OTA, Japan (Reuters Life!) - Solar panels glisten across Ota City's tiny Pal Town neighborhood, nestled among strawberry fields in one of Japan's sunniest spots, a testament to the allure of renewable energy in this resource-poor country.
Three-quarters of Pal Town's homes are covered by solar panels, which are distributed for free and have become one of the main draw-cards for residents keen to minimize their power bills.
"We moved here because of the panels -- it was something we wanted, but not something we could afford on our own," said resident Mika Hiroshima, who moved to Ota with her husband and two small children in early 2005. "It just doesn't pay."
Located 80 km (50 miles) northwest of Tokyo, the 41 hectare (10 acre) Pal Town, dubbed "Solar City," received free solar panels from 2002 through a 9.7 billion yen state-backed study on how to ensure a steady supply and avoid blackouts. Lots of small solar power generators are connected to the power grid.
But that power is unreliable in cloudy Japan. At high noon in sunny weather, a 4-kilowatt rooftop power generator produces more than enough power to run a typical household. But in cloudy weather, the power generated is less than half.
Officials also say that without a comprehensive strategy involving both corporations and local government, expanding the solar grid to other parts of the country would be difficult.
"People want solar power," said Kazuo Nagashima, an Ota City assistant section manager. Virtually all 550 families that now have solar panels in Pal Town say they want to keep them after the tests end in March 2010. "But local governments can do very little on their own."
Solar energy policies have been on-again, off-again in Japan. Despite committing decades to research in solar power, it has failed to develop a strong market at home, adopting, scrapping and then reviving again subsidies for home-use solar generators.
Analysts also fear that the development of advanced production lines and equipment would eventually mean that anyone will be able to match Japanese technology.
"Japan is making the same mistakes it made in chips and LCDs," said Yoshihisa Toyosaki, President at J-Star Global Inc, an IT consultancy in Japan. "I doubt if Japan will be represented in the top ten solar power firms in five years."
Japan's heavily indebted government plans to revive subsidies scrapped in a 2006 round of budget cuts.
Japan has earmarked 9 billion yen ($92 million) for solar panels for households in this year to March 2009. Its Ministry of Economy, Trade and Industry is seeking 24 billion yen ($246 million) for subsidies in the year starting April 2009, and estimates that about 100,000 homes would install solar panels next year, with the subsidy.
Japanese firms such as Sharp Corp, Kyocera Corp and Sanyo Electric Co, once made over 50 percent of the world's solar cells, but they lost market share in 2007 to Germany's Q-Cells and China's Suntech, as they misread a surge in global demand and failed to procure enough silicon.
"No new solar entrant is going to be able to beat Japanese firms' technology -- developed over 30 years -- but unless Japan does more to bolster its domestic solar market, Japan might lose out," said an official at a Japanese solar panel making equipment supplier who asked not to be named.
"The competition is very hungry, very aggressive, and they have momentum."
Editing by Miral Fahmy