Japan's Energy Choices to 2020
This report examines Japan's plans to expand coal both domestically and in Southeast Asia against global trends of accelerated renewable electricity capacity. It finds this strategy is misaligned with the strategic interests of Japan's technology-based industries.
The research finds 53% of the Nikkei top 100 companies (representing almost 140 trillion yen of market value and employing over 3.5 million) have business models that would prefer proliferation of renewable electricity generation, both in Japan and globally, compared to 6% for coal power-related markets.
It concludes that while Japan has surrendered an early lead in solar PV technology, it still retains core R&D and manufacturing competences in Li Ion storage, components and key materials from which to succeed in the still evolving renewables markets. This success will likely depend on it pivoting away from its coal based power generation plans with far more focus on solar and wind.
Bloomberg New Energy Finance (BNEF) projects “renewable energy sources are set to represent almost three quarters of the $10.2 trillion the world will invest in new power generating technology until 2040, thanks to rapidly falling costs for solar and wind power, and a growing role for batteries, including electric vehicle batteries, in balancing supply and demand.” This will be accompanied by the global phase out of coal power, both the IEA and BNEF predict.
Japan's energy policies appear to be driven primarily by organizations that favor the development of large-coal power generation by the existing regional power companies over rapid scaling up of solar and wind power in a more liberalized electricity generation market place. Policy is driven by the "power triangle" consisting of the Japan Business Federation, or Keidanren (representing industry), the Ministry of Economy, Trade and Industry (METI) and the Cabinet Office currently headed by Prime Minister Shinzo Abe.
An analysis of the representation within the METI-Keidanren-Cabinet triangle of power shows the predominance of influence by a few companies from the power, energy intensive and fossil fuel sectors. Industry representation from technology, automotive, telecommunications and homebuilding/construction is weak. The influence of other stakeholders such as trade unions, NGOs, local government, media, civil society group, other government ministries and overseas interests within the energy policy making process is marginal.
As a result, Japan is unique among G7 nations in that it is adding to its domestic coal power generation capacity (46 coal plants, or 21GW in the pipeline) counter to the global coal phase out trend. In parallel with this, its public finance assistance of power projects overseas is primarily directed at coal-generated electricity with a pipeline of 30GW of coal projects planned, mainly in Southeast Asia.
We believe the fundamental shift in world energy generation to solar and wind power described in this report represents a huge global opportunity for Japanese industry, whose strength lies in technology, manufacturing and related services. Although Japan faces issues like a low self sufficiency in energy ( 6.0%), its energy security, restart of nuclear power stations and other various Japan-specific problems of introducing renewable energies, we would like to see Japanese energy policy, particularly in its overseas funded energy projects in key emerging markets, aligned with renewables as opposed to coal, thus maximising opportunities for its economy and industries.
Japan’s continued pursuit of coal firing power generation abroad does not represent any global or long-term trend. It is taking place haphazardly as some firms find temporary commercial benefit in a number of developing countries all of which are committed to the Paris Agreement. The current push for coal abroad should be viewed as short-termism.
Coal power is becoming increasingly contentious in Japan. It is not a welcome energy form for most local communities. Public protests and lawsuits are likely to occur in the future on this issue. The coal lobby in Japan clearly recognizes the challenges ahead for the fuel. Carbon pricing is crucial in this context. Should the true price of carbon emissions become a reality, this along with the rapidly declining costs of renewables would hasten the demise of coal power in Japan and elsewhere. This will in turn give rise to a huge new business opportunity for Japanese industry. Jobs and technologies that supported coal expansion would find cleaner jobs and bigger business opportunities in the thriving new world of renewable energy.
This numerical analysis clearly shows corporate Japan would benefit more from expanding domestic and global renewable energy compared to coal. This should be intuitively obvious by understanding Japan is poor in energy resources but rich in technological and manufacturing innovation.
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