As Goldman Sachs Group Inc. and billionaire Masayoshi Son lead a swarm of investors exploiting Japan's solar power subsidies, the world's biggest, Sumitomo Corp. is betting on wind.

The trading house, Japan’s second-largest investor in power generation outside utilities, will add wind farms and at least two biomass plants to take advantage of the above-market rates for electricity from renewable sources the government introduced in July. Sumitomo’s local utility, Summit Energy Corp., expects profits from wind power to triple in as many years, said the unit’s president, Shinichi Kitamura.

Sumitomo’s focus is in part a response to a rush into solar projects that’s pushing up land prices and salaries, as well as luring investors from gambling parlor operators to asset managers. While government data show that Japan can build wind farms at a cheaper price and with higher returns than solar, 99 percent of applications for the new tariffs are for electricity generated from sunlight.

“With so many companies rushing in we are seeing a solar bubble forming and land prices are rising,” Kitamura said in a Sept. 7 interview. Japan’s ambitions in renewable energy look more manageable in wind energy, he said.

Prime Minister Yoshihiko Noda announced on Sept. 14 an energy policy that calls for a phaseout of nuclear energy over the next three decades and to triple generation from renewable sources. The ruling Democratic Party of Japan last month recommended renewable energy make up about 40 percent of Japan’s total by the early 2030s, from the current 8 percent that mostly comes from hydropower.

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To help meet the target, Japan introduced subsidies known as feed-in tariffs (FITs) on July 1 that require utilities to buy power from renewable energy providers at premium prices. As a result, investment in solar, wind and other forms of clean energy may jump to $17.1 billion this year from $8.6 billion in 2011, Bloomberg New Energy Finance estimates.

The rate introduction follows the examples of Germany, Spain and Italy, who since 2004 overtook Japan as the global leader in terms of installed solar capacity. The rates are now being cut across Europe as the volume of solar projects they created make subsidies unsustainable at their original levels.

The lessons of Europe show that those that get in early reap the most benefit before tariffs rates are cut. Of all the renewable energy types available in Japan today the quickest to set up on a utility scale is solar, said Dean Enjo, an analyst with CLSA Asia-Pacific Markets in Tokyo.

Power Crisis

“Right now Japan is in a power crisis and the immediate response will be in solar,” Enjo said. “Solar farms can be scaled up in months. Biomass, geothermal, wind, they are all viable sources, but they take a lot of time and have a lot of red tape involved.”

From October, all wind power developers will need to make an environmental assessment of noise pollution from humming turbines and to show profit feasibility, after some wind farms failed to make money. Geothermal projects can take as long as a decade to develop, Summit’s Kitamura said.

In the two months after Japan started offering feed-in tariffs, applications for 155 solar projects each with a capacity of at least 1 megawatt (MW) were made, government data show. Wind power attracted 14 applications and biomass just one.

Projects to add more than 1,150 MW (1.15 GW) of solar plants have been announced this year in Japan, compared to none last year, according to BNEF. Those estimates, which exclude residential installations, mean about 110 MW of utility- size solar capacity may be commissioned this year, up from 10 MW last year, BNEF said in an Aug. 31 report.

Pachinko Power

Among the most ambitious plans is Orix Corp., a finance and leasing company that seeks to spend more than its annual net income of 86 billion yen ($1.1 billion) on solar plants.

Japan Asia Group, a Tokyo-based brokerage and an aerial surveyor that started looking at renewables three years ago, last month pledged to invest 150 billion yen to build 500 MW of solar power across the country by March 2015. The amount exceeds Japan Asia’s revenue over the last two years.

Solar investors such as Toshiba Corp., which makes solar equipment, are being joined by companies as varied as asset manager Sparx Group, Mitsui Chemicals Inc. and pachinko parlor operator Novil Corp.

Sparx’s announcement that it would build a solar plant helped its stock jump the most in a month on Sept. 7 in Tokyo.

“The solar market is the most lucrative to investors and it’s going to be the one heating up for at least the next three years,” CLSA’s Enjo said.

Goldman Sachs

The attraction for investor lies in the feed-in tariff. At 42 yen per kilowatt-hour for 20 years of a solar project it’s triple the 14.59 yen per kilowatt-hour industrial users paid for electricity during the 12 months ended in March. That’s grabbed the attention of investors outside Japan.

A group including International Business Machines Corp. and Goldman Sachs won approval to build Japan’s largest solar plant of 250 MW in the southern city of Setouchi, which will cost as much as 86.1 billion yen, the local council said Sept. 13 on its website. That would be Goldman Sachs’s second renewables investment in Japan after it bought 5.1 percent of Eliiy Power Co. a lithium-ion battery maker, last year.

“We expect the clean technology and renewable energy industry to play an increasingly important role in Japan, and we remain focused on this area,” Ankur Sahu, Goldman Sach’s co- head of merchant banking in the Asia Pacific, said in an e- mailed statement.