Japan ministry to seek $1.2 bln for new energy

By Mayumi Negishi

TOKYO, Aug 26 (Reuters) - A Japanese ministry is seeking $1.2 billion next year to speed up alternative energy use -- a 50 percent hike from 2008 -- as the country falls behind its Kyoto Protocol commitments to cut greenhouse gas emissions.

The Ministry of Economy, Trade and Industry (METI) plans to ask for 131.7 billion yen to promote solar, wind and biomass power and clean cars in its budget request to be submitted to the Finance Ministry by Friday, sources said on Tuesday.

Of the total, it hopes to secure 23.8 billion yen for subsidies for residential solar panels, reintroducing aid that Japan scrapped in March 2006 to the detriment of its domestic solar power market.

Japan is home to solar cell makers Sharp Corp (6753.T), Kyocera Corp (6971.T) and Sanyo Electric Co (6764.T), who lost market share in 2007 even as Germany's Q-Cells AG (QCEG.DE) and China's Suntech Power Holdings (STP.N) gained ground in the red-hot industry.

METI's request, to be finalised on Wednesday, is the springboard for negotiations with the Finance Ministry slated to last through December in a fight for revenue as public debt and health costs rise and the nation ages.

But METI's plan is widely expected to stand, following Prime Minister Yasuo Fukuda's pledge in June to install solar panels in 70 percent of newly built homes by 2020.

METI also hopes to set aside 40 billion yen in aid to corporations and local governments that build wind farms and other clean energy projects, with roughly 6 billion yen to 7 billion yen likely to go to large-scale solar power generators.

Supporters of METI's bid hope to boost aid to private sector firms to cover half of operating costs on mega-solar fields, up from the current one-third.

Subsidies, along with tax incentives and high electricity costs, will help solar panel makers take the plunge and invest in capacity expansion, said Takao Kashiwagi, a professor at Tokyo Institute of Technology and head of a METI panel on new energy.

"Once solar cell makers reach annual output of 1,000 megawatts, that would halve production costs" per unit, he said.

It now costs roughly 2.3 million yen to install a 3 kilowatt solar power system for a home -- an investment that solar panel salespeople say a home-owner can recoup in 20 years via saved electricity costs. (Reporting by Mayumi Negishi; Editing by David Cowell)