- Energy risk casts a shadow over the recovery of the Japanese economy - 25th July 2014 YANAGISAWA Akira, T. Yoshioka, H. Suzuki, R. Ikarii, S. Iwata, Y. Shibata and K. Ito The Energy Data and Modelling Center The Institute of Energy Economics, Japan

0 Background
Japanese economy is showing signs of growth due to Abenomics, improvements of people mind, Japanese company’s management efficiency, etc. in greater or less degree. On the other hand, there are some risks about energy situation like unstable electric power supply and demand, soaring fossil fuel costs, high risks at introducing too much solar photovoltaics at renewable energy. In addition to that, there is a geopolitical risk under the tense situation in the Middle East and Ukraine and there are many problems to solve. It is indispensable to solve these problems for a sustainable growth of Japanese economy. It is suited to use quantitative information for analysing problem we faced or for considering energy mix. We projected Japanese economy, energy supply and demand and analysed the effect for various case toward FY2015.
● Outlook toward FY2015
• Macro economy and production activities .  Primary energy supply • Final energy consumption • Energy sales . Renewable power generation
● Special topics
• Sensibility analysis of nuclear power generation • Impact analysis of rises in oil and LNG prices • Impact analysis of depreciation of the yen 1
O The economy grows by 0.9% in FY2014 with strong investments and exports despite of the rise in tax. The growth in FY2015 surpasses potential growth rate with recover of private consumption supported by better employment situation.
TPES decreases slightly before levelling off substantially in FY2015. Oil dips below 200 Mtoe for the first time in 46 years, lowering oil dependency to 40%. Natural gas hits a new high in FY2014 followed by rapid decrease by 10% in the next year.
TFEC stays in around 331 Mtoe for three years in a row. It is less than before the earthquake in FY2010 by 4%. Whilst industry records a new high after the earthquake, energy conservation in transport continues. Buildings will cease to fall. Final energy consumption Final energy consumption by sector
C The sales increases for three years in a row although they are less than before the earthquake by 5-6% due to electricity saving. “Power,” mainly for industry, hits a new high after the earthquake. “Lighting,” mainly for household, turns to increase in 3Q2015. Electricity sales Electricity sales by use Large-scale industrial users Power contracts for commercial users Power contracts for small-scale industrial users Lighting contracts
■ 2014   ■ 2015

Share of coal-fired generation also increases to 29%. Thermal power generation in total, however, is slightly below than the peak in FY2013. LNG generates 20% more electricity in FY2015 than before the earthquake although share of thermal power generation shrinks to 76%. Power generation mix for utilities
Note: Electricity purchased is not included. 7

Sales for industrial uses increase for the sixth straight year of growth, topping 20 billion m³. The industrial share of city gas reaches 55%. Whilst other uses hits the highest except for just before the earthquake, residential keeps a long downward trend in principle. City gas sales City gas sales by use Year-to-year changes (Billion m³) ■ 2014   ■ 2015
Whilst naphtha and diesel oil sales show relatively firm, heavy fuel oil C for power generation diminishes. Gasoline drops to 53 gl, which is the lowest level since FY1996. The total sales may fall below 180 GL for the first time in a half of century by FY2016. 2010 2011 2012 2013 2014 2015 -♦-Total fuel oil →Fuel oil other than heavy fuel oil C for electric  utilities Year-to-year changes  (GL) ■ 2014   ■ 2015
The current petroleum market is tightened due to capacity reduction to meet the law “Sophisticated Methods of Energy Supply Structures.” Additional capacity reduction by 400 kb/d may be needed to meet the new standard (draft) depending on measures. Crude oil throughput and refinery capacity
Installed capacity of renewable power generation increases to 54.9 gw, or 16% of total capacity, by the end of FY2015 generating 10% of power. Cumulative burdens related to FIT amount JPY63 trillion over 20 years for 89 GW of authorised capacity, which correspond to JPY3,600/MWh. Cumulative burdens by FIT (for authorised as of March 2014) JPY63.4 trillion
Massive use and high prices of fossil fuels result in heavy burden of import spending, which is comparable with just after the oil crises. Although the burden reduces slightly in FY2015, the situation may not be improved significantly depending conditions.
Real GDP and gross national income reduce by 0.2% and 0.3%, respectively due to price rises of oil by $10/bbl and of LNG by $50/t. The impacts reach also non-energy intensive industry and household. 13 Topic 3
O Depreciation of the yen by JPY10/$ expands Japanese economy by 0.4% although the effect is obscure compared with the past. Effects by economic expansion and by price rises offset each other, resulting in almost no changes in energy consumption in total. Impacts on exports by depreciation Impacts by depreciation of the yen by JPY10/$ of the yen by JPY10/$ (FY2015) 14 Topic 1
Fossil fuel import spending decreases by JPY1.4 trillion if nuclear power generation increases by 120 twh. Real GDP and gross national income increase by 0.14% and 0.23%, respectively. Power generation cost decreases by JPY1,600/mWh, reducing the risk of further electricity price hike. Impacts of nuclear power plants’ restart