IEEJ：August2018○ｃIEEJ 2018
Special Bulletin
A Japanese Perspective on the International Energy Landscape (385)

July 20, 2018

Participation in Two Meetings for Scenario Planning
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan
Since last week, I have participated in brainstorming discussions based on the scenario
planning approach at two different meetings. The first of them was the 46th Energy and Environment
Summer School sponsored by the Institute of Energy Economics, Japan, on July 12 and 13. The
second was a scenario planning workshop in Malaysia on July 16.
Scenario planning is an approach for exploring uncertain future scenarios. When a futurescenario of a specific problem area is considered, various factors exert influence on the futurescenario development. In scenario planning discussion, the most important and uncertain factor is
extracted “as a branching point” to develop scenarios that differ depending on how the factor wouldwork. In this sense, scenario planning differs from “business as usual” anticipations or outlooks
based on trend analysis. By developing different future potential scenarios each of which is logicallyconsistent in itself, scenario planning aims to contribute to strategic decisions on responses andpolicies for different future scenarios.
Participants in scenario planning discussions at the two meetings are now facing great
uncertainties in considering strategic decisions for the future and intended to make preparations foraddressing the uncertainties. In the following, I would like to summarize key impressive points inthe scenario planning discussions at these meetings.
In the IEEJ Energy and Environment Summer School, some 100 Japanese energy industry
stakeholders participated to discuss the theme of “Japanese and other energy markets reaching aturning point: Scenario planning to depict pictures for 2050” divided into 13 discussion groups overtwo days. While issues taken up for discussion ranged very wide, those related to international
politics, geopolitical risks and crude oil prices attracted interests from participants. This indicatesthat crude oil price hikes and Iranian and other geopolitical risks behind the hikes have become key
topics that energy industry people cannot ignore. Participants also indicated their growing interest inissues regarding the expansion of advanced energy-related technologies including renewable energy,
storage batteries and electric vehicles for which costs have rapidly declined, as well as hydrogen,and carbon capture and sequestration (CCS) of which future potential has attracted attention. Many
issues were also taken up in regard to nuclear power generation that is important for considering
Japan’s future energy mix and has faced various challenges including the restart of nuclear power
plants under new safety regulations. Furthermore, changes in the exterior environment for energy
markets attracted interest along with issues involving the future course of the energy industry thatfaces structural energy market changes such as market liberalization and fiercer competition.
As issues of interest to participants were put in order in accordance with the scenario
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planning approach for discussion to extract scenario branching points, various and numerous
branching points were selected at each group. Generally, the nuclear plant restart and other issues
regarding nuclear power generation and those related to the future and potential of renewable energy
were selected in many groups. Issues of interest to discussion and scenario branching points selectedby participants (and groups) indicate what discussion participants recognize as the most uncertain
and important issue at present. While there are numerous uncertain factors for Japanese energy
industry stakeholders, the utility or value of scenario planning is in discussion using flexible,
strategic thinking on what factors would exert great influence in the future, what changes ordevelopments could arise from such factors, what meanings resulting scenarios would have forenergy industry stakeholders participating in the discussion and what responses should be taken.
In scenario planning discussion at the workshop in Malaysia, I saw interesting
brainstorming on issues of interest based on Malaysia’s unique situation. In Malaysia’s generalelection in May, an opposition camp led by former Prime Minister Mahathir Mohamad defeated aruling camp, leading to the first regime change since Malaysia’s independence in 1957. Under
Mahathir who has been re-inaugurated as prime minister, Malaysia is tackling new policies,
reorganizing government agencies and replacing senior officials. Regarding energy, the Ministry ofEnergy, Technology, Science, Climate Change and Environment was established in July to cover awide range of energy related areas. How energy policies would be developed under the new ministry
is a matter of great interest to energy industry stakeholders in the country.
At the Malaysian workshop, some 20 energy policy makers, industry stakeholders andacademics participated in discussion on Malaysia’s energy scenario, including future pictures of theelectric power sector, from 2030 to 2050. Various issues were taken up there, indicating the diversity
and complicatedness of issues of interest to these participants. What I viewed as key points were
how Malaysia should change the position of coal-fired power generation accounting for 45% of its
total power output in 2017 and how we should view the future of renewable energy that is expected
to play an important role to reduce the heavy dependence on coal and be expanded substantially
under new policies.
The reason for coal’s largest share in the power mix is that coal power generation is themost competitive power source. Coal is socially and economically required to provide citizens(including low-income people subject to subsidization) with electricity at affordable prices tosupport the Malaysian economy. In this sense, the importance of coal-fired power generation isbased on the “realities” in Malaysia as long as the abovementioned needs exist, coal would have nochoice but to play some key role. However, Malaysia is enhancing initiatives to prevent climatechange and air pollution, leading to very important challenges for coal. As noted above, the new
Malaysian government is considering an ambitious policy to rapidly expand renewable energy
including solar photovoltaics, biomass and biogas. How such policy would or could be implemented
is still uncertain. At the workshop, therefore, participants discussed what points would be important
for a scenario where renewable energy would be expanded substantially. They also discussed howinternational arguments over climate change, energy security changes and crude oil pricefluctuations would influence renewable energy, coal and nuclear power generation. This exactly
indicates the present issues of interest to Malaysian people.
In preparing for the uncertain future, we must develop capabilities to make and implement
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strategic decisions. The scenario planning approach is designed for such purpose. Its appropriate use
will remain important for energy stakeholders in the future.

Contact: report@tky.ieej.or.jp
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