The future of Japan's energy and environmental
policies
2019/08/15

Sumiko Takeuchi
Senior fellow and member of the board of directors at the IEEI※

Reprinted by courtesy of The Japan Times（JUL 29, 2019）

This is the fifth and final article in a series of reports about Japan’s energy policy.
In the first four parts of this series, I mainly outlined the current state and challenges
facing the supply side of energy. But reflecting the growing popularity of the sharing
economy and progress in digitization, we are going to see a sea change in how we use
energy. In the last entry in this series, I’d like to think about both the supply anddemand sides of Japan’s energy, which is at a major turning point.
The catalyst for drastic change in Japan’s energy and environmental policies is theFukushima No. 1 nuclear power plant disaster that started in 2011. Until then, thegovernment had focused on raising the ratio of nuclear power generation to tackle theburgeoning crisis of global warming, but the disaster brought an abrupt about-face,with Tokyo now seeking to reduce reliance on nuclear power as much as possible. Inaddition, the government has deregulated the postwar power industry structure underwhich regional power monopolies had dominated the supply chain from generation toretail. The deregulation still requires more revisions, but it is hoped that the paradigm
shift under which the adjustments of supply and demand are now entrusted to themarket economy rather than the monopolies-led supply chain will be an important
starting point for future reform. And in a new environment with a completely
liberalized market, Japan has to work through the following four changes.
The first is depopulation. Japan is facing a population decrease, the scale of which theworld has never experienced, and half of the nation’s cities, towns and villages could
cease to exist by 2040. Rapidly depopulating regions are already facing difficulties inmaintaining all kinds of social network infrastructure, such as energy and watersupplies, and transportation. Several municipalities have suffered from a loss ofgasoline stations, and in the near future, maintaining the nationwide power
Copyright © 2019 International Environment and Economy Institute. All rights reserved.

transmission network will also run into problems.
The second is decarbonization. Japan has envisioned a society where carbon dioxide
emissions would be cut by 80 percent by 2050. The drastic reduction in carbon dioxide
would require a shift to electrification of energy demand and low carbonization of
power sources. The electrification of demand means a shift to electrification ofequipment that previously used fossil fuels as energy to move, as exemplified by ashift to electric vehicles from gasoline-powered cars. The electrification of demand iscombined with generating CO2-free electricity via renewables or nuclear power.
Electricity and hydrogen can be made without emitting carbon dioxide, depending on
methods of production, and we need to make the best use of them as much as
possible. If low carbonization of power is pursued to the best extent possible under thistheory, a trial calculation of supply and demand shows that Japan’s power demand
could grow about 25 percent from 2013 levels by 2050. Unless we curb the ratio ofthermal power generation to about 35 percent of the power mix, we would be way off
the target of an 80 percent CO2 reduction by 2050. Even if we used the government’s
most ambitious renewable energy introduction outlook, renewables would only coverabout 55 percent of projected power demand in 2050. If we put priority on achieving
the 80 percent greenhouse gas emissions reduction target for 2050, the remaining 10
percent of demand would need to come from nuclear power.
The third is decentralization. Previously, it was the era of mass production wherepower generated at large-scale power plants is transmitted over long distances toconsumption areas, but what’s on the rise now is distributed power generation
technology that generates electricity closer to where it will be used, such as solar andwind power. The factors that hindered their growth was mainly the high cost and thefluctuating power output depending on the weather. But in terms of cost, the price has
declined exponentially in recent years. To control an unstable output would require
such things as expanding power transmission networks or storing electricity in power
storage batteries, but the price of storage batteries is expected to decline further,which could make them come into popular use. Storage batteries have traditionallybeen supported by demand for a backup power source in case of disasters, but thedecline in cost could pave the way for making the most out of zero-marginal-cost
renewable energy.
The last is digitization. Most of the global population now uses the internet and stays
connected. In addition, the dramatic decline in sensor prices has made it possible toquantitatively grasp ideas for products and services that consumers desire. Reflecting
Copyright © 2019 International Environment and Economy Institute. All rights reserved.

changes in the preferences of consumers fed up with a deluge of goods in their lives, allbusinesses that have previously supplied goods as tools are now shifting their focus tooffering a strong customer experience. Tire manufacturers, for example, are making atransition to offering sensor-embedded tires to customers to provide optimal
maintenance services at optimal timing. Energy is just a means of moving equipmentthat makes people’s lives more convenient. We may see the advent of service
providers that do not offer such equipment as cars, air conditioners and refrigeratorsbut instead offer such value as mobility, a comfortable indoor environment and proper
management of necessary food. There is great potential in the world of energy, too, fordigitization to create new businesses and change the industrial structure.
These trends prompting a revolution in Japan’s energy industry are inescapable andsome of them have already made substantial headway. It’s important to picture thefuture of Japan’s energy industry that is led by these big trends as well as to see how
to connect the dots toward such a future. A few decades may not be enough time tochange the social infrastructure of energy, but the transition is definitely underway. It
can be said that Japan now stands at the crossroads of a good future and a bad one.

Copyright © 2019 International Environment and Economy Institute. All rights reserved.