Japan to back clean-energy users with $1.3 billion in investment subsidies

Japan plans to provide 210 billion yen ($1.34 billion) to help companies that are using clean power to fund investments, in a push to boost demand for renewable energy and spur growth in regional areas, a government official said late on Monday.

The subsidies are designed to help the country, the world's fifth-largest emitter of carbon dioxide, reach its clean energy targets and reduce its reliance on imported fossil fuels after facing setbacks on wind and solar projects.

The scheme will provide funds over five years starting in fiscal 2026, said Juntaro Shimizu, director of the Green Transformation (GX) policy group at the Ministry of Economy, Trade and Industry.

Companies that rely entirely on decarbonised electricity and contribute to regions where the power is generated will be eligible for subsidies covering up to half of their capital expenditure, he said. Data centre operators meeting the same criteria will also qualify.

The government plans to begin soliciting applications from eligible businesses next fiscal year.

Japan wants renewables to account for up to 50% of its electricity mix by fiscal 2040, with nuclear power supplying another 20%, up from 22.9% renewables and 8.5% nuclear in fiscal 2023.

Progress toward the renewable energy goal has slowed as offshore wind projects, seen as crucial to achieving the target, have faced surging costs, while large-scale solar farms have stalled due to local opposition.

The new support measures form part of Japan's "GX 2040 vision," a national strategy integrating decarbonisation and industrial policy approved by the Cabinet earlier this year, seeking to promote the energy transition and economic growth.

As part of the framework, the government will establish a "GX Strategy Region" system to create new industrial clusters in areas with decarbonised power sources.

Local governments and companies will jointly draw up plans, with the national government selecting regions and providing support through subsidies and regulatory reforms. Applications from local governments are expected to open later this fiscal year, Shimizu said.

($1 = 156.7200 yen)

-Yuka Obayashi/Reuters