By Kimiko Hirata, International Director, Kiko Network
Changes in the 5 years after Fukushima
The 2011 Tohoku earthquake and tsunami that resulted in the Fukushima Daiichi nuclear accident was a clear turning point in shifting Japan’s energy system. Right after the accident, all 50 nuclear reactors in Japan were shut down and required to undergo a safety check. As of May 2016, 14 reactors have declared an intent to decommission (including the Fukushima plants), only two reactors are operating, and the remaining 38 reactors are still idly waiting for permission to go back online.
Consequently, thermal power generation, mostly by LNG and oil, has surged to compensate for the short-term loss in nuclear power. This resulted in an increase in both CO2 emissions and costs for fossil fuels (primarily due to a price surge) leading up to FY2013. At the same time, renewable energy installations have sharply increased. Electricity demand has steadily declined for all 10 utilities for the 5th consecutive year (by 3.7%) following a peak in FY2010 (declining from 906TWh to 797TWh in FY2015). These developments have contributed to reduced fossil fuel imports. CO2 emissions also declined in FY2014 for the first time since the Fukushima nuclear accident. While the GDP dropped by 2.0% in FY2014, the Ministry of the Environment stated that the key factors behind the reduced CO2 emissions were reduced energy consumption and improved CO2 intensity through renewables.
Is Japan’s renewable policy on track for an energy transition?
Do these recent developments ensure that Japan is on track for an Energiewende? The answer to this question is both yes and no.
One example can be observed in the recent progress and setbacks in Japan’s feed-in tariff (FIT). The long-awaited FIT introduced in July 2012 demonstrated, was, at first, a success in adopting solar power. It established a guaranteed tariff of 43.2 yen (USD $0.40) per kWh for commercial scale PV over 100MW. It drove an increase in the share of renewables in electricity generation from 10% in FY2010 to 15% in FY2015 (from 1% to 4.7%, excluding hydro). This also contributed to a decline in PV costs. Residential PV costs went down from 50 yen (USD $0.46) per kWh to less than 30 yen (USD $0.28) per kWh – all within 4 years!
Currently, however, the FIT has undergone and is undergoing further changes. The original tariff, which was claimed to be too generous to PV, has declined each year. The tariff of 43.2 yen (USD $0.40) per kWh for commercial-scale PV in 2012 is now only 25.92 yen (USD $0.24) per kWh (as of FY2016). The Japanese government has also decided to allow utilities to curtail electricity from renewables unlimitedly without any financial consequence. Most recently, the government has decided that a tender system will be introduced. With these developments, the previous incentives and positive effects have been almost entirely killed off.
As a result, the future of solar power in Japan is now unclear. Experts predict that this fading FIT will discourage investments in solar power development. At the same time, high expectations remain for other renewable energies, such as geothermal, micro-hydro and wind – technologies which do not yet have high installed capacities in Japan, and whose tariffs, which is still high compared to solar, have remained the same.
The myth of “baseload electricity”
The Japanese government Cabinet approved a revised Basic Energy Plan in 2014. This plan reevaluates the role and definition of nuclear power and coal-fired power as “important baseload electricity” and declares that renewable energy would instead gradually be introduced over a longer time frame. This is reflected in Japan’s Long-term Energy Supply and Demand Outlook of 2015, which projects an increase in electricity demand in FY2030 compared to FY2013 and proposes a quantitative target for the electricity mix in FY2030 (27% LNG, 26% coal, 23% oil, 21% nuclear, and 3% renewables).
These projections imply a heavy reliance on fossil fuels in 2030, almost at the same level as the 10-year average before Fukushima. The nuclear share will decrease from 27% to 21% (a difference compensated by an increase in renewables). However, the proposed 20-22% share of nuclear poses a crucial feasibility question. Assuming a capacity factor of 70%, 35GW of nuclear capacity would be required to meet this given target. At the same time, the current nuclear capacity of 40GW would be reduced to less than 20GW by 2030 if the unit lifetime is set (and maintained) at 40 years. Without extending the unit lifetime or building new reactors, it is not possible to meet the government target. Furthermore, strong public opposition to restarting existing reactors renders the target even more difficult.
Instead, a more likely scenario is coal expansion. Japan is one of very few developed countries to promote coal thermal power. There are currently 47 coal power plants (capacity of 22.5GW) being planned, most of which were planned after the Fukushima accident. If all 47 are built, this could easily cover the nuclear loss and is enough to block potential installations of renewables. The government is providing full support to construct new coal power plants as a source for “clean, stable and reliable” baseload electricity, ignoring the associated lock-in effects.
Issues for the future Energiewende in Japan
In April 2016, the electricity retail market was fully liberalized, allowing households and small business the freedom to choose their power company. This reform is an important step in transforming Japan’s electricity system, but this step alone is not enough; it is crucial to ensure that the shift is in the right direction.
There are a few key steps that could help ensure Japan’s “Energiewende” remains on track. First, Japan would need to keep effective FIT incentives for solar power and other renewables. Japan’s renewable market is still immature and not yet ready for market competition.
Second, Japan would need to reconsider the notion of “baseload electricity” and reverse its priority to renewables. Priority access and priority dispatch for renewables would ensure further deployment.
Third, disclosure of electricity sources by all power companies would need to be mandatory, rather than a “voluntary request”. This would ensure that consumers can choose and support more sustainable sources of electricity.
Fourth, it is crucial to integrate increased flexibility in the energy system together with a better grid connection. Unlimited curtailment without any compensation poses great uncertainty for investment in renewables.
And lastly, setting a clear vision for a sustainable energy future is inevitable. Drastic GHG reduction targets, a nuclear and fossil fuel phase-out plan, and a goal of 100% renewables – such a vision would send the right market signals to relevant stakeholders and help to stop further coal investments.