Balance is pivotal to prosperity in Japan’s energy policy

Author: Masakazu Toyoda, Institute of Energy Economics

Few people would have thought that the Ukraine crisis would come a few months after the COP26 climate conference. People around the world are now reflecting on the added complexity of achieving decarbonisation at the same time as ensuring energy security.

In mid-October 2021, Prime Minister Fumio Kishida’s cabinet approved Japan’s Sixth Basic Energy Plan. The plan represents a concrete roadmap for realising two commitments made by former prime minister Yoshihide Suga: to decarbonise by 2050 and to achieve a 46 per cent greenhouse gas reduction (the base year is 2013) by 2030.

The Ukraine crisis has inflated oil, gas and coal prices which were already on the rise due to the recovery from COVID-19 and has prompted calls for a reduction in dependence on Russia. Europe, which is highly dependent on Russia, has been seriously affected. But the impact of the crisis on Japan is expected to be less serious because of its more balanced energy mix and diversified import sources. This is due to Japan’s energy policy being guided by the principle of Safety, Energy Security, Environment and Economic Efficiency (S+3E).

In light of this S+3E policy, balance without dependence on a single energy source is key. Japan imports nearly 92 per cent of its primary energy, but it also tries to diversify its import sources as much as possible. So, its dependence on Russia for oil and gas is less than 10 per cent.

Renewable energy is certainly good for energy security, but Japan and many ASEAN countries face some limits in expanding their renewable energy capabilities due to their meteorological constraints and geographical features.

Given that Japan places importance on balancing these four elements, a balanced energy mix is envisioned not only for 2030, but for 2050. Multiple scenarios are predicted for 2050. In the power supply mix reference scenario, 5060 per cent is planned to be renewable energy, 3040 per cent to be thermal power — via Carbon Capture, Utilisation and Storage (CCUS) and nuclear energy — and 10 per cent to be zero-carbon hydrogen and ammonia.

In 2030, 3638 per cent of Japan’s energy is planned to be renewable, 2022 per cent nuclear, and the remaining 42 per cent will be oil, natural gas, coal and zero-carbon hydrogen or ammonia 2 per cent, 20 per cent, 19 per cent and 1 per cent respectively. The plan envisions coal co-firing with 1 per cent zero-carbon hydrogen and ammonia and this ratio is set to increase substantially.

Japan must ensure a balance of energy sources is implemented. Japan, when decarbonising its economy, is trying to decarbonise and use fossil fuels in a form of zero-carbon hydrogen or ammonia. This is because the policy focuses on emissions as the cause of the problem, not fossil fuels. Some people may think of safety concerns with nuclear energy while others may think of the limit placed on renewable energy in Japan.

If CO2 is appropriately sequestered and decarbonised through CCUS, we can use it to its full potential. Ammonia co-firing of coal is one such idea. Coal is produced in more diversified and politically stable countries and can better contribute to energy security than natural gas. Coal-fired power plants can be mixed with 5060 per cent hydrogen or ammonia.

If coal-fired power plants can be co-fired to that extent, they will be comparable to gas-fired plants in terms of CO2 emissions. The final goal is to achieve zero-carbon ammonia or hydrogen single firing. The cost-competitive option should be adopted between renewable energy-based or fossil fuel-based hydrogen and ammonia. But here the emphasis will also be on balance. Japan is also trying to share co-firing technology with Asian countries.

Based on the idea that fossil fuels can be decarbonised, Japan is taking the position that fossil fuels are not stranded assets and that new investment is necessary. The policy is positioned as ‘comprehensive resource diplomacy’. Through the framework of multilateral cooperation, it will actively contribute to securing new investment for fossil fuels, innovation cooperation for fossil fuel decarbonisation and the formation of international rules for methane control and credit trading, among others. In this sense, the Ukraine crisis is expected to encourage many countries to share Japan’s energy policy.

The acceleration of nuclear power resumption is also essential. Prior to the Fukushima nuclear disaster, Japan had 54 nuclear power plants. To achieve its 2030 goal, it is necessary to restart approximately 27 nuclear reactors, but the number of nuclear reactors currently allowed to restart by the Nuclear Regulatory Agency is just 10. The acceleration of restarting operations is inevitable and possible, if Japanese safety regulations are optimised to balance the safety and utilisation ratio — for instance, by making the regulations more functional rather than prescriptive.

The Ukraine crisis has served as an opportunity for the US and Europe to reaffirm the importance of nuclear energy. The Japanese government must further reconfirm the importance of nuclear power in light of the S+3E energy security policies.

Masakazu Toyoda is Special Advisor at the Institute of Energy Economics, Japan.