Net Zero Japan 2050
―Summary for Business Leaders―Interim Report on Decarbonization Scenarios for 2050

Center for Global Commons, The University of Tokyo

Nahoko Ishii(Director, Center for Global Commons, The University of Tokyo)
Masakazu Sugiyama(Director, Research Center for Advanced Science and Technology, The University of Tokyo)
June 2023

This report was sponsored by ETI-CGC (an industry-academia collaborative platform established by the University of Tokyo and Japanese businessleaders to discuss pathways for Net Zero in Japan) and is intended to stimulate active climate change discussions by publishing the interim resultsof research activities conducted by Center for Global Commons at the University of Tokyo. The analysis results and views expressed here will be
updated in light of future research activities. This report is published under the responsibility of Center for Global Commons and the authors, anddoes not represent the views of sponsors of ETI-CGC.
The English version of the report is a translation of the original in Japanese for information purposes only. In case of a discrepancy, the Japaneseoriginal will prevail.

Table of Contents

1.

Significance of developing Net Zero Japan 2050 Scenarios ...................................................... 32.

Key messages from the Net Zero Japan 2050 Scenarios ........................................................... 4

3.

Overview of the Net Zero Japan 2050 Scenarios ......................................................................... 4a.

CO2-free energy supply ................................................................................................................. 4b.

Scenarios combining CO2-free energy sources ......................................................................... 5c.

Energy demand in 2050 ................................................................................................................. 7d.

Power mix modeling..................................................................................................................... 16
Issues and actions to utilize each energy source ..................................................................... 22

4.

5.

a.

Solar and wind power generation ............................................................................................... 22b.

Hydrogen and ammonia............................................................................................................... 22c.

Nuclear power ............................................................................................................................... 23d.

Storage batteries .......................................................................................................................... 24e.

Buildings ....................................................................................................................................... 24

f.

Ground transport .......................................................................................................................... 24g.

Steel ............................................................................................................................................... 25h.

Chemicals ...................................................................................................................................... 25
Future research efforts ................................................................................................................. 26

2

1.

Significance of developing Net Zero Japan 2050 Scenarios

In order to keep global temperature rise below 1.5°C from pre-industrial levels, the world must work together
and overcome numerous daunting challenges to achieve Net Zero. In close collaboration with Japanesebusiness leaders, the University of Tokyo's Center for Global Commons (CGC) established the Energy
Transition Initiative – Center for Global Commons (ETI-CGC). The initiative aims to develop pathways, from ascientific perspective, not only for transforming Japan's energy system but also for creating the economic andsocial systems that can lead to a prosperous future.
As the first step in this process, the CGC has developed the Net Zero Japan 2050 Scenarios, quantitative
scenarios of energy systems that can achieve Net Zero by 2050, and presents them in this interim report, called
Summary for Business Leaders While the Basic Policy for the Realization of GX prepared by the Japanese
government adopt a forecasting approach for the next 10 years, and are not necessarily explicit on how Net
Zero will be achieved by 2050 through the integration of efforts in each sector, this report aims to quantitatively
present an overall picture of an energy system for Japan that can achieve Net Zero by 2050. It serves as afoundation for realizing future efforts for Net Zero through a backcasting approach. Considering Japan has
relatively difficult geographical conditions that do not make it easy to apply a large scale of renewable energy
at low cost and has heavy industries that require the development of innovative technologies beyond clean
electricity for decarbonization, the scenarios demonstrates that it is possible to achieve Net Zero in Japan by
2050 through a combination of scientifically recognized approaches: promoting electrification to shift fromconsumption of fossil fuels to electricity; massive introduction of renewable energy; large-scale introduction ofhydrogen, ammonia, and other CO2-free fuels; utilization of nuclear power; and deployment of CO2 captureand storage within the feasible extent. On the other hand, the scenarios clearly highlight the necessity for drastictransitions that are technically feasible but cannot be realized without exceptional levels of policy and investment.
These include large-scale electrification in the building and transportation sectors, the introduction of severalto ten-times the current amount of renewable energy (solar and wind), and the procurement of CO2-freehydrogen, with an estimated annual demand of approximately 20 to 40 million tons for both for power generationand direct use.
These scenarios present some of the possible scenarios that could achieve Net Zero for Japan by 2050, and it
is important to continue exploring desirable ones among diverse possibilities. In addition, the analysis of eachsector involves various assumptions and should be updated with future technological developments. The
scenarios do not aim to accurately predict the energy system of the future, but rather to clarify the scale andpace of transitions toward Net Zero in the future by backcasting from the energy system in 2050 throughscientific and quantitative discussions and to identify bottlenecks and priority targets for action. The overall
picture of the quantitative energy system presented by the Net Zero Japan 2050 Scenarios identifies thetechnologies that should be drastically accelerated for social implementation and the industrial sectors in which
new technological development is required for decarbonization. The ETI-CGC hopes that the development ofthese scenarios will stimulate a broad discussion on the most effective and practical economic pathways to3

achieve Net Zero and lead to recommendations for priority targets for technology development and social
implementation in each industrial sector, as well as policies and investments to realize the transition.
2.

Key messages from the Net Zero Japan 2050 Scenarios

This Summary for Business Leaders gives an overview of the interim results of the Net Zero Japan 2050
Scenario analysis. The key implications that emerged through the analysis are as follows.


Even under Japan's constraints such as limited renewable energy generation potential capacity andheavy industries that are considered technically difficult to decarbonize, Japan's energy system cantechnically and economically achieve Net Zero. By promoting globally-acknowledged decarbonization
measures such as electrification and conversion to carbon-free fuels in all sectors, it is possible to keepenergy costs at a reasonable level without discontinuous changes from the current industrial structure.

Supply of CO2-free energy to achieve Net Zero will rely on a well-balanced energy mix that combines(1) renewable electricity (mainly solar and wind power), (2) CO2-free fuels (primarily from hydrogen andammonia), and (3) nuclear power. There are various possible approaches to this combination, and it will
be necessary to further explore the optimal mix for Japan, taking into consideration the potential of eachenergy supply source, social acceptance, etc.

Diversity and resilience of energy sources will be further enhanced if a sufficient supply of carbon-neutral
fuels (biofuels, synfuels derived from captured CO2, and other life-cycle carbon-neutral fuels; hereafter“CN fuels”) can be secured through technological progress that does not compete with food production
or damage biodiversity. These energy sources should primarily be used for high-priority applications,taking into account the difficulty of energy conversion and their contribution to resilience.



To realize CO2-free energy supply, the current energy system, which relies heavily on the direct use offossil fuels, must be transformed to a new system that uses an optimal combination of electricity,hydrogen/ammonia, and CN fuels. This requires a fundamental transformation of social infrastructure,
which in turn urgently requires the advancement of technological development, policy, and investment.
It is necessary to further clarify the specifics of these recommendations through future analysis and put
them into prompt actions.



Even if the use of fossil resources can be minimized by 2050, the consumption of fossil fuels will not be
eliminated. When using fossil resources, combination with carbon capture and storage (CCS) and carbon
capture and utilization (CCU), whereby the conversion of CO2 captured using renewable energy intohydrocarbons, to a limited extent will play an important role.

3.

Overview of the Net Zero Japan 2050 Scenariosa.

CO2-free energy supply

There are four main energy sources that can both supply energy to meet the demands of Japanese society andachieve Net Zero in 2050.
(1) Renewable energy from solar, wind, etc.

4(2) Nuclear power(3) CO2-free hydrogen and ammonia(4) Biofuels and synfuels (Carbon Neutral (CN) fuels)
How to balance these sources in accordance with Japan's situation will be determined based on technologicalprogress and social acceptability, including cost, available supply, safety, etc. On the other hand, in order tosupport truly sustainable economic activity, regenerative energy sources that can be used in perpetuity without
placing a burden on the earth over the long term are essential. Continued use of fossil resources combined with
CCS is partly inevitable, especially in the industrial sector, as a realistic option to achieve Net Zero by 2050.
However, there is a limit to the amount of CO2 that can be treated by CCS due to geographical restrictions andother factors, so it is necessary to limit the use of CCS to a reasonable and effective extent in the scenarios,
giving priority to sectors where CO2 emission reductions are technically difficult.
As summarized in Table 1 below, each of the four main CO2-free energy sources assumed in the 2050 Net
Zero scenarios has various challenges (technical, economic, and social acceptability) as well as advantages.
Depending on the form of energy use in each sector (e.g., electrification, viability of fuel conversion to hydrogen,etc.), it is necessary to consider the optimal energy mix while taking into account the advantages anddisadvantages of each energy source. With regard to matters such as offshore wind power and the cost of CO2free hydrogen, it is expected that focused investment will further reduce costs by stimulating technologicaldevelopment and mass implementation. On the other hand, social acceptability may be a limiting factor withrespect to the introduction of large solar power facilities on land or the massive construction of new nuclear
power plants, and such constraints need to be considered in the scenarios.

Table 1 Energy sources that can achieve Net Zero
CO2-free energy source
Solar and wind power
generation

Advantages
Large-scale introduction
possible

Nuclear power
generation

Large volume and stablesupplyCO2-free hydrogen andammonia

Necessary for fuelapplications
Power generation withbalancing power
Liquid fuel that is easy
to transport andstockpile

Biofuels and synfuels(CN fuel)b.

Challenges to overcome
Power generation fluctuations (inevitable inprinciple)
Location constraints (including control of rights)
High cost of offshore windNot expected to be a balancing power
Location constraints and disposal of nuclear fuelSocial acceptability
Low-cost, high-volume procurement (imported
from overseas)
Difficult to stockpile for long periods (except fororganic hydride)
Limited supply available
More energy required to produce synfuel thanhydrogen

Scenarios combining CO2-free energy sources

There can be multiple energy scenarios that use a combination of the four CO2-free energy sources to achieve
Net Zero. In this analysis, these scenarios were classified based on the energy source maximally utilized, andfour typical cases of scenario were analyzed: (1) maximum utilization of renewable energy, (2) maximum

5utilization of hydrogen, (3) maximum utilization of nuclear power in addition to renewable energy and hydrogen,and (4) maximum utilization of CN fuel.
In all scenarios, electrification is promoted in buildings and all other sectors. In Scenario (1) and (3) in particular,
thorough electrification is essential to maximize the use of renewable and nuclear power generation. Also, in
Scenario (2), a considerable amount of energy demand must be supplied by renewable electricity, and largescale promotion of electrification will be essential because it is difficult to replace all current fossil fuel use withhydrogen. Therefore, this analysis makes the following assumptions: Scenario (1), (2), and (3) assume themaximum possible electrification; Scenario (1) assumes that solar and wind power generation are introduced inlarge quantities without any constraint on the amount of electricity available (the maximum amount that can be
introduced in the vicinity of Japan) and that the discrepancy with electricity demand is managed through active
use of storage batteries. Scenario (2) assumes that CO2-free hydrogen and ammonia procured from overseas
is used in large quantities for thermal power generation as balancing power because the introduction ofsolar/wind power generation and storage batteries is subject to the limitations of potential capacity and highcost. Scenario (1) and (2) assume that nuclear power generation capacity has a 60-year lifespan and no new
construction to take place, while Scenario (3) assumes that nuclear power generation is actively utilized whileconsidering life extension, replacement, and new construction of generation facilities. In Scenario (4), it would
be relatively easy to replace most of the current fossil fuel use with CN fuels, but it would be difficult to supply
CN fuels in as large a quantity as the current fossil fuels, so a considerable push in electrification would still benecessary, although not as great as in Scenario (1) through (3).
The level of difficulty in promoting such electrification varies by sector. There are clear prospects for thetechnology required for electrification of the building sector, and the task will be to promote its implementation
in society. With respect to mobility, the electrification of light passenger vehicles is almost within reach, but there
are significant technical hurdles for the electrification of heavy commercial vehicles, especially ships and aircraft,making the use of hydrogen and CN fuels likely necessary for these. In heavy industry, there are several
processes that makes substantial electrification very difficult. Therefore, in sectors such as steel, chemical, andcement manufacturing, it will be necessary to continue to use fossil resources in conjunction with CCS, while
waiting for innovative technological developments to enable electrification, and attempting maximum conversion
to hydrogen and ammonia.
The most desirable scenario among Scenario (1) through (4) for Japan should be determined by consideringvarious socioeconomic criteria. Additionally, another essential factor is whether a viable pathway can be drawn
to realize the scenario. Taking the above into consideration, the vision of society that we should target for2050 may lie somewhere between these Scenarios.

6Table 2 Four energy scenarios classified based on the energy source maximally utilized

Scenario classification(1) Renewableenergy1utilization(4) CN fuel3
utilization

Electrification + CN
fuel

Mobility

BEVs, hydrogen for heavy vehicles, CN fuel for aircrafts, etc.

PHEV using CN fuelHydrogen for heavy
vehiclesCN fuel for aircraft,etc.

Industry

Fossil resources for use together with electrification, conversion to hydrogen, and CCS(limited use)
High potential
capacity,
low cost

Low potential
capacity,high cost

Low/high potential
capacity,
low/high cost

Low potential
capacity,high cost

Nuclearpower

60-year lifespan, no new construction

Lifespanextension,
replacement, andnew construction560-year lifespan, no
new construction

Hydrogenfired
thermalpower

Provide the balancing power and that renewable energy and nuclear power cannot andcompensating for shortfalls

RenewableenergyPowersupply4(3) Renewableenergy orhydrogen& nuclear power
utilization

Maximum electrification

Buildings
Energyconversion
policy bysector(2) Hydrogen2
utilization

Considered scenario #(see below)

Scenario 7-a

Scenario 1-a

Scenario 1-c/7-c(Further investigation
planned)BEV: Battery Electric Vehicle, PHEV: Plug in Hybrid Electric Vehiclec.

Energy demand in 2050

In order to envision an energy system for 2050, it is first necessary to quantify energy demand. The starting
point for scenario development is to quantify energy demand for each sector, building assumptions of the scaleof activity, product demand, and technological innovation in that sector. This analysis did not consider abrupt
socioeconomic system shifts. Instead, it estimated energy demand by assuming the utilization of
decarbonization technologies expected in 2050 for each sector. The analysis hypothesized a business-as-usualcase in which the current foundation of economic activity and industrial structure continues. It considered adecrease in demand proportional to population decline (about 20%), increase in energy efficiency associatedwith electrification (especially mobility), progress in recycling (chemical industry and steel), and a mild decline
in exports (steel).

1 Electricity generated mainly from solar and wind power
2 CO2-free hydrogen and ammonia procured mainly from overseas
3 Synfuels produced from biofuels and recovered CO2 (utilized within the constraints of production potential)
4 Obtained by optimal calculation minimizing power system cost (equipment) with the power supply-demand balance (hourly) within thenine regions of Japan as a condition
5 Assumed generation capacity to be examined in more detail7Key assumptions for each sector in the decarbonization scenarios are summarized below.
(1) Buildings — heating
Heating-related energy demand is assumed to decrease by 30% from 2019 as a result of adecrease in energy demand due to population decline, improved insulation, increased energy
efficiency through electrification (use of heat pumps), and an increase in demand due to improved
living standards. It is assumed that hydrogen fuel cells will be used in some environments whereuse of heat pumps is difficult.

Figure 1 Final energy demand (EJ) — buildings (heating)(2) Buildings — non-heating
Energy demand is assumed to decrease by 19% due to population decline and by 10% due toimproved energy efficiency, and 100% electrification is assumed to be achieved through thoroughpromotion of electrification.

Figure 2 Final energy demand (EJ) — buildings (non-heating)(3) Ground transport
Transportation demand was assumed to be accordance with the forecast of volume and mileage by
the Japan Automobile Manufacturers Association (Figure 1). Transportation energy efficiency is
assumed to remain unchanged from the current level, except for an improvement of energy efficiency

8

of passenger electric vehicles (16%).
With the progress of electrification of the drive train, it is assumed that battery-driven electric vehicles(BEVs) and hydrogen-driven vehicles (FCVs) will account for 90% and 10%, respectively, of
passenger vehicles (light-duty vehicles; LDVs) on a volume basis, while BEVs and FCVs will accountfor 60% and 40%, respectively, of commercial vehicles (heavy-duty vehicles; HDVs). The energy
demand in 2050 as a result of these assumptions is projected as shown in Figure 2.

Figure 1 LDV/HDV volume and travel distance forecasts

Figure 2 Final energy demand (EJ) — ground transport(4) Shipping (domestic Japan)
It is assumed that transportation demand will remain constant due to population decline offset withincreased demand for cargo transport, and that there will be a 20% improvement in the energy
efficiency of vessels. Electric power from storage batteries and fuel cells is assumed to be the9mainstream for short-distance marine transportation, with a portion using ammonia internal
combustion engines. Energy demand for international transportation is not included in the energy
consumption of Japan.

Figure 3 Final energy demand (EJ) — shipping(5) Aviation
The amount of freight ton-kilometers for both domestic and international freight transportation isassumed to be unchanged from 2019 levels, with the impact of population decline and logistics
growth offsetting each other. A 19% decrease commensurate with population decline is assumed
for passenger transportation. Meanwhile, energy efficiency is assumed to improve by 40% in bothfreight and passenger transportation. Electrification is assumed to be limited to short distances, andthe main energy sources to be artificial fuels synthesized from CO2 (40%) and biofuels (40%).

Figure 4 Final energy demand (EJ) — aviation
10(6) Iron making
Domestic demand is assumed to decrease by 19% in proportion to population. The ratio of exports
to domestic steel supply is assumed to decrease from 33% to 20% due to increased production
capacity in Southeast Asia and other foreign countries. Progress in recycling is assumed to increase
the share of steel scrap in steel raw materials from 35% in 2019 to 70%. Two thirds of the remaining
pig iron production is assumed to be converted from blast furnaces using coal to direct reduction ofiron (DRI) using hydrogen. Furthermore, the ratio of electric arc furnaces in steel production isassumed to increase from 25% in 2019 to 50%. Under these assumptions, the energy demanddecreases by 53% shown in Figure 7 is derived assuming the energy efficiency of each process(Figure 6).

Figure 5 Hypothesized steel production volume and manufacturing process ratios

Figure 6 Energy efficiency of each process in iron making
11

Figure 7 Final energy demand (EJ) — steel(7) Chemicals
In terms of demand, a 47% per capita decrease in the use of plastics and a 10% per capita decreasein the use of chemicals other than plastics (except for 19% per capita decrease in fertilizers) is
assumed. By way of chemical feedstocks to meet these demands, the primary method of plastics
recycling, which is currently heat recovery, is assumed to be converted mainly to mechanicalrecycling and chemical recycling, and the shortfall in demand to be met by bio-feedstocks (Figure9). The energy intensity of the chemical process is assumed to remain unchanged from 2019 at
49.5 GJ/t. The energy for production is assumed to be sourced from 35% electricity, 30% hydrogen,and 35% fossil fuels + CCS.

Figure 8 Chemical product demand (million tons) — chemicals

12Figure 9 Chemical feedstock

Figure 10

Final energy demand (EJ) — chemicals(8) Cement
Energy demand is expected to decrease by 19% due to population decline and by 10% due toimproved manufacturing efficiency. Technically, energy-savings in the firing process, electrificationof heating, and use of biofuels and hydrogen are assumed while CCS is considered to be essential
for the inevitable CO2 emissions.

Figure 11

Final energy demand (EJ) — cement
13

Table 3 shows the main decarbonization technologies and changes in energy demand in each of the sectors
described above (2019 values are actual values and 2050 values are the result of this scenario analysis). Energy
demand is expected to decrease by 43%, from 13.2 EJ to 7.5 EJ.
Figure 14 presents the results with energy demand in each sector on the vertical axis and the percentage ofsupply of each energy source on the horizontal axis. The area occupied by each color represents the total
supply of each energy source in 2019 and 2050, respectively. In all of the Scenarios (1) through (4) describedin the previous section, the promotion of electrification is essential under the constraints of achieving Net Zero.
For this reason, the energy demand estimates presented here for each sector assume the maximum possible
promotion of electrification. (In the case of maximum utilization of CN fuel in Scenario (4), it is possible that CN
fuels could directly replace current fossil fuel use. However, since the supply potential of CN fuels needs to befurther examined in future study, this study only presents scenarios assuming maximum electrification.)
Correspondingly, fossil fuels represented in black (without CCS in 2019) account for the majority of the area in
2019, while electricity represented in blue accounts for about 69% of final energy demand in the 2050 scenarios.

14

Table 3 Overview of final energy demand in Japan in 2019 and 2050
SectorBuildings
heatingPrimary decarbonization technology—

Buildings — nonheating
Passenger
vehicles (LDV)
Commercial
vehicles (HDV)
Shipping
Aviation
CementSteel

Chemicals
Other

Thorough electrification of heat supply (use ofenergy-efficient heat pumps, etc.)
Reduction of power consumption of existing
appliances, computer equipment, etc. byimprovement of energy efficiency
Nearly all electrified
Combination of electrification and hydrogenpowered depending on application
Combination of
Use of clean ammonia
electric-powered forfor long-distanceshort distance travel
domestic navigation
Utilization of biofuels or
synfuels (SAF)
Decrease in energy demand due to improved
manufacturing efficiency, and energy saving andelectrification of the firing process. CCS utilized
for residual emissions.
Use of recycled steel. Use of hydrogen in crude
steel production. Approx. half of steel production
electrified. CCS utilized for residual emissions.
Increase of recycling rate (especially chemical
recycling), reduction of plastic consumption, andelectrification of chemical processes. CCS
utilized for residual emissions.
Progress in clean electrification made inrailroads, agriculture, and other industries

Total

Final energy demand (EJ)
2019
2050
1.67

1.17

2.28

1.60

1.47

0.38

1.16

0.62

0.15

0.11

0.39

0.20

0.21

0.16

1.59

0.75

2.28

0.92

1.92

1.55

13.2

7.52

Note: Decreased demand due to population decline in 2050 (approximately 20% decrease from 2019) istaken into account in all sectors.

Figure 12

Energy demand (EJ) in 2019 (actual) and 2050 (estimated)15

As a result of this promotion of electrification, electricity demand is expected to increase by 56% over 2019,reaching 1,448 TWh per year, as shown in Figure 13. Note that all hydrogen is assumed to be imported, andthe electricity used in each sector to produce hydrogen is not included in the electricity demand here.

Figure 13

Electricity demand (TWh) in 2019 (actual) and 2050 (estimated)

If future progress of this study indicates that more desirable changes in the social and economic structure canbe hypothesized, the assumptions for estimating energy demand will be revised accordingly, and energy
demand in 2050 will be reexamined.
d.

Power mix modeling

Optimization calculations were performed to identify the optimal power mix that meets the assumed annual
power demand of 1,448 TWh in 2050 as described in the previous section, such that the power system cost is
minimized while maintaining the balance between supply and demand of electricity. In conducting this simulation,
analysis was conducted using an optimal power generation mix (OPGM) model 6 with the cooperation ofProfessor Ryoichi Komiyama, the Fujii-Komiyama Laboratory at the University of Tokyo.
The power mix was derived by optimization calculations for the 11 cases shown in Table 4, including Scenario(1) through (4) shown in Table 2. The three assumptions that were varied in each case were (i) the cost ofsolar/wind power and storage batteries, (ii) the potential capacity of solar and wind power installed, and (iii) the
6

OPGM is an analytical model of electricity supply and demand for a power system based on linear programming, where the objectivefunction is to minimize the power system cost (generation cost + fuel cost + power storage cost). Analysis was conducted with zero CO2emissions as a constraint within a geographic and temporal resolution of the hourly electricity supply-demand balance in the nine regionsof Japan.

16

installed capacity of nuclear power. Regarding power generation costs, Bloomberg NEF's 2050 cost outlook(high and low) was used for solar/wind power and storage batteries7, and the 2030 values from METI data8
were referred for other power generation costs. All fossil fuel-based power generation was assumed to be
combined with CCS, and the same METI data were used for the cost of this9. Thermal power generation using
CO2-free hydrogen and ammonia is assumed to be exclusively fired and not to require CCS. Hydrogen cost
was assumed to be 20 JPY/Nm3 (approximately 2 USD/kg), in line with the government target for 2050. It wasalso assumed that there would be no quantity constraints on the hydrogen through imports.

Table 4 Eleven cases of power mix derived by the OPGM model
Case

1-c

1-b

1-a

2

RE costHigh

Storage battery
costJapan – high

RE potential
capacity limit10
Nuclear power
generation
installed
capacity11
(GW)

Low

46

Hydrogen + nuclear
power utilization
scenario

3

4

5

6

7-a

7-b

7-c

Low

High

37

Hydrogen utilization
scenario

Japan – low
No
limit

Low

High

USA & Germany –mediumNo limit

24

37

Renewable energy
utilization
scenario

46

Renewable energy +nuclear power
utilization

The case numbers correspond to the ease of introducing renewable energy and storage batteries. In Case 1,
the cost of renewable energy generation and storage batteries is assumed to be high, and the potential capacityof renewable energy to be small, making it a case where renewable energy generation is difficult to introduce.
Conversely, in Case 7, the cost of renewable energy generation and storage batteries is low, and renewableenergy generation is introduced without any limits on the potential capacity, making it a case where renewableenergy generation is introduced to the maximum extent possible, including the contribution of storage batteries
to the adjustment of electricity supply and demand. Cases 2 through 6 assume situations intermediate between

7 Bloomberg NEF(2022), 1H 2022 LCOE Update
8 Set based on the Ministry of Economy, Trade and Industry's “List of various types of power source (Document 3, Working Group on

Power Generation Cost Verification (8th Meeting) of the Advisory Committee for Natural Resources and Energy)” [in Japanese].
9 Set based on the Ministry of Economy, Trade and Industry's “List of various types of power source (Document 3, Working Group on
Power Generation Cost Verification (8th Meeting) of the Advisory Committee for Natural Resources and Energy)” [in Japanese].
10 Low: PV 259 GW, onshore wind 41 GW, offshore wind 47 GW. Ministry of the Environment, “Entrusted Work Concerning theDevelopment and Disclosure of Basic Zoning Information Concerning Renewable Energies (FY 2019) (March 2020)”. High: PV 699 GW,
onshore wind 285 GW, offshore wind 1,120 GW. Central Research Institute of Electric Power Industry, “Examination of Mass Introduction
Scenarios for Wind and Solar Power Generation Toward Realization of Net Zero” [in Japanese] (Strategic Policy Committee of theAdvisory Committee for Natural Resources and Energy, 34th Session, December 14, 2020).
11 24 GW capacity assumes 60-years operation of existing nuclear power plants and 37 GW capacity assumes 80-years operation ofexisting nuclear power plants. Data from “31st Session of the Nuclear Energy Subcommittee, Electricity and Gas Industry Committee,
Advisory Committee for Natural Resources and Energy” [in Japanese]. 46 GW is the sum of the existing nuclear power plant capacity
assuming 80-years operation and the capacity of nuclear power plants for which there are plans for new construction. Current Status of
Nuclear Power Plants in Japan, Japan Atomic Industrial Forum, Inc.(https://www. jaif. or. jp/cms_admin/wp-content/uploads/2023/01/jpnpps-operation20230110. pdf, accessed: January 30, 2023).

17

the two.
Concerning the installed capacity of nuclear power plants, the following cases were assumed: existing nuclear
power plants are phased out, based on a lifespan of 60 years (24 GW installed capacity in 2050; subcase “-a”
or none); the upper limit of operation period is tentatively extended to 80 years, based on the basic policy on
the shift from nuclear power phase-out as presented in the government's GX Implementation Council (37 GW;
subcase “-b”); all nuclear power generation from ongoing new construction projects is operational (46 GW;
subcase “-c”).
The correspondence with Scenarios (1) through (4) shown in Table 2 is also noted in Table 4.

Based on the above scenario settings, the power mix in 2050 was calculated by optimization calculations
taking into account the hourly power supply-demand balance given by the OPGM model. The power mix
for Scenarios (1) through (4) is shown in Figure 14.

Figure 14 2050 power mix
Maximum hydrogen + nuclear power utilization scenario (1-c): Limited amount of renewable energy
generation and storage batteries installed due to cost and potential capacity limits. The introduction of
46 GW of nuclear capacity reduces the need for hydrogen (ammonia) fired thermal power generation
relative to 1-a. The power system cost is also slightly reduced compared to 1-a.



Maximum hydrogen utilization scenario (1-a): Limited amount of renewable energy generation andstorage batteries installed due to cost and potential capacity limits. Hydrogen (ammonia) fired thermal
power generation is the main source of electricity supply, accounting for 55% of total power generation.

18

Power system costs are the highest of the four scenarios.
Maximum renewable energy utilization scenario (7-a): Largest amount of renewable energy generation
installed, and a large number of storage batteries installed to fill the gap between the amount of electricity
generated each hour and electricity demand. Due to the low renewable energy operation rate andfrequent output curtailment, the power generation installed capacity is the highest. The installed capacityof solar power generation is 657 GW, about 10 times the current capacity.

Maximum renewable energy & nuclear power utilization scenario (7-c): Although much of the electricity
supply depends on renewable energy generation, the introduction of 46 GW of nuclear power reduces
the amount of renewable energy generation compared to 7-a. Power system costs are also reduced
slightly from 7-a.

In all cases, the use of thermal power generation combining fossil fuels and CCS is extremely limited. This isbecause fossil fuel-based thermal power generation is slightly more expensive than hydrogen-based thermal
power generation, based on the assumption that hydrogen can be imported at the government's target cost of
20 JPY/Nm3 (about 2 USD/kg) in 2050 without quantity constraints.
Regarding storage battery demand in the mobility sector, it is calculated that 5.8 TWh (3.2 TWh for passenger
vehicles and 2.6 TWh for commercial vehicles) of storage batteries are required. The storage battery demandin the renewable energy utilization scenario (1.322 TWh) corresponds to 19% of the total storage battery
demand taking into account demand in mobility, while storage battery demand in the hydrogen + nuclear power
utilization scenario, which makes the least use of storage batteries (0.169 TWh), corresponds to 3%.
In the OPGM simulation, in nine regions that are currently used as a unit for power supply and demand
adjustment in Japan, considering the hourly power supply and demand balance (“same amount at the sametime”), the combination of power sources that minimizes power system costs is calculated. In the hydrogen +nuclear power utilization scenario (1-c), nuclear power is operated as the base power source, while hydrogen(ammonia) power generation is introduced in large quantities and functions as a balancing power for renewableenergy sources (solar and wind power). On the other hand, in the renewable energy utilization scenario (7-a),a large amount of renewable energy generation is introduced, and storage batteries play an important role inbalancing the hourly electricity supply-demand balance. Solar power output is curtailed frequently and in large
quantities.

19

Figure 15

Example of electricity supply and demand management

Of the four scenarios, the scenario that requires the most hydrogen is the hydrogen utilization scenario
at 43 million tons, while the scenario that requires the least is the renewable energy + nuclear power
utilization scenario at 18 million tons. In the latter scenario, if green hydrogen were produced by waterelectrolysis using the entire amount of output-curtailed electricity from renewable energy generation, 1.8
million tons of hydrogen could be produced. This is equivalent to about 1/5 of the 7.9 million tons of nonpower generation hydrogen demand in 2050, most of which will need to be produced by means otherthan electricity from the Japan power grid. In other words, it is necessary to rely on imports or hydrogenproduction from off-grid renewable energy sources, such as deep offshore wind power.

20

Figure 16

2050 hydrogen demand

Of the four scenarios, the scenario that requires the most CCS is the hydrogen utilization scenario (1-a),which is estimated to require 67 million tons of CCS. The scenario with the lowest CCS demand is therenewable energy + nuclear power utilization scenario (7-c), which requires 49 million tons of CCS.
Although there are many uncertainties, the amount of CCS processing within Japan is expected to be
100 million tons per year, and the amount of CCS required in this scenario is within the range of theamount of CCS that can be processed.

Figure 17

Required CCS in 2050

21

4.

Issues and actions to utilize each energy sourceThis scenario analysis showed that even under the characteristic conditions of Japan such as a limited
renewable energy generation potential capacity and a heavy industry that is considered technically difficult todecarbonize, Japan has the potential to achieve Net Zero while keeping energy costs at a reasonable level
without abrupt changes from the current industrial structure. This can be achieved by promoting globallyaccepted decarbonization measures such as electrification and conversion to carbon-free fuels in all sectors. A
number of issues must be resolved in order to realize the energy system picture presented in these scenarios.
The most important of these are as follows.
a.

Solar and wind power generation

For the mass introduction of renewable energy (especially solar power), it is essential to lower
the cost of storage batteries, which are necessary for balancing power. A maximum of 1.3 TWhof storage batteries is required (for Scenario 7-a). Storage batteries for power systembalancing require a much longer cycle life and higher reliability than storage batteries forvehicles because they are subjected to repetitive near-maximum charge-discharge cycles at ahigher frequency.

A maximum of 657 GW of solar cells needs to be installed (Scenario 7-a). This is almost equal
to the 699 GW of potential capacity estimated by the Ministry of the Environment, and will
require a drastic change in land use, including the conversion of the agricultural land that
accounts for much of that potential capacity. Needless to say, the introduction of such a large
number of solar cells should avoid causing environmental damage or vulnerability to disasters.



The maximum wind power capacity indicated by the simulation is 159 GW (Scenario 6), which
is more than the potential capacity estimated by the Central Research Institute of ElectricPower Industry, but much less than the amount estimated by the Ministry of the Environment.
A shift to offshore wind power in particular is expected in the case where the aforementioned
large-scale installation of solar cells is difficult. Currently, cost and many other factors are
obstacles to the introduction of offshore wind power, especially in remote locations. In order toencourage the large-scale introduction of offshore wind power, it is essential to lower the costof innovative technologies such as floating offshore wind power, while concurrently ensuring
the predictability of the business opportunities through government leadership.



Although this analysis takes into account hourly balancing constraints, it does not consider
stability of frequency in the AC power grid. Frequency stabilization is a challenge when large
amounts of solar and wind power are introduced into the power system via inverters and theratio of power generation by rotating machinery, which has a frequency stabilizing effect due
to inertial forces, is greatly reduced.

b.

Hydrogen and ammonia


It is estimated that an annual amount of approximately 19.3 million tons (Case 7-a) to 43.2

22

million tons (Case 1-a) of CO2-free hydrogen and ammonia is necessary. Of this, 11.9 million
tons (Case 7-a) to 35.8 million tons (Case 1-a) is for power generation. The higher caseexceeds the government's goal of 23.5 million tons (hydrogen + ammonia) by 2050.
The only possible way to produce such a large amount of hydrogen in Japan throughrenewable energy generation and water electrolysis is to introduce a large amount of offshore
wind power. Domestic production of blue hydrogen using fossil resources imported fromabroad is unrealistic given CCS throughput constraints.



Domestically produced CO2-free hydrogen and ammonia is important for energy security, but
it is uncertain whether it will be able to meet all of Japan's hydrogen demand in 2050, and it isnecessary to secure a large volume and stable procurement route for CO2-free hydrogen andammonia produced overseas.



Thermal power generation technology based exclusively on hydrogen and ammonia, rather
than co-firing with fossil fuels, is a requirement in order to decarbonize the power supply by
2050. Technology development and social implementation for this needs to be accelerated.

c.

Nuclear power

Nuclear power is expected to function as a base load for the steady supply of electricity, but it
cannot cover the majority of power supply.



In Case 1, where the constraint on renewable energy generation is significant, the increase innuclear power installed capacity results in a reduction in installed capacity and operation rateof hydrogen-fired thermal power generation. In Case 7, where the constraint on renewableenergy generation is minor, the increase in the installed capacity of nuclear power generation
results in a reduction in installed capacity of renewable energy generation, storage batteries,
and hydrogen generation. These trends suggest that nuclear power may be the only solution
to decarbonize the power supply in a situation where the mass introduction of renewableenergy and hydrogen-fired thermal power generation is difficult.



The share of electricity supplied by nuclear power (independent of the cost of renewableenergy generation, storage batteries, and hydrogen-fired thermal power generation) is limited
to the installed capacity of nuclear power generation. For 24 GW of installed capacity (Cases
1-a through 7-a), this is 10 to 11%, and 19 to 22% for 46 GW of installed capacity (Cases 1-c
and 7-c).



In order for nuclear power to become a major power source, the installed capacity of 46 GW
or less assumed in this analysis is not sufficient. To introduce nuclear power generation oflarger capacity, it is essential to build public consensus on the renewal of facilities and theconstruction of new nuclear power plants, as well as to establish a sustainable nuclear fuelcycle. Additional social costs are not considered in this simulation (safety costs, etc.) and thetime required to build new facilities must also be taken into account.

23

d.

Storage batteries

The mass introduction of solar and wind power generation (Case 7) requires the mass
introduction of storage batteries to balance the mismatch between electricity supply anddemand.

It is estimated that 0.15 to 1.32 TWh of storage battery capacity is needed for power balancing
and 5.8 TWh for mobility.



It is necessary to resolve lithium supply concerns (refining country risk reduction and recycling)
and develop new technologies that do not rely on lithium.



A significant extension of cycle life and improved reliability are required for power balancing inparticular.



It is also necessary to develop technologies to reduce CO2 emissions in the manufacturing,
recycling, and disposal processes.

e.

Buildings
Policies and investment are needed to promote the upgrading of building facilities in order tomake heat pumps as the primary heat source.



To convert water heating in housing complexes to heat pumps, it is essential to radicallydownsize heat pump water heaters in accordance with the limited space available.

When the energy supply for buildings is almost entirely electrified, its resilience becomes aconcern. It is necessary to introduce an integrated energy system that manages energy
demand and supply, in which solar cells and storage batteries are installed in close proximity
to buildings as far as geographical conditions allow. This energy management system will
enable independent power supply during disasters.

To improve the energy efficiency of building air conditioning, it is essential to control the flowof heat in and out of the building, and it is extremely important to strengthen insulation andmake windows and other openings more sophisticated.

f.

Ground transport

It is assumed that 90% of passenger and other LDVs will be storage battery-driven electricvehicles, but the utilization rate of storage batteries for vehicles is very low, and there issignificant concern that this will be waste of storage battery resources.



It is expected to minimize the total capacity of storage battery for passenger vehicles by theincreased use of shared vehicles and the proliferation of rapid charging facilities.



The utilization rate of storage batteries for vehicles can be increased by the expansion ofvehicle-to-grid systems, which allow electric vehicle batteries to serve for the matching
between demand and supply in the power grid.

Once sufficient quantities of CN fuel become available, plug-in hybrid vehicles utilizing CN fuelare expected to reduce the use of storage batteries in passenger vehicles (Figure 18).

24

Technological innovations are needed to decarbonize commercial, maintenance and other
HDVs. Electrification is a common issue for both storage battery-driven and hydrogen-driven
systems. Conversion to hydrogen will require high-capacity fuel cells for vehicles and advancesin hydrogen storage technology.

Figure 18

Passenger vehicle energy and battery demand(in the case a large supply of CN fuel is available)

g.

Steel


Institutional development is necessary to encourage greater use of scrap materials and theestablishment of supply chains.



It is necessary to promote the conversion from blast furnaces to direct hydrogen reduction in
the iron making process and to electric arc furnaces in the steel making process.

Technological development and promotion of introduction of technologies that further reduce
CO2 emissions and direct hydrogen reduction, etc., beyond the CO2 Ultimate Reduction
System for Cool Earth 50 (COURSE 50) currently under consideration, are required.

h.

Chemicals

It is necessary to convert to recyclable plastic products through processes that minimize
energy input and CO2 emissions, and to develop institutions to promote recycling.

The development of innovative chemical recycling technologies is expected to significantly
improve the recycling rate.

Electrification and conversion to hydrogen of the material conversion process will be important.



In order to replace conventional processes that use fossil resources, there is a need to develop
technologies and promote the introduction of chemical synthesis processes that use bioresources as feedstock.

25

5.

Future research efforts

Based on the assumption that current industrial structure, population, and other macroeconomic trends willcontinue, this scenario analysis has highlighted the scale of efforts required for Japan to achieve Net Zero by2050 as well as the sectors that will need to undergo major transformation from 2019 to 2050, that is, the sectorsthat are highly critical to the success of achieving Net Zero.
Sectors which require investigation of decarbonization scenarios in detail and intensive discussion on transition
strategies can be categorized as follows.


Sectors which have some prospect for decarbonization technologies and accordingly strategies forsocial implementation should be discussed:
Buildings and mobilitySectors which further progress in decarbonization technologies is needed:
Steel and chemicals



Sectors which, although not included in detail in this analysis, have the potential to increase
explosively in energy demand toward 2050:
IT (networks, information processing, sensing, etc.)

Another important consideration concerning power supply common to all sectors is the strategy to introduce
400 to 700 GW of solar power or at least 200 GW of offshore wind power in Japan by 2050. Furthermore,investigation of CN utilization scenarios is a task for the future, and it is necessary to study CN fuel supply
potential and CN utilization energy scenarios in each sector.
Regarding future transition strategies, we will clarify the necessary technologies and development direction,
focusing on the sectors mentioned above, and quantitatively discuss the transitions required in each sector in
the pathway to 2050. In doing so, we would like to identify bottlenecks to early adoption of decarbonizing
technologies, such as institutional deficiencies and lack of investment that hinder transitions, and to identify
specific policies needed to resolve these bottlenecks. We would like to study not only the actions necessary
regarding technologies and institutions related to individual sectors, but also cross-sectoral economic measures,such as carbon pricing and methods of finance. By quantitatively estimating the scale of investment necessary
for transitions in each sector and aggregating these estimates to present the scale of investment required toachieve Net Zero in Japan, we would like to discuss and propose the appropriate scale and measures forrequired investment and additional policies, and if needed to discuss proposed means such as GX transition
bonds.
Furthermore, we would like to develop our research to envisage a bright and prosperous Japan in 2050, asociety that maximizes well-being, and a future vision that reflects changes in industrial structures and lifestyles.

26