COVER STORY • 5

The Potential & Challengesof Renewable Energy
Deployment in Japan
AuthorHiroko Nakamura

By Hiroko Nakamura

In fiscal 2020, Japan’s total power generation was 1,001 terawatthours (TWh), with 19.8% of the electric power supply generated
from renewable energy (hereafter “renewable power”), including
large scale hydropower. The share of renewable power has almost
doubled from fiscal 2011 levels (10.4%). The Feed-in-Tariff (FIT)
scheme introduced in July 2012 has contributed greatly to thismassive increase. However, given the high surcharges under the FIT
scheme shouldered by consumers, amounting to a total of around
2.7 trillion yen in fiscal 2021, an auction scheme was introduced forlarger projects in 2017. In April 2022, a Feed-in-Premium (FIP)
scheme will be introduced with the intention of encouraging power
generators to act more in line with market trends.
With Cabinet approval of the Sixth Strategic Energy Plan, Japanhas welcomed the new year with a new renewable deployment target
for the electric power mix in 2030. This paper will examine current
trends and challenges of renewable energy deployment in Japan.

How Challenging Are Japan’s Renewable Energy
Targets?
The Sixth Strategic Energy Plan, approved by the
Cabinet in October 2021, renewed Japan’s
renewable energy targets. The new overall target
aims to have an “ambitious” renewable power mix
of 36-38% in 2030 compared to the previous
target of 22-24% set out in the Strategic Energy
Plan published in 2018. This amounts to a total of336-353 TWh of renewable power, calling for
installed capacity of 103.5-117.6 gigawatts (GW)of solar power, 23.6 GW of wind power (17.9 GW
onshore, 5.7 GW offshore), 1.5 GW of geothermal
power, 50.7 GW of hydropower, and 8 GW ofbiomass.
How does this compare to previous targets? The
renewed targets do not call for significant
increases in hydropower and geothermal power,
but require efforts to upscale solar power, wind
power, and biomass for which previous targets
were 64 GW and 10 GW, and 6.02-7.28GW,
respectively (Chart 1). The installed capacity ofthese sources stood at 62.4 GW, 4.6 GW and 5.4
GW, respectively, as of June 2021. Taking into
26 Japan SPOTLIGHT • March / April 2022

consideration the capacity of facilities already approved under the FIT
scheme yet to be commissioned, an additional 22.6-36.7 GW will beneeded to meet the renewed target for solar power, and an additional
7.7 GW for wind power. However, even the offshore wind projects forwhich winning bidders were recently selected will only come online
in 2028 at the earliest.
This paper will focus on the three sources that require significant
efforts in increased deployment: solar power, wind power andbiomass.

Solar Power – Main Driver of Renewable Energy
Deployment
Solar power has been the main driver of renewable energy
deployment in Japan (Chart 2). Japan’s increases in renewableenergy will need to continue to rely on solar power in the short term,
due to the shorter lead time required to install solar power
generation facilities and the cost reductions already achieved for thistechnology. In order to achieve the renewed 2030 target, Japan will

CHART 1

Status quo of renewable energy deployment
against new 2030 targets
140
120

New target
103.5-117.6 GW

100
80
New target
50.7 GW

60
40
New target
17.9 GW

20
0

Solar

Onshore wind

New target
5.7 GW

Offshore wind

New target
8 GW

New target
1.5 GW

Geothermal

Hydro

Biomass

Previous target

Additional from previous target-20
Installed capacity

Yet-to-be-commissioned

Source: Compiled by the Institute of Energy Economics, Japan based on published METI data

https://www.jef.or.jp/journal/

have to deploy 4-5.5 GW every year during the coming decade.
However, with a FIP scheme to be newly introduced this year, a waitand-see mood is expected to prevail in solar investments this year.

Overcoming land restrictions

Power generation per area of flat land
(MWh/km2)

GW

Further increases in solar power entail many challenges. Japan
already has the third-largest installed capacity of solar power in theworld, only after the United States and China. The amount of solar
power generated per area of flat land tops all other countries with
570 MWh/km2. Germany follows with 190 MWh/km2, or only onethird the figure for Japan (Chart 3). This indicatesthe limits faced by Japan in increasing solar power
CHART 2
generation.
Renewable energy increases in Japan underSocial acceptance has become anotherthe FIT scheme
challenge. Natural disaster-induced accidents and90
landscape conservation issues have aroused local
resistance against utility-scale solar power80
projects. This has led to a recent increase in the
70
number of local ordinances that regulate the siting
60of solar power facilities. Therefore, in addition tothe objective judgment of whether an accident is
Solar
50(Commercial)really attributable to the siting or if there wereSolar
40
problems with the construction, there is a growing(Residential)
need for fostering good relations with the local
30
Wind
community, which often have a sense of ownership
Geothermal
20
Hydro
of local natural resources or the landscape andBiomass
10
ecosystem that it is a part of. Developers shouldmake efforts to foster a win-win relationship with
0
Before 2012 2013 2014 2015 2016 2017 2018 2019 2020 As of
local communities, for example by demonstrating
June
June
how the facility can be counted on for disaster
2012
2021
Fiscal year
relief. Local governments can play a key role inrepresenting local values and ethics. To this end,
Source: Compiled by the Institute of Energy Economics, Japan based on published METI data
the government seeks to initiate positive zoning
measures and support local development plans for
CHART 3
renewable energy.
Power generation per area of flat land
In 2021, the Ministry of Agriculture, Forestry
1600
and Fisheries eased a requirement for farmers who
install solar panels on abandoned farmland to
1400
produce 80% or more crops per square metercompared with the regional average. This will help
1200
promote agrophotovoltaics, which have become
1000
mainstream in many parts of Europe where suchprojects now represent a large share of winning800
bids in renewable power auctions. The Cabinet has
600
recently approved a bill to facilitate the utilizationof land plots with unknown owners. When this bill400
becomes law, more land area will be available for200
the installation of renewable power facilities.
0

Japan

Germany

FranceAll renewables

UK

China

US

India

Solar power

Source: Compiled by Institute of Energy Economics, Japan based on published METI data and IEA (2021)
Renewables 2020

Future applications
With the end of the FIT scheme for projects
exceeding 1MW, onsite power purchaseagreements (PPAs) are expected to continue toincrease in the short term, mainly for selfJapan SPOTLIGHT • March / April 2022

27

TABLE

Results of 2021 offshore wind power auctions
Area(capacity)
Winning
bidderAkita Yurihonjo

Choshi(16.8 MW)Akita Noshiro MitaneOga(478.8 MW)(819 MW)(390.6 MW)

Toda Corp-led
consortium

Mitsubishi Corp-led
consortium

Mitsubishi Corp-led
consortium

Mitsubishi Corp-led
consortium

Goto

Bidders

T

P

F

T

P

F

T

P

F

T

P

F

1)

207

120

87

208

120
(13.26)

88

202

120
(11.99)

82

211

120
(16.49)

91

185.6

87.60
(22.59)982)–161.52

87.52(18.18)73

156.6583.65(17.00)73

3)–157.7793.8(16.97)

64

149.7

58.73
(24.50)

91

–

4)

–

149.3571.4(22.30)78

144.7378.2(18.40)

66

–

5)

–

127.0469.0(27.00)68140.2062.58(23.00)78–

Notes: 1) – 5) indicate the ranking of bids. T stands for total; P for price score (total 120 points); F for feasibility score (total 120 points). Prices (yen/kWh)are provided in brackets for each bidder, calculated based on the price score, which represents the ratio to the winning bid.

Source: Compiled by the Institute of Energy Economics, Japan based on the joint press release by the Ministry of Economy, Trade and Industry (METI) and theMinistry of Land, Infrastructure and Transport (MLIT) dated Dec. 24, 2021

consumption in the industrial and commercial sectors. PPAs, which
do not require upfront capital costs, will be an attractive option for
public buildings, for which the government seeks to make theinstallation of solar panels mandatory by 2040. In the residential
sector as well, a real estate developer has announced that it will
install solar panels on all new residential buildings, using a PPA
model.
Promising future applications for solar power are building facades,
automobiles, roads and greenhouses. Innovative solar photovoltaic
technologies can enable the application of solar modules to places
that we could never imagine before due to their lightweight andflexible features. At the end of last year, a national research anddevelopment agency, the New Energy and Industrial Technology
Development Organization (NEDO), announced plans to allocate 20
billion yen for the development of perovskite photovoltaic
technologies, for which Japanese companies have demonstrated
world-leading power conversion efficiency levels and innovating
coating methods that greatly reduce production time and costs.

Offshore Wind Momentum
Japan initially introduced onshore wind power in the 2000s, but its
deployment has been slow, accounting for only 0.9% of total power
generation in fiscal 2020. According to the Japan Wind Power
Association (JWPA), Japan bears the potential for around 128 GW of
fixed offshore wind power in shallow ocean areas 10-50 meters deep
and around 424 GW of floating wind power in areas 100-300 metersdeep. Most of these areas are located in the regions of Hokkaido,
Tohoku and Kyushu.
28 Japan SPOTLIGHT • March / April 2022

The year 2021 was a landmark year for offshore wind power, apromising technology for Japan, given its limited flat land area with
optimal wind conditions. The government held the first round of
auctions for offshore wind projects in sites designated as promotion
zones under the Act on Promoting the Utilization of Sea Areas for theDevelopment of Marine Renewable Energy Power Generation
Facilities. The first auction was held for a project off the coast of
Goto city in Nagasaki Prefecture. Only one bidder responded to thecall and the result was finalized in June. Auctions were also held forthree projects in the sea area offshore Noshiro city, Mitane town andOga city, all in Akita Prefecture; the sea area offshore Yurihonjo city
in Akita (northern and southern sides of the prefecture); and the sea
area offshore Choshi city in Chiba Prefecture. The winning bidders
for all three projects were announced on Dec. 24, 2021 (Table).
The auction results for the three projects aroused both optimism
and concerns for the future of offshore wind power development inJapan. The price target for offshore wind power in 2030-35 has been
set at 8-9 yen/kWh. This had been considered an ambitious target
compared to the FIT price of 36 yen/kWh for fixed-bottom offshore
wind power initially determined in fiscal 2014. The winning bid for
the Akita Yurihonjo project (11.99 yen/kWh) was less than half of thebid cap (29 yen/kWh) and offered reality to the feasibility of the2030-2035 target.
Hopefully, the fact that consortiums led by the same corporategroup won all three auctions with an outstandingly competitive pricewill not discourage future bidders from working closely with local
stakeholders to foster good relations. A significant feature of thecurrent Japanese auction scheme is that once a promising area foroffshore wind projects is selected, a council comprising interested

parties, including local government and fishery cooperatives, isassembled to discuss the designation of a promotion zone andaspects the auctions should consider. The price score and feasibility
score, which includes local considerations, are equally allocated 120
points. As aforementioned, fostering local understanding is essential
for successful renewable power projects. While we have yet to see
how these projects will play out, hopefully the Japanese auction
model will set a promising example for other Asia-Pacific countries
sharing similar circumstances, including those pertaining to local
resource management.
Commenting on the auction results, Minister of Economy, Tradeand Industry Koichi Hagiuda mentioned his idea to consider ascheme that would facilitate the participation of other players. The
large-scale deployment of offshore wind power, which requires as
many as 10,000-20,000 components, promises to have positive
impacts on domestic industry. As turbines get larger, suppliers will
have a larger incentive to develop and enhance local supply chains to
reduce transportation costs. A wider range of project operators
would allow for the diversification of the supply chain. However, therecent auction results could be a sign of early market consolidationin Japan.

Revisiting the Value of Domestic Biomass
Resources
Biomass power generation accounted for 2.9% of Japan’s total
electric power generation in fiscal 2020. It used to have the largest
renewable share in Japan’s electric power mix before it was
surpassed by solar power in fiscal 2014. The government haspromoted the deployment of biomass power generation through the
FIT scheme, but biomass power generation facilities of 10 MW andmore will be covered by the FIP scheme from April 2022. “Locallyintegrated” projects contributing to enhancing local resilience and/or
promoting the consumption of local products will remain eligible for
the FIT scheme.
Japan faces several challenges in increasing biomass power
generation, which requires a stable fuel supply. Many large-scalebiomass-fired power plants currently rely on imported palm kernel
shell (PKS) and wood pellets that can be procured stably. However,
not only are these imports expensive, the use of PKS, in particular, isinternationally debated from the perspective of socially andenvironmentally ethical supply chains.
With around two-thirds of its land covered with forest, Japan ishome to a promising source of domestic woody biomass. Using
domestic resources will increase the energy self-sufficiency rate,
improve its resilience against natural disasters and contribute to the
management and utilization of domestic forests, much of which havebeen left unmanaged for many years. Biomass power generation
therefore promises to bring enormous local economic benefits,
including employment. Government efforts to promote the use offorest residue and thinned wood have led to their increased use.
However, fuel costs, which account for 70% of biomass power
generation costs, still need to be reduced to ensure continued
operation after the FIT expires.
The current forestry system has been developed mainly for highvalue building materials, mostly made of conifers. Much domestic
woody biomass for energy use is produced from thinning residues
and other material that could not be used for building purposes.
Because woody biomass for fuel use is a byproduct, it is difficult toforecast supply. Furthermore, the collection and transport system
has been tailored to the needs of bulky lumber and should be mademore cost-efficient for woody biomass for fuel use. This has
disincentivized many biomass power generators from using
domestic biomass and instead rely on more stable imported
supplies.
Broadleaf trees, which comprise around 30% of forest
accumulation in Japan, are not widely used for construction because
they tend to grow crookedly. Therefore, systems to transport woody
resources out of broadleaf forests are underdeveloped in many partsof Japan. We have yet to seek ways to harness these abundantdomestic resources in a sustainable way. Thinning unmanaged
forests will contribute to sustainable forest management and thus
local water management. Securing demand would also contribute to
the stable development of the local forestry industry. Domestic
hardwood pulp materials may also be used in the pulp and paperindustry, which also relies heavily on imported resources.
Planting fast-growing trees exclusively for fuel use can also savetime and costs. The commercial use of fast-growing trees will lead toincreased revenue for local forestry workers. Local procurement ofwoody biomass for power generation can create a sustainable winwin relationship between the forestry and power sectors.
Challenges pertaining to the use of woody biomass in power
generation include retaining the quality of woody biomass resources,
such as the moisture content which can affect the capacity factor.
Local providers of biomass may develop drying processes or securestorage facilities to increase the value of their woody biomass
products. Yet there is no standardization scheme in place to evaluate
the quality of these products.
It will also be important to verify lifecycle GHG emissions, as wellas to certify that woody biomass products are from sustainably
managed forests. While biomass is considered a carbon neutralenergy source, it should be kept in mind that if large amounts offossil fuels are used along the supply chain, its CO2 emissions could
exceed the amount absorbed during photosynthesis. The
government has been addressing such supply chain issues.
Currently, there is limited information on the availability anddistribution of woody biomass products. A transparent system
visualizing supply and demand, tracing the origin of resources andtracking GHG emissions will be called for as more biomass is used in
the power sector.
Japan SPOTLIGHT • March / April 2022

29

Other Challenges & Potential Solutions
Increasing renewable energy – especially variable renewableenergy – in the power grid entails various challenges, including those
associated with power transmission, supply-demand balancing andenergy storage.
As aforementioned, offshore wind power is found in the Hokkaido,
Tohoku and Kyushu regions, located far from the major urban
electric power consumption areas. A masterplan for a transmission
network based on the Sixth Strategic Energy Plan and the potential
project areas is being discussed under METI. Related cost allocation
is another topic of ongoing discussions.
Energy storage is also an issue to be highlighted in the massive
integration of variable renewable energy in the power grid. Pumped
storage and battery technologies are key solutions to providing
flexibility to the grid. Grid-scale battery energy storage systems(BESS) can smooth out output fluctuation and thus contribute toaccommodating high shares of renewable energy. Japan is a global
leader in the development of various battery technologies but further
cost reductions are called for.
Surplus renewable power can also be used to produce hydrogen,which can be stored for longer periods of time in fuel cells. A powerto-gas (P2G) system using a water electrolysis process to use
electricity to split water into hydrogen and oxygen can provide gridbalancing services and demand management. A hydrogen utilization
business model that optimizes the exploitation of hydrogen both as acommercial commodity and an energy source for balancing the
supply and demand of the electricity grid is currently being
demonstrated at Fukushima Hydrogen Energy Research Field(FH2R), which only recently supplied fuel for the relay torch andhydrogen-powered vehicles used at the Tokyo Olympics andParalympics Games. Since hydrogen can be used in sectors otherthan power generation, the P2G model is an optimal solution forenergy system integration, or sector coupling.
Another issue often overlooked is the secure procurement ofmetals that will be required in large quantities as the world shifts tolow carbon forms of energy and to the massive deployment of
renewable energy. In addition to the rare earth and rare metals
required for various battery and fuel cell technologies, metals suchas copper will be required in greater amounts not only for electric
mobility but also for wind and solar power facilities.

auction in November 2021. Renewable energy value had been tradedin the Non-fossil-Value Trading Market, open only to electricity
retailers, who purchase credits to fulfill their obligation under the Act
on Sophisticated Methods of Energy Supply Structures to achieve a
non-fossil electricity ratio of at least 44% in their electricity sales by2030. The newly launched market, which was detached from theNon-fossil-Value Trading Market, allows consumers to directly
purchase renewable energy value certificates.
Some key discussion points in launching the Renewable Energy
Value Trading Market were the nature of the FIT certificates –whether they would simply guarantee renewable energy sources or ifthey would function as a guarantee of origin – and price levels. The
development of a permanent tracking scheme for certificates isunderway.
Japan saw a significant increase in onsite and physical (offsite)
PPAs in 2021. A number of milestone physical PPAs between
developers and consumers were signed with registered retailers
under the Electricity Business Act. METI changed the rule inNovember 2021 so that corporate consumers can use the selfwheeling program for electricity generated at new sites owned byother companies. The benefits of the self-wheeling program, which
include a smaller wheeling fee and exemption from surcharges,
could previously only be enjoyed for transferring self-generated
electricity to other locations through the grid. Sometime in the near
future, a deregulation of Non-fossil Value Credits market rules may
allow direct virtual PPA contracts between developers andconsumers.

Conclusions
It is often speculated whether or not the ambitious goals set out inthe new Strategic Energy Plan can be met. However, in our drive
toward a decarbonized society, the question is how we can achieve it.
Despite the various challenges associated with massive deployment
and integration of renewable energy, there is still much unlocked
potential. Creative market and business models, as well as innovativetechnologies, will help harness our renewable resources in asustainable way.

New Frameworks for Promoting Renewable Energy
The year 2021 saw many demand-driven changes in the market
framework of renewable power procurement. Amid the growing
momentum for achieving carbon neutrality, this trend was largely led
by major companies seeking to procure large amounts of renewable
power with “additionality” in Japan.
Japan’s Renewable Energy Value Trading Market held its first
30 Japan SPOTLIGHT • March / April 2022

Hiroko Nakamura is a senior researcher at the Institute of Energy Economics,
Japan. She has a Master’s degree in Education from Kagawa University and a
B.A. in Law from Keio University. Her expertise is in climate policy, renewableenergy and hydrogen policy, and participative democracy in energy policy.