IEEJ：September 2015ｃ
○ IEEJ 2015

Special Bulletin
A Japanese Perspective on the International Energy Landscape (236)September 11, 2015

Present Energy Mix Situation and Challenges in JapanKen Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan
In the second week of September, I had opportunities to make presentations and havediscussions with various people on Japan’s energy mix at various locations in Japan.
After six months of deliberations at the Long-term Energy Supply and Demand Outlook
Subcommittee of the Advisory Committee for Natural Resources and Energy, the Ministry ofEconomy, Trade and Industry in July decided and released a long-term energy supply and demand
outlook indicating the target energy mix picture Japan will pursue for FY2030. As is well known, theoutlook features an electricity mix for FY2030 in which renewable energy will account for 22-24%
of total electricity generation, nuclear energy for 20-22%, liquefied natural gas for 27% and coal for
26%.
The long-term energy supply and demand outlook has been put forward as a desirable
perspective that envisages the simultaneous achievement of the so-called 3Es -- economic efficiency,energy security and environmental protection -- by lowering electricity costs, raising Japan’s energy
self-sufficiency rate and offering a greenhouse gas emission reduction target as ambitious as Westerntargets, while giving top priority to safety in nuclear power generation. But a deep analysis of theelectricity mix indicates various challenges to be solved for the realization of the desirable
perspective. It has been pointed out since its release that the perspective could not be realized
naturally or easily. It has also been noted that the balanced and simultaneous achievement of the 3Es
would be challenging as the 3Es can trade off with each other.
Discussions in the week led me to recognize anew various challenges involving therealization of the desirable perspective. One of the biggest challenges may be related to nuclear
power generation. Nuclear power generation serves effectively as a domestically produced energy
source, emits no carbon dioxide at power generation stage and provides massive electricity
efficiently and stably at competitive prices, making great contributions to the 3Es. But nuclear safety
is the biggest concern. It is an important challenge to restore or establish the reliability of and publicconfidence in nuclear energy policy.
When the long-term energy supply and demand outlook was decided, no nuclear power
plant was in operation in Japan. After a far-longer-than-expected screening and checking process, theNo. 1 reactor of Kyushu Electric Power Co.’s Sendai nuclear power station restarted on August 11,
putting an end to the absence of nuclear power generation in Japan at last. From the viewpoint of1IEEJ：September 2015ｃ○ IEEJ 2015achieving the 3Es, it is hoped that the Sendai No. 1 reactor would steadily accumulate good
operational performance, with progress being made in plans for other nuclear reactors to follow suit.
Over the nuclear plant restart, however, there are complicated problems including
coordination between local governments hosting nuclear power plants, and their residents andneighboring local governments, in the presence of various views about safety concerns, thepotentially enormous damage of disasters and nuclear fuel cycle problems such as how to handle
spent nuclear fuel. The week’s discussions prompted me to reaffirm that there are complex
conditions and challenges regarding the nuclear restart’s contributions to the 3Es and progress in therestart of other candidate plants.
As noted in the long-term energy supply and demand outlook, more specific and detailed
consideration and initiatives are decisively important. It is also indispensable to gain various
citizens’ understanding. Faithful, easy-to-understand communications based on objective and neutral
facts will be required to prevent national discussions on energy, which is important for the Japaneseeconomy and national livelihood, from being unilateral, biased or lacking composure. It may not beeasy for Japan to overcome the dichotomy over nuclear energy to simultaneously achieve the 3Esand S (safety). Those who are involved in energy and nuclear policy must redouble their efforts torealize the desirable perspective.
Through the discussions in the week, I also felt that how to manage and overcome thetrade-off relationship between the 3Es has emerged as a problem, as symbolized by problems
including how to position coal and coordinate it with other energy sources in the energy mix.
Coal power generation is excellently competitive as a baseload power source. As theelectricity market will be deregulated further, market players may naturally select coal power
generation to survive and win in an increasingly competitive environment. Pursuing economicefficiency under market principles leads to inclining toward coal. As a matter of course, the problem
is that the pursuit of economic efficiency can conflict with environmental protection as another ofthe Es.
In order to achieve its target of reducing greenhouse gas emissions in FY2030 by 26%
from FY2013, Japan will have to enhance energy conservation, use renewable and nuclear energy
and restrict coal power generation’s share of power output to 26%. The problem is how Japan could
impose the restriction and secure market players’ compliance with it in an electricity market that isbeing increasingly deregulated. Conceivable measures may include power generation business
operators’ implementation of voluntary action plans, as well as the restriction on small inefficient
coal power plants under the energy conservation act and the replacement of outdated fossil power
plants with more efficient coal plants. But it may be difficult to achieve environmental targets in a
fully liberalized market. How to position nuclear power generation in a liberalized market would
also be a big problem. The problem will specifically emerge and become subject to consideration inthe future. It may become a major challenge for Japan in trying to simultaneously achieve the 3Es.
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IEEJ：September 2015ｃ
○ IEEJ 2015

Finally, I also felt through the discussions that various challenges regarding the nuclear
restart and market deregulation problems have increased uncertainties for market players. It may be
an important challenge for market players to secure flexibility in dealing with uncertainties. As far aselectricity supply and demand are concerned, expectations may grow on greater flexibility regarding
LNG procurement, given the characteristics of other electricity sources. Various domestic challenges
regarding the energy mix may exert influences on Japan’s international strategies including LNG
procurement conditions.

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