Takaichi’s Trump-Like War On Solar Will Kneecap The Economy

Moving Japan to High-Cost Electricity

Source: Sonnedix Note: The embedded title is my addition

The Takaichi administration has declared a Trump-like war on commercial solar power. For the first time since the 2011 nuclear catastrophe, Japan will end all subsidies for megasolar farms (over 1 MW) and for ground-mounted solar over 10 kW. Beyond that, the government will now require that any new projects go through a safety certification process. That seems a proper response to mudslides at some megasolar farms placed on deforested hillsides (see photo at the top), but only if safety is not used as a pretext.

The war on solar (and perhaps wind as well), as I’ll detail at the end, strikes another blow to Japan’s per capita growth and living standards, not to mention the climate.

While Sanae Takaichi’s predecessors may have moved too slowly on promoting solar power, Takaichi seems positively hostile, having declared, “We strongly oppose covering our beautiful country with foreign-made [i.e., Chinese] solar panels.”

Informed sources told me that these moves came from the LDP and its Ishin ally, rather than from the Ministry of Economy, Trade, and Industry (METI). Officials there have been debating whether it was yet time to reduce or eliminate subsidies. However, they had not yet reached a consensus.

Rationalizations: China and Environmental Damage

Takaichi claims solar is unsafe because it makes Japan dependent on China. That’s like saying that Japan should shut down its auto industry rather than import rare earths from China. Instead, Japan helped develop other sources of rare earths. India has become the world’s third-largest generator of solar power and a major producer and exporter of solar modules, but still relies on China for upstream components. So, why not partner with other rich countries to help India develop further? Initially, these panels might cost more, but that is less costly than sticking to coal and gas. Besides, if the LDP says it still wants rooftop solar, Japan must get affordable panels from somewhere.

Solar’s opponents also point to the environmental damage caused by building 20% of Japan’s 9,200 solar sites in once-forested locations prone to mudslides. There have been more than 230 accidents in such sites. In one, 120 homes were destroyed. The irony is that climate change has increased the frequency of torrential storms afflicting a power source intended to fight climate change. Not surprisingly, local opposition to megasolar has increased, and not just in the hazard-prone areas. Politicians who are antagonistic to solar because they support the fossil and nuclear sectors have taken advantage of legitimate concerns.

Voters seem ambivalent. 74% of municipalities have enacted ordinances promoting renewable energy. Tokyo and Kawasaki now require rooftop solar on new buildings. Yet, half of municipalities have complained about the damage, and 12% have enacted ordinances restricting siting, up from 5% in 2020.

Why are renewables being built in hazard-prone places at all? Japan’s leaders claim it’s because Japan has so little flat land. In reality, Japan has plenty of land, but politicians won’t change the land-use laws that prevent its use. In 2020, there was already enough abandoned farmland to generate 112 GW of renewable capacity, a volume equal to a third of total electric capacity. By 2030, says the Agriculture Ministry, abandoned farmland could triple to 30% of all farmland, as the number of farmers halves. A government official told me that farmland cannot be used because Japan lacks food self-sufficiency. But I don’t believe abandoned land produces any food. Taro Kono, a former contender to be Prime Minister, has repeatedly complained about the land-use laws.

Those who want Japan to limit growth in renewables point out that solar and wind are pricier in Japan (see chart below). The primary reason, however, is the land-use restrictions creating high acquisition and construction costs. Plus, utilities charge renewable producers higher connection fees than elsewhere.

Source: CarbonTracker data emailed to me

Solar Subsidies Out; Fossil Subsidies Expanded

Takaichi boasts that she is helping those upset with high prices by ending the yearly ¥3 trillion ($20 billion) Renewables Promotion Tax Surcharge. It would save taxpayers far more money by ending subsidies to the fossil fuel industry, but the LDP has instead increased such subsidies, e.g., by lowering the gasoline tax.

In 2025, 38% of government spending on energy and “decarbonization” was devoted to projects aimed at prolonging the use of fossil fuels: gasoline subsidies, carbon capture and storage (CCS), as well as co-firing hydrogen and ammonia with coal and natural gas, for electric power plants. Only 4% was dedicated to renewables.

A leading politician told me he “hated megasolar” and wanted to stop subsidizing it. But he insisted that fossil subsidies be maintained. How, I asked, does it help Japan to subsidize a mature sector like fossil fuels? Apparently never having been asked to provide a justification before, he had none. Such is the power of vested interests.

Making It Impossible to Reach 2030 and 2040 Energy Goals

Post-Fukushima subsidies helped solar capacity grow from almost nothing in 2010 to 10% of electricity output by 2024. While impressive, the progress could have been even faster. Japan has the lowest share of renewables among the Group of Seven countries. The pro-fossil and nuclear lobbies say Japan cannot do better, using excuses like alleged lack of land. They’re wrong.

Japan could generate 80-90% of its electricity from emission-free sources by 2035, according to several studies cited by the International Energy Agency (IEA). America’s Berkeley National Laboratory estimates that, by 2035, 70% could come from renewables, 20% from nuclear power, and the remaining 10% from natural gas. Coal would be completely phased out. A shortfall in nuclear power could be made up for by LNG. This would reduce electric power emissions by 94% and total national emissions by almost a third. Moreover, it would cut electricity costs by 6% compared to 2020, even with the investments needed to prevent blackouts, such as battery storage, smart grid technology, and interconnections among Japan’s separate electrical regions.

METI has far more modest renewable goals, just 36-38% by 2030 and 40-50% by 2040. Under current policies, it won’t even reach them. The problem is that, in 2015, Shinzo Abe diluted the Feed-in-Tariff (FIT) enacted in 2011 by the Democratic Party of Japan government to a weaker Feed-In-Premium (FIP). The FIT obligated utilities to purchase all electricity generated by renewable projects at a guaranteed price for a specific period, regardless of how much the utilities used. This incentivized utilities to switch from fossil fuels, give renewables access to the grid, and invest in grid upgrades and battery storage.

The FIP dropped the requirement to purchase all the renewable energy; on the contrary, they could curtail renewables’ access to the grid without any compensation. As curtailments increased, investment in renewables dropped.

Under the FIT, annual solar electricity capacity additions reached a peak of 10.8 GW in 2015. Under the weaker FIP, solar additions fell to only 2.5 GW in 2024 (see chart below). Total renewables additions fell to only 3.5 GW. To reach Tokyo’s renewables goal for 2030, solar alone would have to increase by 3.5-to-5.4 GW per year. If Takaichi abolishes the FIP, annual growth could dwindle further.

Source: https://www.irena.org/Publications/2025/Jul/Renewable-energy-statistics-2025

OCCTO, an organization of utilities that generate 90% of Japan’s total electricity, confirms Japan will not meet the goal, saying their use of renewables will increase from 27% in 2025 to only 30% in 2029 and 33% in 2034. Moreover, it projects that, in 2034, coal will still supply 25% of electricity.

Tokyo Favoring High-Cost Electricity

All this means Japan will face rising electricity costs while costs drop elsewhere. That’s bad news for Japan’s ability to grow and to take advantage of AI and other electricity-intensive resources.

Around the world, renewables have become, by far, the lowest-cost source of electricity. See the chart below, which compares the lifetime cost of building and operating different technologies in 2024. Using CCS for coal and gas, as Tokyo wants, makes the cost prohibitive. (I’ll talk about nuclear in a future post.) Between now and 2035, the renewable advantage will multiply as the lifetime cost falls by another 22% for onshore wind, 31% for solar, and 50% for battery storage.

Source: Nuclear from https://www.lazard.com/media/uounhon4/lazards-lcoeplus-june-2025.pdf; the rest from https://www.renewable-ei.org/en/activities/column/REupdate/20250507.php

No wonder that, in 2024, 90% of the global increase in electric capacity (GW) came from solar and wind. This shows the power of price (see chart below). It also means the average cost can come down even as countries expand capacity.

Source: https://www.irena.org/News/articles/2025/Apr/Renewables-in-2024-5-Key-Facts-Behind-a-Record-Breaking-Year

Even in Japan, solar is already the lowest-cost source and is becoming more so with every passing year. By 2024, the cost of building and operating new solar power without battery storage had fallen to the same level as just operating an existing coal-fired plant. The cost of new solar with battery storage is down to the cost of running existing gas plants. Onshore wind is still higher (see chart below).

Source: https://www.renewable-ei.org/en/activities/column/REupdate/20250507.php

What this means is that, unless Takaichi’s policy is reversed, Japan will face higher electric bills than others (nuclear costs depend on what it takes to make restarted plants fit for service). Expensive and dubious techniques like co-firing with ammonia and/or hydrogen, or CCS, will widen the cost gap (see the earlier chart for how much CCS adds to the cost of coal and gas plants).

The Economic Impact

Currently, Japanese industries pay the same for electricity as their counterparts in Europe, while Japanese households pay 10% less, all in PPP dollars. But if Japan chooses high-cost electricity, that will dampen growth. Let’s consider a few ways.

Source: https://www.oecd.org/content/dam/oecd/en/publications/reports/2020/10/energy-prices-and-taxes-for-oecd-countries-2020_29289aef/dbf6150b-en.pdf Note: PPP means Purchasing Power Parity, which eliminates distortions caused by currency and price fluctuations to compare prices in terms of their real impact on living standards.

Already, given Japan’s backwardness in software, the country spends more on imports of digital services than on fossil fuels. Now, consider AI’s incredible hunger for electricity. Previously, Japan’s electricity usage peaked in 2010 and fell by 12% through 2024. Now, OCCTO, the organization of Japan’s utilities, predicts that, depending largely on how much AI and data centers Japan employs, electricity demand will grow as much as 25% by 2040 and 40% by 2050. That would require upgrading the grid, adding much more battery storage, and building more electricity plants.

If Japan fails to expand these capacities, then its companies and consumers won’t be able to use as much AI as others. That will dampen productivity and economic growth. Or, if it does grow capacity, but refuses to use enough renewables, electricity prices will soar to levels far higher than elsewhere. That will pressure household budgets while making it harder for Japan’s exporters to compete. If foreign companies follow the Scope 3 rules, which require them to purchase only from customers using 100% renewable energy after 2030, then they will buy less from companies producing in Japan. Consequently, Japan’s leading companies will shift even more facilities to countries with lower electricity costs. Back in 2020, some of Japan’s leading companies warned the Suga administration about this risk. One way or another, growth and living standards will suffer.

Several years ago, hundreds of energy-consuming corporations formed new organizations pushing for more renewables and eventually even an impactful carbon tax. Today, they feel it’s politically safer to keep a low profile. Unless these powerful firms take a stance, reversing the war on solar will become more challenging.

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