NS4960
Spring Term 2017
Japan: Energy Outlook
Overview
• Outlook for Japan's energy sector
• Japan's efforts to restart nuclear power stations has
been slow and susceptible to local opposition
• Generous subsidies have sparked a boom in solar
power
• However generators are also planning new coal plant
construction threatening Japan's record on
greenhouse gas emissions
2
Recent Developments I
• After the 2011 Fukushima disaster
• Natural gas,
• Crude oil and
• Fuel oil
• All used used to boost electricity generation as all
Japan's nuclear plants went offline
• Expectation most nuclear plants would eventually restart.
• As of mid 2016 only
• 26 of the country's 43 reactors have applied for start-up
inspections, and
• 5 have been examined
• Process taking much longer than originally anticipated.
3
Recent Developments II
• Oil
• Oil consumption has been on a broadly falling trend since 1996
due to
• Greater energy efficiency and
• Reduced use of the fuel in power generation
• Fukushima reversed this trend temporarily in 2011-12
• Latest government forecasts non-power sector oil demand falling
by 1.7% annually 201 6-21
• LNG
• LNG consumption rose rapidly after Fukushima, but a small drop
occurred in 2014 suggesting that consumption had peaked.
• Restarting nuclear reactors was expected to cut gas use further
4
Recent Developments III
• Coal
• Coal use has broadly trended upward, but dipped in the
immediate aftermath of the 2011 earthquake because some coal
plants taken offline
• The construction of new plants since 2011 has taken coal
consumption back to pre-Fukushima levels
• 1.9 GW of new plants are under construction and the pipeline of
planned projects is now the largest of any energy source.
5
Import Dependence I
• Although country able to source additional LNG after
Fukushima, this extra demand pushed prices to record
highs
• In 2013 Japanese spending on fossil fuels equaled
• 5.3% of GDP compared with
• 3.1% for China and
• 1.5% for the U.S.
• The total cost of power generation in Japan rose from
• 7.5 trillion yen ($71 billion) in 2010 to
• 10.6 trillion yen ($100.3 billion) in 2012 despite electricity
demand contracting
6
Import Dependence II
• Import dependence remains a vulnerability for Japan,
dragging on economic expansion as faster growth is
generally accompanied by an increase in demand for
commodities.
• Japan therefore considers nuclear power essential
• Plant upgrades and safety measures to meet new
regulations following Fukushima expected to cost more
than $26 billion through 2020
• The omission of nuclear power from the energy mix in the
long term would entrench dependence on imported
energy commodities
7
Coal Option I
• Coal Option
• Japan has turned to coal to provide the baseload power
supply formerly generated by nuclear
• Coal is cheap and has more diverse and secure supply chains
than LNG or oil
• While 1.9 GW of new coal plant are under construction
compared with 5.3 GW of new gas plants there are 28 GW of
coal plant proposals versus 14.9 GW for gas
• To the period to 2026 30 GW of coal fired plants will be built
implying a heavy shift to coal.
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Coal Option II
• Problem
• Shift to coal is incompatible with Japan's emission
targets
• In context of
• falling electricity demand
• growth in renewables, and
• Possible uncertain return of nuclear
• New coal plants risk becoming stranded assets.
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Renewables
• Renewables
• Renewable energy capacity is expected to reach 60 GW
by March 2017
• Next 20 years may expand by 87.7 GW -- already
approved
• Of this 82.1 GW are solar
• Solar receiving generous feed-in-tariffs
• Wind capacity only 3.17 GW having expanded by less
than 1 GW since 2009
10
Assessment
• Energy-saving measures mean electricity demand will
probably stabilize for fall
• Japan at risk of building excess high-emission capacity
since government and utilities will continue to pursue
nuclear restarts to
• To avoid losing billions of dollars of sunk capital and
• To improve the country's energy security
• Cost of subsidies will rise rapidly as solar capacity is
installed under the current feed-in tariff scheme
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