Suga stepdown

What does a new prime minister mean for Japan’s energy future?

In early September, Japan’s current Prime Minister (PM) Yoshihide Suga announced that he will no longer be seeking re-election, amid low approval ratings. This puts the top spot in Japan’s politics up for grabs, with important implications for the nation's future. All eyes are on this week’s party poll for party leader of the Liberal Democratic Party (LDP), with Taro Kono, Fumio Kishida, Sanae Takaichi and Seiko Noda contesting to be the next Prime Minister of Japan.

While the immediate pressures for the incoming PM is to tackle the continuing social and economic fallout from the COVID-19 pandemic, energy and climate policy have also emerged as a key battleground of the leadership contest. Current frontrunners Taro Kono, and Fumio Kishida clash on their views on energy policy, with the former having a more progressive stance on carbon reductions than the latter.

Tsuruga Nuclear Power Plant. Photo credit: Hirorinmasa (CC BY-SA 3.0)

The longstanding nuclear divide

Since the shutdown of nuclear plants amid safety concerns in the post-Fukushima era, the issue of nuclear restarts is at the forefront of policy debates, with themes spanning safety, climate impacts and social acceptance. While a decade has passed since the deadly incident, little progress has been made on increasing public acceptance of the fuel, as companies continue to fight an uphill battle to restart nuclear reactors. 

As the world recenters their attention on decarbonization, both supporters and critics have started framing the role of nuclear in relation to renewables. Many see nuclear as a necessary evil, crucial to either fill the gap where renewable resources are lacking or to ensure grid stability. This political divide, mainly stemming from the spectrum of opinions surrounding renewables, is also seen among the four PM hopefuls. 

Kono is a longstanding critic of nuclear power who sees no future for nuclear in Japan’s long term strategy, instead, vows strongly in favour of renewables. Kishida treads a fine line between being cautiously pro-nuclear and continuing support for the expansion of renewables. On the other end of the spectrum, Takaichi, a harbinger of conservative values, sees renewables as insufficient to meet Japan’s carbon neutrality ambitions and is a fierce supporter of nuclear power and fossil fuels as a backup. 

An united front on renewables

Undeniably, the current leadership race has largely invigorated the renewable energy industry in Japan, with all running candidates expressing some form of support for the sector. The uniform tone on renewable energy came after years of groundwork crushing many longstanding misconceptions that stood against renewable deployment. 

Until recently, some responsibility for Japan’s reliance on fossil fuels falls on the lack of alternatives. Japan’s low uptake on renewables, currently standing at 10% in 2020 (excluding hydro), can be justifiably blamed on unsuitable terrain. Japan, with its mountainous terrain, has made for a difficult home for large solar and onshore wind installations. 

However, this pessimistic tone has shifted significantly in recent years in the face of overwhelming evidence. In 2020, the Ministry of the Environment released a comprehensive study on renewable energy potential, highlighting that Japan has more than double the renewable energy potential it needs to power its economy. 

These estimates, though considered bullish by domestic standards, are dwarfed by estimates from the International Energy Agency (IEA) and International Renewable Energy Agency (IRENA), which boast figures up to ten times the ones released by MOE. This debunks years of misconception that Japan has exploited much of its renewable energy potential, leaving ample room for wind and solar to grow. 

Even traditional hold-outs, such as the Ministry of Economy, Trade and Industry (METI), are quick to admit renewable energy, in particular solar, will emerge as the cheapest source of power generation by 2030, beating out traditional nuclear and coal plants. Indeed, there have been encouraging signs that the political and institutional frameworks in Japan are adjusting to provide the much-needed policy support for renewables and the future seems bright for renewables to take off in Japan. 

Debunking integration costs

Despite the general optimism on renewables, behind closed doors, many still hold bearish views on the role of renewables in its power mix, expressing serious concern over higher share of renewables in its grid. This view is best represented by conservative hardliner Sanae Takaichi, who, despite expressing support for the renewables sector, holds a much-nuanced position on the overall role of renewables in Japan. Takaichi insists that renewable energy is not the solution Japan is looking for and that continued use of nuclear and fossil fuels as back-up is critical to ensure grid stability. 

Her concerns potentially stem from the one last obstacle before mass proliferation of renewable energy in Japan - the challenge of integration costs. Indeed, systems integration is a perennial challenge as countries look to integrate higher proportions of renewables into the grid. Various estimates of integration costs in Japan have placed the figure at about JPY 4/kWh (~US$36/MWh), equivalent to more than half of the electricity prices in 2020. These high integration cost estimates, once again, drive home the myth that, in spite of cheaper generation costs, investments into renewables-powered grid is expensive. 

However, based on TransitionZero estimates, such integration cost figures are largely inflated. In fact, between 2018 and 2020, the costs associated with integrating solar in the grid ranges between 0.5 to 1.3 JPY/kWh (US$4.4-11.6/MWh). During the same period, the integration costs for wind came out negative, meaning that wind generation adds value to the grid.

The wide disparity among different estimates of integration costs stem from the varying methodologies in estimating integration cost. Most estimates of integration costs for variable generation, such as solar and wind, take into account the costs of battery storage to manage variability, therefore contributing to high cost estimates. When in fact, the issue of intermittency could be better managed through enhancing grid flexibility through long-term planning and grid infrastructure upgrades that allow for additional flexibility in power grids.

Continued coal use remains the elephant in the room 

As an alternative to renewable energy, conservatives such as Sanae Takaichi, are calling for the continued use of fossil fuels to serve as back up for renewable power, a position that appeals to the interests of traditional Japanese utilities. However, continued operations of coal runs contrary to Japan’s net zero ambitions. Thus, though not made explicit, Takaichi’s support for coal is likely premised on the use of “high efficiency and low emissions”  coal plants and deployment of carbon carbon and storage (CCS).

Takaichi’s stance is not unique. In fact, many in Japan have bought into the rhetoric that next generation coal plants, coupled with CCS, are pivotal technologies for Japan’s net zero future. For example, Japan has invested heavily into commercializing integrated coal gasification combined cycles (IGCC) plants, which convert coal into gas for combustion.  The country has also placed its bets on hydrogen and its carriers, such as ammonia, which emits no carbon when burnt, as an alternative for combustion engines in the power sector. 

However, these coal plant technologies have largely failed to deliver on their promises. IGCC plants offer only marginal (~10%)  emissions abatement compared to traditional pulverized coal plants, and are prone to cost blowouts. The direct combustion of ammonia, on the other hand, remains a largely untested technology, far from a commercialised roll-out. This relegates its application to limited co-firing with coal plants, which continues to pump out double the carbon emissions of unabated gas plants, at a cost double that of traditional coal plants. Unless coupled with CCS technologies, these technologies have no place in Japan’s net-zero energy future. 

A fork in the road?

With largely differing views on energy policy, it is not a stretch to say that each one of the candidates holds the key to a distinct energy future for Japan. The liberal Kono embodies a predominantly renewable-powered Japan, absent of fossil fuels and with a revitalized grid system that is decentralized, digitized and resilient. On the other hand, a Takaichi-led Japan will see a largely business-as-usual scenario, with nuclear and fossil fuels continuing to steal the show.

While the world waits to see which energy future Japan chooses, we can already draw one bold conclusion: a vision of Japan’s future can no longer be untangled from its energy and climate policy decisions. 

The ascent of climate policy up the political agenda is part of an international trend. As climate change develops into a megatrend of the 21st century, akin to globalization in the 20th century, climate policy is no longer a fringe issue, but is now integral to any discussion on the future economic prospects of the country. With the IPCC’s latest warning on how close we are to climate tipping points, we no longer have the luxury of time. It is now time to grab the bull by the horns and start confronting key climate challenges head on. What Japan, and perhaps the world, needs now, is a visionary leader to set a course towards a net zero energy reality.