Japan's Toshiba Corp and Sharp Corp said on Friday they are considering working together in the solar power business amid growing demand for cleaner energy, sending their shares higher.

The financial crisis has shut off much of the funding for new projects since late last year, but solar power firms are still hurrying to boost capacity as governments worldwide support expansion of the clean-power systems to cut greenhouse gas emissions.

The Chinese government said on Thursday it would launch a generous new subsidy for solar power systems, lifting shares in U.S.-listed solar companies.

Shares of Sharp gained 4.7 percent and those of Toshiba rose 2.5 percent on Friday morning, outperforming the broader market.

The Asahi newspaper reported earlier that Toshiba and Sharp may form a comprehensive alliance in the solar power business, with Toshiba supplying electricity distribution systems to Sharp, and Sharp supplying panels to Toshiba.

They aim to tap demand for large solar power systems at factories, buildings, and public facilities, the paper said.

Toshiba spokesman Ken Shinjo said the company is looking at various suppliers of solar panels, including Sharp, but has made no decision.

Sharp spokeswoman Miyuki Nakayama said the company has been in alliance talks with many firms, including Toshiba, and that nothing has been decided.

Sharp, the world's No. 2 maker of solar cells behind Germany's Q-Cells, has allied with Italy's Enel to jointly set up solar power generating plants in Italy.

Toshiba, which is facing massive losses this fiscal year on its struggling chip business, sees the solar power business as one of its growth operations and aims to increase annual sales from it to 200 billion yen in the year to March 2016.

The company expects the global solar market to expand 83 percent to 2.2 trillion yen by then.

Sales from the solar business are still very small for Toshiba now, Shinjo said.

The Japanese government and companies aim to boost solar power capacity by 10 times in 15 years to 2020 and to lift the global share in solar cell production to over one-third from the current 25 percent.

Sharp said in January it would bring forward the start of a new domestic solar cell plant to the end of this year from spring 2010.