IEEJ © January 2015

The 419th Forum on Research Work

16 January 2015
The Institute of Energy Economics, Japan

Toward Choosing Energy Mix▌Background and problems
Long-term strategy is important for resource-poor JapanThe Cabinet approved a new “Basic Energy Plan” in April 2014 after the plan wasrevised with no quantitative energy mix being depicted. The absence of quantitative
energy mix picture, however, hinders proper energy investments and causes grave
concern regarding sustainable economic growth and social development. We would
like to appreciate the establishment of the Subcommittee on Long-term Energy
Supply-demand Outlook to specify energy mix and the energy supply and demandbalance structure in the future.
Japan features an extremely low self-sufficiency ratio in energy supply and depends
almost entirely on imports for fossil fuel supply. Japan must build an appropriate
long-term energy strategy to maintain a stable society without being shaken by
growing international turmoil. To this end, Japan must work out an outlook based ondata and clarify its impacts.

▌Energy supply and demand in 2030
Dependence on high-cost electricity sources will damage society

We conducted a quantitative analysis of an energy supply and demand picture thatJapan can strategically select for 2030, using an econometric model with someuncertainties taken into account. Particularly, we developed four scenarios withattention paid to a power generation mix influenced strongly by renewables andnuclear use policies (Table 1).
Table 1 | Outline of scenarios and power generation mix (2030)
Scenario I

Scenario II

Scenario III

Scenario IV

Renewables

35%

30%

25%

20%

Thermal

65%

55%

50%

50%

Nuclear0%

15%

25%

30%

Electricity generation (PWh)

1.1

1.2

1.2

1.2

The energy mix for the power generation sector accounting for 30% of energy
consumption can greatly influence the economy and environment as well as energy
supply and demand.
Adverse impacts on the economy will be remarkable in the Scenarios I and II where
Japan will increase its dependence on high-cost electricity sources (Table 2). Thismeans that electricity price rises and growing fossil fuel import spending will harm
Japan’s competitiveness and purchasing power. As a result, the maximum gap in real
gross domestic product between the scenarios for 2030 could be JPY10 trillion. In theScenario I where Japan will depend only on fossil fuels and renewables, 5% of thefuture GDP growth in the Scenario III utilising nuclear will be lost.
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Table 2 | Comparison of impacts

Power generation-related costs(JPY/kWh)

EconomyReal GDP(JPY2005 trillion)

Fossil fuel imports(JPY trillion)

Environment
Energysecurity

CO2 emissions(percent change from FY2005)

Energy self-sufficiency ratio(%)

LNG imports(Mt)

201020132030Scenario Scenario Scenario Scenario
IIIIII
IV

8.6

14.8

21.0

19.0

16.4

14.8

512

531

684

690

693

694

17.8

28.1

33.7

32.2

31.6

32.0

-7

2

-20

-24

-26

-26

187

1925

28

28

70.6

87.7

84.4

69.7

65.3

70.0

These macroeconomic impacts will spill over to the employment situation andhousehold budgets. Unemployment in the Scenario I will amount to 300 thousandpeople more than in the Scenario III. For workers free from unemployment, theaverage wage will be JPY40,000 less. The income decline will coincide with electricrate rises.
Energy-related carbon dioxide emissions will be the lowest level among thescenarios in the Scenarios III and IV where renewables and nuclear as zero-emission
power sources will account for 50% of electricity generation. At the same time,
security will be ensured most, because renewables and nuclear are domestic orquasi-domestic resources. From the viewpoint of environment and security, it isimportant to appropriately use both renewables and nuclear rather than exclusively
choosing renewables or nuclear.

▌Choosing energy mix
Desirable energy mix and policy direction

The energy mix set by the government should be a target backed by policy measures.
The government should fully take into account long lead times and lifetimes peculiar
to energy and environment technologies and equipment, technological innovation
speed, and physical, social and political constraints on the introduction of thesetechnologies. Based on these factors, the government should work out a feasibleenergy mix. The government should also regularly review policy progress andtimely revise the target energy mix in consideration of domestic and overseas energy,economic and environmental situations.
The principle of “Three Es and S” (energy security, environment, economic efficiency
and safety) for energy policy is an everlasting evaluation standard. Fossil fuelconservation and the expansion of the self-motivating energy ratio will beindispensable since energy security and climate change measures should becontinuously enhanced. The government should timely implement an appropriate
policy for achieving goals in a manner to minimise costs for society.

Contact: report@tky.ieej.or.jp|2