25 March 2014
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Japan's energy challenges

Japan's energy policy challenges of energy security, energy efficiency and environmental sustainability -- the "3Es" -- have only become more challenging following the Fukushima nuclear crisis.

Japan's energy policy challenges of energy security, energy efficiency, and environmental sustainability -- the "3 Es" -- have only become more challenging following the Fukushima nuclear crisis.

The impact of Fukushima was immediate, with the loss of nuclear power. At the time of writing, all of Japan's nuclear power stations were closed. Nuclear energy accounted for 15% of Japan's energy, and 30% of electricity, until the Fukushima crisis. This lost nuclear energy has been replaced by oil and gas, increasing the country's dependence on fossil fuels. Oil now accounts for about 50% of Japan's total primary energy supplies, while coal is 23% and natural gas 22%.

As a resource-poor country, Japan imports virtually all of its primary energy requirements. Japan's own production of oil, natural gas, hydro electricity, biomass and other renewables (like solar and wind) provide less than 5% of Japan's energy supplies. Thus, Japan is the world's largest liquefied natural gas importer, second largest coal importer, and the third largest net oil importer. This import dependence is exacerbated by a weakly developed renewable energy sector and the loss of nuclear power.

Japan imports virtually all of its oil needs. Some 85% of Japan's oil imports come from the Middle East, leaving the country highly exposed to potential political volatility in this region. Japan's main oil suppliers are Saudi Arabia, United Arab Emirates, Kuwait, Qatar and Iran, along with Russia.

Over 95% of Japan's natural gas supplies are also imported. But there is greater diversity in the sources of gas imports, with Indonesia, Australia, Malaysia, Qatar, Brunei, the United Arab Emirates, Oman and the US all being suppliers.

Japan depends on imports for more than 99% of its domestic coal needs. Some 60% comes from Australia, with much of the rest arriving from Indonesia and China.

Security of supply is thus one of the most important policy issues in Japan, given its near-compete reliance on imported energy, and its relative isolation from energy suppliers.

To reduce the risks of supply insecurity, Japan undertakes a number of measures like maintaining strategic oil and gas stocks, holding long-term supply contracts for gas and coal, investing in overseas energy projects, resource diplomacy with suppliers, and diversifying supply sources.

All these measures help reduce the insecurity of energy supply. But they cannot completely eliminate all supply insecurities. In particular, heightened tensions with Japan's neighbours in the East and South East China pose a threat to the critical sea lanes between Japan and the rest of the world.

Efforts to improve energy efficiency -- the amount of energy required to produce GDP -- offer many potential benefits like reducing import dependence, and therefore security of supply risk, as well as cost savings. This applies to all energy users, namely industry (accounting for 30% of Japan's energy consumption), transport (38%), commercial (18%) and residential (14%).

Japan has one of the world's very best energy efficiency performances. Following the oil shocks of the 1970s, the economy achieved an energy intensity improvement of around 30%. However, since the mid-1980s, this improvement as levelled off.

There has been a strong emphasis on "voluntary approaches", particularly with industry, to improve energy efficiency. While such voluntary approaches may have been somewhat beneficial, they have not been enough. They must be complemented by strong regulations and higher taxes. Japan also has a strong energy research and development program, supported by the government, which mainly pursues energy efficiency measures.

Improving efficiency is key to sustainable energy policy. As a party to the Kyoto Protocol, which it ratified in June 2002, Japan has committed to reducing its greenhouse emissions by 6% below 1990 levels. Japan's Kyoto Protocol Target Achievement Plan includes about 60 policies and measures, mostly related to improving energy efficiency.

But Japan has never been on track to meet its Kyoto commitments, even though it hosted the meeting which created these noble ambitions. And as fossil fuel consumption is now replacing nuclear energy, the Japanese government was obliged to inform the recent climate change meeting in Poland that it could not meet its Kyoto commitment.

Before the Fukushima crisis, Japan was the world's third largest producer of nuclear power, after the US and France. Nuclear energy seemed to be one of the country's least expensive forms of power supply, and was seen as essential for sustainable development and energy security (even though it must import uranium).

Since the Fukushima crisis, there has been a vigorous debate about the future of nuclear energy in Japan. There is now a very strong anti-nuclear movement, with the majority of public opinion favouring a phase-out of nuclear energy. The anti-nuclear movement includes former Prime Minister Junichi Koizumi, industry leader Masayoshi Son and Nobel Prize Winner Kenzaburo Oe. This movement is drawing inspiration from Germany's decision to terminate nuclear power by 2022.

This has threatened Japan's 2010 Energy Plan which called for at least 12 new nuclear reactors to be constructed by 2020. The nuclear share of electric generation was slated to increase to a 50% share by 2030 as the country sought to attempt to reduce greenhouse gas emissions and reduce security of supply risks.

The previous government led by former Prime Minister Noda was indeed committed to phasing out nuclear energy by 2030. But this was met with a push-back from the "nuclear village" (especially the business sector) and the current administration headed by Prime Minister Abe, which came to power in December 2012. They support nuclear power providing at least 15% of power generation.

Prime Minister Abe and industrial interests in Japan favor re-commissioning nuclear power to lower energy costs. But this is not so simple. A new, strengthened nuclear agency, the Nuclear Regulation Authority, must declare any plant safe before it starts. In addition, the law gives towns and villages a say over nearby nuclear plants, and most want to abandon nuclear power.

But the Fukushima crisis has highlighted the full risks and costs of nuclear energy. Japan may be one of the world's less suitable countries for nuclear energy, in light of its vulnerability to earthquakes, sitting as it does on the Pacific "ring of fire". Japan accounts for one-fifth of the world's big earthquakes. This also means that burying nuclear waste (nuclear's great unsolved problem) at home is out of the question. Japan reportedly asked Mongolia to take its accumulated nuclear waste, but this opportunity was wisely declined.

Japan's governance, based on cosy relationships between big business and government, again is not appropriate for a nuclear industry. The Fukushima disaster exposed many cases of regulatory non-compliance, weak supervision and cover-ups by the Tokyo Electric Power Company. Japan's deep bureaucratic tradition, both in business and government, also means that it lacks the agility to respond quickly and decisively to such crises.

The Fukushima crisis has confirmed that the cost advantage of nuclear energy is all too often a mirage. Because, when things do go wrong, they go horribly wrong. As Robert Giegengack of the University of Pennsylvania said, "As we saw in Japan, the consequences of mistakes with nuclear power are very great". Just now, two and a half years down the track, the Fukushima crisis still seems to be getting worse. And it will likely be a question of decades, rather than years, before the problems are solved.

The Fukushima crisis has seen an explosion of interest in renewable energy as a key element in Japan's energy mix. Japan has until now lagged its developed country peers in developing renewable energy sources. Indeed, contrary to its reputation for being on the cutting edge of green technology, its adoption of renewable energy has been painfully slow.

As part of the revised energy policy plan, Japan is now trying to encourage a greater use of renewable energy, from sources such as solar, wind, geothermal, and biomass for power generation.

The Japanese legislature approved generous feed-in tariffs for renewable sources in July 2012, compelling electric utilities to purchase electricity generated by renewable fuel sources, except for nuclear, at fixed prices. The costs are shared by government subsidies and the end users. The feed-in tariffs spurred development of nearly 1.4 GW of renewable energy capacity that was installed between July 2012 and February 2013.

Biomass made up the largest portion (68%) of generation from other renewable sources in 2011. Wind, solar, and tidal power are being actively pursued in the country and installed capacity from these sources increased in recent years to over 4 GW in 2011, up from 0.8 GW in 2004. However, these sources continue to account for a relatively small share of generation at this time.

Most of the growth of renewables in the past year has occurred in solar energy as a result of heavy investment for large-scale PV units. METI is considering 21 additional geothermal projects in addition to the 17 facilities containing 520 MW of capacity that currently exist. The potential for geothermal power is significant because the country has the third largest reserves in the world.

In conclusion, Japan is still a country in search of a dream, despite the promise of Abenomics. It needs to believe in something and regain its self confidence. The Fukushima crisis provides an opportunity of charting such a new future based on renewable energy, based on a new harmonious relationship between the Japanese people and nature. But the tight bonds between big business and government are holding it back from this dream.


John West
Executive Director
Asian Century Institute
Tags: japan, energy, security of supply, energy efficiency, environmental sustainability, Fukushima, nuclear energy, renewable energy

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