1. NS4960 Spring Term 2018 Japan: Energy Outlook
Oxford Analytica Japan: Coal is set for growth despite solar boom, June 13, 2016

2. 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

3. 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.

4. Recent Developments II
Oil
Oil consumption has been on a broadly falling trend since due to
Greater energy efficiency and
Reduced use of the fuel in power generation
Fukushima reversed this trend temporarily in
Latest government forecasts non-power sector oil demand falling by 1.7% annually
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

5. 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.

6. 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

7. 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

8. 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 GW of coal fired plants will be built implying a heavy shift to coal.

9. 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.

10. 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

11. 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