Energy (ANRE) has been pushing to become increasingly competitive in an attempt to bring down high energy prices.

The current renewable energy laws have set low targets for the percentage of power that companies must source from renewable energy, relying on the subsidies and surplus energy charges to sustain growth in the renewable energy sector.

With market forces gaining control over the dynamics of energy supply, renewable energy producers are concerned they may be unable to compete without strong Government backing.

According to an ANRE spokesperson, the subsidy is no longer required as solar power has spread “sufficiently”.

“In order to expand such [renewable] sources, Japan should introduce a system of fixed-price purchasing arrangements,” said Tetsunari Iida, a senior researcher at the Japan Research Institute.

Wind-power firms have also seen waning Government support, with companies selling electricity at prices below profit. Eurus Energy signed a contract with Tohoku Electric Power Company in 2003 to sell power at 7 yen per kilowatt-hour, with the cost of wind-powered energy generation in Japan estimated at around 9-14 yen per kilowatt-hour.