Energy Future Past: The re-emergence of Nuclear and the position of Renewables in Japan’s future energy mix

Just three years on after the devastating tsunami which caused the immediate loss of 10 GW of nuclear electric generating capacity, the Japanese government has approved an energy plan to reinstate nuclear power as base-load energy.

Amidst the emotional debate shadowing nuclear energy, it’s crucial to remember the leaps and bounds Japan has made to move away from imported fossil fuel and nuclear dependency – and to celebrate achievements in renewables.

energy is not waterYoshiharu Tachibana, University of Tokyo. “Almost all economists take electricity as if they are dealing with the flow of water… You take it as granted that electricity can be dealt as if it were water”. Energy Security Initiative at Brookings “Restructuring the Electricity Sector in Japan: Will it Enhance Energy Security?”. 13 March 2014

A difficult decision led by long-term weakened economic sentiment and energy security concerns

As an energy resource scarce country that has withstood over two decades of economic stagnation, the environmental, economic and human devastation left in the wake of the 2011 Fukushima Daiichi Nuclear Power Station disaster has propelled the topic of ‘energy security’ to the top of Japan’s focus more than ever.

Nuclear had contributed almost 30 percent of Japan’s electricity requirements prior to the loss of the reactors and was expected to provide half of Japan’s energy needs by 2030.

The below chart from the Institute of Energy Economics, Japan and published by the Washington Post demonstrates how Japan managed to close the energy gap with the loss of its significant nuclear component – by ramping up fossil fuel imports which increased by 21 percent in 2012. Liquefied Natural Gas (LNG) was selected as the “fuel-of-choice” to substitute for the loss of nuclear. However, this proved to be increasingly unsustainable.

meeting nuclear gapSource: Institute of Energy Economics, Japan. 2013

In 2012, US$250 billion (24 trillion Yen) was spent on importing fuel which accounted for one-third of total import expenditure. However, continuous rising costs in imported LNG and oil has resulted in a loss of over US$30 billion (2.5 trillion Yen) for the country’s top nineteen utilities in the past two years.

The new Basic Energy Plan approved in early April, which sets the direction of policies for the next twenty years, highlighted the economy’s unsustainable path in being increasingly reliant on imported fossil fuel for energy. “(Japan’s) dependency on fossil fuels has increased to about 90 percent from the pre-(Fukushima) disaster level of 60 percent as far as electricity is concerned,” the paper states. In response, nuclear has been reinstated in the countries future energy mix as a key “base-load electricity source”.

Message remains clear: Nuclear will not be the only solution

Opposition to the new Basic Energy Plan’s strategy of restarting the reactors have been loud and clear for a country still raw from the pain of the Fukushima Daiichi nuclear disaster. A survey conducted at the end of 2013 showed 80 percent of the Japanese public were in favour of decommissioning some or all of the existing nuclear reactors in the country.

Despite the difficulties in severing ties with the nuclear sector which still holds much of Japan’s capital investment, the costs accumulated as a result the shutdowns were substantial and have continued to grow – “The reactor restarts are facing significant implementation costs ranging from US$700 million to US$1 billion per unit, regardless of reactor size or age”. Hence, the new plan described the role of nuclear as “lower as much as possible” and did not specify the proportion forecast for the future energy mix. In other words – there is no expectation for nuclear to regain its former glory.

However, an indispensable player has long been making steady progress in Japan – Renewables.

Key renewable policies

With the return of nuclear and increasing dominance of gas, there has been no urgency for a significant ramp up of energy input from renewables. However, with the current unprecedented exponential renewables boom in China, as well as steady global progress – the clean energy source remains a force to be reckoned with.

The presence of renewables cannot be denied, even within Japan’s new Basic Energy Plan which referenced prior established renewable targets of “13.5 percent in 2020” and “about 20 percent in 2030” as benchmarks for what is to be expected this round. The present coalition partner New Komeito had also pledged in their 2012 campaign that clean energy would account for 30 percent of Japan’s energy mix by 2030. Below are two crucial milestones in Japan’s renewable energy policies:

1) The Feed-in tariff for electricity from renewable energy sources 2012 (updated 2013) offered utility companies substantial subsidies by allocating a fixed price for electricity purchase from renewable sources (PV, wind, geothermal, biomass and hydropower) – with costs absorbed by the end consumers.

Under the scheme, various clean energy initiatives totalling 30 GW have been approved by the Ministry of Economy, Trade and Industry (METI), of which approximately 25 GW were PV systems. Since the program’s inception, 7.6 GW of clean energy capacity has been successfully added.

However, the FIT system has experienced a number of challenges in achieving completion rates of approved large-scale PV systems. As of January 2014, 4.7 GW of approved large scale PV projects have not yet progressed to site selection stage or purchased any equipment. Investigations by METI revealed the rising price of imported components due to the devaluing Yen; as well as rising installation labour costs within the domestic market were causing intentional delays as projects developers sought to wait for higher return on investments. Furthermore, the promise of higher margins from uncommitted projects on a higher FIT rate meant system integrators were not rushing to lower costs. In response, METI will move to disqualify uncommitted projects from the FIT program if they fail to act by a set date.

Japan Non Res PV costsThe cost of large (over 1,000 kW) non-residential PV systems has not lowered in 2013. Source: Ministry of Economy, Trade and Industry. 2013

FIT“The popularity of Japanese solar is easily explained by the attractive FiT for solar and wind”. Comparison of onshore wind and solar policy incentives in APAC. Source: Bloomberg New Energy Finance. Asia-Pacific, Mid-Year Renewables Update. July 2013

2)The Subsidy program for Residential PV systems (which recently closed in March 2014) has been a successful program for twenty years – with ‘over 1.5 million residential roofs solarised’ and added about 6 GW of renewable energy to the Japanese grid. Towards the end of the program challenges were experienced with fewer available installers as businesses shifted their focuses to the more profitable small non-residential PV systems.

res PVSource: National Energy Foundation and Japan Photovoltaic Expansion Centre. 2013

Solar strength-to-strength and the beginning of wind

The Bloomberg New Energy Finance ‘Asia-Pacific, Mid-Year Renewables Update’ described Japan’s solar market as “in the middle of a hype” with over US$7 billion worth of solar energy investments in Q2 2013 alone. Since pro solar incentives were introduced, solar accounted for 97 percent of new renewable capacity. Below are just some of the recently announced initiatives and achievements as a result of solar friendly policy:

  • Mitsubishi and C-Tech Corporation will build a 77 MW solar complex of 20 billion yen investment in Tahara City by 2015
  • Showa Shell Solar Unit will build a 29 MW station backed by 30 billion yen in Southwest Japan by 2015
  • Orix Corp. and JFE Holdings Inc. has started building a 13.5 MW solar power station in Tochigi prefecture, north of Tokyo
  • Honda to build a 10 MW solar installation in the city of Tochigi prefecture city of Sakura by 2015
  • Mitsui to build solar plants with the ability to supply 30,000 households in the region most affected by the earthquake and tsunami
  • Habitat for Humanity’s Solar Home Recovery Project 2013 saw installation of solar panels in storm-damaged region

solarJapan continued to lead in solar energy investments compared to APAC neighbours. Source: Bloomberg New Energy Finance. Asia-Pacific, Mid-Year Renewables Update. July 2013

Starting in April 2014, the government will cut solar tariffs in a bid to promote other renewable sources like wind and geothermal. The below were announced in March 2014:

  • State-run Japan Oil, Gas & Metals National Corp. (JOGMEC) guarantees debt for a 5 MW geothermal project planned by a unit of Kyushu Electric Power Co. in the south-western prefecture of Oita
  • JOGMEC guarantees debt for a 400 KW geothermal power station in Fukushima
  • GE plans to develop 2.85 MW wind turbine

Innovative and smart business models are emerging all over Japan, where renewable sources are abundant but land is at a premium. The Kizuna Foundation has been working with locals who have suffered from the tsunami and nuclear disaster to utilise land no longer suitable for settlement to host renewable sites for solar and wind – thereby providing those who have been most affected with remuneration and a chance to rebuild their lives.

Problems with Renewables

The role of renewable energy in the world’s third largest economy cannot be without its challenges. The new Basic Energy Plan provided no specific targets for renewables in the future energy mix and watered down the wording for clean energy, from “significantly” to a weakened “further” exceeds previously announce targets.

Though clean energy is substantial (with hydropower at 8.4 percent), true renewables such as wind and solar only represent 1.6 percent of the current electricity mix (EIA International Energy Statistics, October 2013)

According to Wharton University of Pennsylvania, the IEA highlighted a number of pain points experienced by the Japanese renewables industry. Since 2011, the cost of installed PV in Japan are more than double that of Germany due to higher cost of land and labour; tougher regulations and standards; and the need for more expensive advanced technologies due to land shortages.

costAverage Cost of Renewables Across Asia. “Solar has seen the largest declines in costs over the past few years, but Japan still stands out as the highest cost country; its favourable incentives ensure that the whole supply chain makes attractive returns”. Source: Bloomberg New Energy Finance. Asia-Pacific, Mid-Year Renewables Update. July 2013

Immature battery storage technology and infrastructure, such as high-voltage transmissions lines, are fundamental barriers to the expansion of renewables as a primary electricity source in Japan.

Bureaucratic red tape has also been seen as a deterrent for investments. Japan’s Asahi Shinbun newspaper quoted “lengthy and complex environmental impact assessments” as a key example which caused Green Power Investment Corporation’s delayed projects on Honshu Island and Tokyo.

What we do know is that despite these challenges, for Japan – a country abundant with natural energy sources, haunted by the consequences of nuclear and battling import energy costs threatening to cripple the economy – renewables is an opportunity that is here to stay. As an energy steward and tech leader, Japan has proved it has no plans to be left behind in the global race for renewables.

By Ailin Sun


4 Comments Add yours

  1. Very interesting and important topic.

    I would imagine that in such a dense urban environment it would be difficult to integrate renewable resources due to scarcity of land (as you mentioned above). What are the actual renewable resources in Japan? In other words the potential solar, wind, hydro capacity based on available resource?

    It would be interesting to understand how much of the demand can actually be met by local renewable resources even at full capacity? I wonder how energy efficiency will feed into this mix?

    I also wonder how countries without access to local resource will eventually manage if the goal is to go to 80-100% renewable?

    1. Ailin Sun says:

      As mentioned above, Japanese renewables are mostly solar (at this stage) and insignificant compared to the fossil fuels and nuclear. Even if we include hydro, the mix is just above 10%. In other words, it’s not feasible to consider the 3rd largest economy being solely reliant on renewables given the limitations of the technology at present.
      You’ve guessed it, energy efficiency is the other piece of the puzzle and Japan has long been embedded in efficiency policies. For the purpose of this blog I limited the topic to just renewables so was not able to include the amazing developments on that front.
      The Japanese have long been referred to as Energy Stewards because of their efficiencies which really worked wonders after the loss of the nuclear base-load after the tsunami. They are also restructuring their entire energy network which is another interesting piece.
      In regards to countries going 80-100% renewable, this article is interesting:
      Iceland is already 85%. There are also grids being constructed globally with this very purpose in mind – so renewable energy can be transferred.
      However, the story obviously differs country to country.

    2. Ailin Sun says:

      And I forgot to thank you for replying! Very first comment =) THANK YOU DANIEL lol

  2. Jane Lambert says:

    Very informative piece- I was surprised to learn that “true” renewables accounted for <2% of Japan’s current electricity mix.

    You mention that Japan is restructuring their energy network. What will this entail? Will this go some way to addressing some of the infrastructure challenges highlighted by Daniel?

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