Japan intends to promote renewable energy and nuclear energy by subsidizing up to half the cost of investments in factories and data centers using 100% carbon-free electricity.
The government plans to allocate 210 billion yen ($1.33 billion) over five years, starting in fiscal 2026.
The move is part of Tokyo’s efforts to foster regional industrial hubs by subsidizing sites that make highly competitive products, such as semiconductors, industrial robots and pharmaceuticals.
One requirement will be electricity from 100% renewable or nuclear energy, including cutting-edge sources such as perovskite solar cells, which are thin enough to be bent.
For example, a company signing a 20-year contract to access electricity directly from a wind farm would be eligible. Projects combining renewable energy and the use of forests to absorb carbon dioxide and achieve virtually zero CO2 emissions would also be eligible.
Japan intends to subsidize up to half of the investment if a newly built factory uses 100% renewable energy and operates in an area where the energy source is located. When the factory is outside the power source area, the subsidy rate will be about one-fifth.
The approach aims to bring economic benefits to areas where energy sources are located, by encouraging the construction or resumption of operation of clean energy plants. Tokyo also wants to encourage domestic production of products considered important for security and economic competitiveness.
In addition, the plan supports the development of industrial centers. Grants can help cover the costs of transforming abandoned petrochemical complexes into new industrial bases. The Ministry of Economy, Trade and Industry and the Japan External Trade Organization will cooperate to attract foreign startups and companies. About 3.5 billion yen will be allocated to the initial budget proposal for fiscal year 2026, which begins in April. A notice will soon be issued for local governments to submit their location proposals.
In addition to quickly establishing the electricity transmission networks needed for data centers, Japan will promote deregulation, such as making water for industrial purposes more affordable, so that local governments can attract businesses.
The introduction of renewable energy in Japan has not progressed as expected. In August, a consortium led by trading company Mitsubishi Corp. withdrew from an offshore wind power project that expired in 2021, saying rising material prices made the project unviable. Some solar power plants have even reduced their energy production due to falling market prices, making them unviable.
Despite progress in resuming operations at Tokyo Electric Power’s Kashiwazaki-Kariwa nuclear plant and Hokkaido Electric Power’s Tomari plant, many nuclear facilities have yet to pass inspections or obtain local permits.
For Japan to meet the targets set by the government in February, the government will need to more than double the country’s current renewable energy production and reactivate all of the country’s nuclear power plants.
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