NS4960 Spring Term 2017 Japan: Energy Outlook Oxford Analytica Japan: Coal is set for growth despite solar boom, June 13, 2016

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

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.

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

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.

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

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

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.

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.

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

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