Three years ago, Japan, a powerful, wealthy island nation who at the time had the highest retail electricity prices in the world, pulled th plug on its pioneering - albeit expensive - solar subsidies. With hindsight, you could easily say that the timing of this decision was awful, coming as it did just as the cost of conventional energy started to escalate and the solar industry took off. You might even say that this effectively handed leadership of the world's solar industry to Germany. As Japanese demand dropped off, solar sales declined, curtailing investment in capacity expansion and long-term silicon procurement which meanwhile happened everywhere else.

And yet, retrospectively, it wasn't actually that bad a decision - 3 years of no subsidies has saved them some money. For now, the solar industry continues to be much more national than global so they probably have not lost that many exports. Moreover, they still have quite a few solar companies growing fast within the industry at the upstream equipment supplier and solar module manufacturing level.  One last point on Japan's solar industry  - few realize that on some metrics, Japan had actually already reached grid parity with solar power in 2005, it's just that no one got that excited about it  !

So my interest was piqued to learn today from Reuters that Japan, spurred on by its famously interventionist Ministry of Economy, Trade and Industry - METI - is poised to provide subsidies and tax breaks for solar panel makers from 2009. Other than successful lobbying by the Keiretsu, the principle reason for this appears to be a target which aims to have more than 70% of new homes equipped with solar panels by 2020. And with annual housing starts running in Japan at just under 750,000 per year, that's a lot of solar power that will need to be bought.