IEEJ: January 2014. All rights reserved.

The 414th Forum on Research Work

Economic and Energy Outlookof Japan for FY2014—Japan is reaching a crucial moment—
20th December 2013
YANAGISAWA Akira, T. Yoshioka, H. Suzuki,Choi J. W., R. Ikarii, S. Iwata, Y. Shibata and K. Ito
The Energy Data and Modelling Center
The Institute of Energy Economics, JapanIEEJ: January 2014. All rights reserved.

Context
Background
Expectations on the future course of the Japanese economy are growing thanks
to the “Abenomics” and an overseas economic recovery forecast. However, anearlier-expected expansion in exports has yet to emerge, with wage
improvements remaining uncertain. The Japanese economy is feared to slump
due to a consumption tax hike planned for April 2014 under such situation.

It is plagued with a mountain of energy problems including the tight electricity
balance, safety assessment on nuclear power plants, risks of renewables
diffusion concentrating in PVs, growing energy costs and rising dependence onenergy imports. This outlook has been made to contribute to analysing
immediate challenges and considering a more desirable energy mix in Japan.

Outlook for FY2014• Macro economy and production

activities• Primary energy supply• Final energy consumption• Energy sales

Special topics• Sensibility analysis of nuclear powergeneration• Prospects for introduction ofrenewable power• Sensibility analysis of the TPP

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IEEJ: January 2014. All rights reserved.

Major assumptions in the Reference Scenario
World economy (real GDP growthrates) in FY2014
 United States: 2.5% or more
 European Union: Recover slowly Asia: More than 6% due to strong
ASEAN economy
Oil, LNG, and coal CIF prices
Referring to Koyama and Morikawa“Outlook on the International Oiland Gas Situation,” etc.
October 2013  FY2014
 Oil: $113/bbl  $105/bbl
 LNG: $788/t  $784/t
 Steam coal: $103/t  $110/t
Taxes Consumption tax (VAT): Raised to
8% in April 2014 from 5%
 Oil and coal tax: Raised by
JPY96/t-CO2 in April 2014

Exchange rate
 JPY100/$ on average throughout thesecond half of FY2013 and FY2014
Nuclear power generation
 The first group of restarting plants
will take about nine months forassessment.
 The following groups will take sixmonths. Up to 16 plants restart by
the end of FY2014 generating
82 TWh of electricity.
Electricity supply and demand
 Each electric utility will secure areserve capacity of at least 3%,
based on a government’s report.
Climate conditions
 Warmer winter in FY2013 than theprevious year Milder summer and winter in FY2014
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IEEJ: January 2014. All rights reserved.

Japanese economy will slow down Japanese economy will achieve the highest growth in FY2013 in the last
17 years excluding the year just after the Lehman crisis.
 The robust economic growth will be tested if it is sustainable in FY2014.
Real GDP, its components and IIP
4%

3.3%

Contribution

2.6%

Net exportsof goods
andservices

Year-to-year changes

3%
2%
0.7%

1%
0%
-1%

2.0%

0.8%

0.3%

PublicdemandPrivatedemand-0.7%

Real GDP

-2%
-3.0%

-3%

Industrial
production
index-4%
2011

2012

2013

2014

3IEEJ: January 2014. All rights reserved.

Primary energy supply will decline again
 The economic slowdown, electricity saving and energy conservation willreduce primary energy demand.
 Oil will dip substantially while natural gas and coal will record new highs.
Primary Energy Supply
Primary energy supply by energy source
520

510

514

+1.0

Coal

Mtoe+0.3

Hydro+0.1

New energy

491

488
480+1.1

Natural gas

500
490

+15.3

Nuclear

484

486

470
2010 2011 2012 2013 2014

Oil-19.5-20-10
0+10+20
Year-to-year changes (Mtoe)
2014
20134

IEEJ: January 2014. All rights reserved.

Final energy consumption will also be back toa declining trend The slowdown of production activities will result in a slight increase inenergy consumption by industrial sector.
 Energy consumption by residential, commercial and transport sectors will
decrease due to electricity saving, improvement of fuel economy, and mildtemperatures.
Final energy consumption
Final energy consumption by sector
345

344

340

Mtoe+0.1

Industry-0.0

Commercial

335

Transport-0.6334

330

332
330

330

Residential-0.7-1.0 -0.5 0.0 +0.5 +1.0 +1.5

325

Year-to-year changes (Mtoe)

2010 2011 2012 2013 2014

2014

2013

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IEEJ: January 2014. All rights reserved.

Electricity sales revert to increase but do not recoverto the level before the earthquake Electricity sales increase for two years in a row though the pace is slow.
 Power contracts tow the growth while lightning contracts decrease.
Electricity sales

Electricity sales by contract

960
942

TWh940Power contracts
other than largescale industrial
users

920
900
895

880

+0.9

Large-scaleindustrial users

887

890 891

Lighting
contracts

+0.4

-0.4

-10+1+2

Year-to-year changes (TWh)8602010 2011 2012 2013 2014

2014

2013
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IEEJ: January 2014. All rights reserved.

Thermal power generation will hit a record high inFY2013 before decline in FY2014
 Generated by coal- and LNG-fired thermal power continue increasing,while oil-fired thermal decreases greatly as nuclear power increases.
 Nevertheless, electricity generated by thermal power is 22% more, andthat of nuclear is 72% less than in FY2010.
Power generation mix for utilities
100%

80%
60%
40%

8%

9%
12%

31%

8%
2%
15%

8%
1%
15%

11%

5%
42%

47%

48%

8%
10%
5%

48%

New energy
HydroNuclearOil, etc.

31%

LNG

20%
23%24%

25%

27%

27%

2010

20112012

2013

2014

Coal0%
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IEEJ: January 2014. All rights reserved.

City gas sales break the historical record for four
consecutive years
 Industrial sales increase for five years in a row, which account for all of
the increase in total sales since FY2010.
 Sales for residential, commercial and others uses remain almost
unchanged.
City gas sales
City gas sales by use
37.5
37.1

+0.4

Industrial

37.0

Billion m3

36.7

36.5

Others

36.3

35.9

36.0
35.5

+0.0

+0.0

Commercial

Residential

-0.0

35.3

-0.2

35.02010 2011 2012 2013 2014

0+0.2+0.4+0.6

Year-to-year changes (Billion m3)

2014

20138IEEJ: January 2014. All rights reserved.

Fuel oil sales dip below 190 GL for the first time in
28 years
 Gasoline and kerosene will drop to the level of 16 years ago and 43 years
ago, respectively.
 Although heavy fuel oil C for electric utilities will decrease by 9.4 GL, it isstill 9% more than the level before the earthquake.
Fuel oil sales
Fuel oil sales by products
200
195

196

196

198

196

GL190
185+0.1

Naphtha

188

185

180

181178175179177

Diesel oil-0.3

Heavy fuel oil A-0.5

Kerosene-0.5

Gasoline-0.8

Heavy fuel oil C-9.5-10 -81702010 2011 2012 2013 2014

Total fuel oil

Fuel oil other than heavy fuel oil C forelectric utilities-6-4-20+2Year-to-year changes (GL)
2014

2013
9Topic 1

Hoped more rigorous and better staffed safetyassessment of nuclear power plants
IEEJ: January 2014. All rights reserved.

 If the assessment proceeds smoothly as in the High-level Case, power
generation costs will decrease by around JPY1,500/MWh from the Low-level
Case, reducing the risk of further electricity price hike.
 And furthermore, fossil fuel imports will decrease by JPY1.5 trillion, and real
GDP growth rate will expand by 0.17% points.
Impacts of nuclear power plants’ restart in FY2014
Power generation
by nuclear (TWh)300

Power generation
costs (JPY/kWh)
12.9

13288

Fossil fuel imports(JPY trillion)
28

Energy-related
CO2 emissions (Mt)

1,220
26.6

250
189

200
150

1211.726

1111.424

1010.4

25.4
25.1
24.2

22

1,205

1,200
1,180

1,170

1,160
1,157

114

100

98.2

82

500242010 2014

208187162010

2014

1,140
1,120

1,125

1,100
2010

2014

Low-level
Case
Mid-level
Case
High-level
Case

1,123

18.1

2010

FullOperationCase2010 201410

Topic 2Introduction of renewables and their burdens on
consumers increase rapidly
IEEJ: January 2014. All rights reserved.

 Installed capacity of renewable power generation increases to 36.6 GW, equivalent to 13%
of total capacity, by the end of FY2014 generating 7% of power generation.
 Cumulative burdens of FIT amount as much as JPY19 trillion over the next 20 years only for
43.8 GW of existing and authorised capacity in July 2013, which correspond to
JPY1,100/MWh.

Installed capacity of renewables

Cumulative burden by FIT(for authorised as of each month)

1420

Solar PVfor nonresidence

11.5

1218

Solar PV for
non-residence

158

4

20

8.2

6.9
5.3

Solar PV
forresidence

6.8

3.5
2.9
2.6

3.3

1.6

2010 2011 2012 2013 2014
As of the end of FYWind

JPY trillion

GW

10619Biomass

Solar PV for
residence

10Hydro75Biomass
Note: FIT covers also mini-hydro,geothermal, etc.

Geothermal
Wind4207/2012 10 1/2013 4Of which:operating

711

Topic 3

Japanese economy and energy consumption
expand by the TPPIEEJ: January 2014. All rights reserved.

 The Japanese economy expands by 0.9% as a whole by removing customs.
Energy consumption also increases by 0.6%.
 While all energy sales increase, city gas sales are most affected due to its highsales share for industry use.
Impacts of removing customs by the TPP
Real GDPPrimary energy supply
Coal
Natural gasOilFinal energy consumption
IndustryTransport
Residential and commercial
City gas sales
Electricity sales
Fuel oil sales
Energy-related CO2 emissions

+0.9%
+0.6%
+0.9%
+0.8%
+0.4%
+0.6%
+0.8%
+0.4%
+0.3%
+0.6%
+0.5%
+0.4%
+0.6%

0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2%

Compared to the case of removing no customs 12

IEEJ: January 2014. All rights reserved.

Summary
Outlook toward FY2014

Special topics

 Macro economy
GDP growth slows due to effect ofretroaction decrease by the lastminute demand of tax raise, etc.

 Restart of nuclear power plants
Hoped prompt procedures after
finishing the highest-level safetyassessment

 Energy supply and demand
Energy consumption decreases forthe first time in two years due toslowing economic recovery.

 Fast expansion of renewables
Required system improvement assoon as possible for adequate andsustainable introduction ofrenewables
 Impacts by the TPP
Energy demand increases due to theeconomic expansion

Both natural gas and coalconsumption hit new highs.
 Energy sales
Steady growth of city gas, slightincrease of electricity and sharp
drop of fuel oil CO2 emissions
Decrease in FY2014 after hit thehistorical high in FY201313

IEEJ: January 2014. All rights reserved.

New target by FY2020: GHG -3.8%* from FY2005
 Increase in energy-related CO2 emissions by 0.4% imply 9% and 5% of decreases
in primary energy supply and power generation, respectively.
 Energy efficiency improvement of 2.0% per annum will be needed if 2.0% of
economic growth is achieved as the Council on Economic and Fiscal Policy says.
Energy-related CO2 emissions, primary energy supply and power generation
105

CO2

101.6
100.3
100.3

100.4

FY2005=100100Powergeneration

9595

91

90

85
2005//2008

2010

2012

2014

2020

* By the Global Warming Prevention Headquarters (15 Nov 2013).
This tentative target assumes no GHGs reduction by nuclear but is based on carbon intensity of electricity in FY2012.

Total
primaryenergy
supplyLow–level Case for projection inwhich nuclear power generation inFY2014 is only 5 TWh bigger than inFY201214

IEEJ: January 2014. All rights reserved.

Further electricity tariff raises may happen
 High fuel costs rise power generation costs since the earthquake.
 Only less than half of JPY3.6 trillion of the increases in the costs has
been covered by raises in electricity tariff.
Structure of increase in power generation costs
1816Fuels, 7.2

1.7
0.4
1.6

3.6

JPY trillion

1412Fuels, 3.7

10Purchase fromothers864
20Ordinary losses
Other revenues
Electricity price increase

Others and taxes
Depreciation andRepair
Labors
FY2010The latest year
Major costs

Differences
between the years
Mesures to tacklethe additional costs

The latest year is a year from
4Q2012 to 3Q2013.
Contact: report@tky.ieej.or.jp

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