Seven-Point Plan for Japan’s Energy Strategy Post-Fukushima
Japan should become a world leader in energy efficiency, eliminate the obstacles to renewable energy deployment and start to rebuild trust in nuclear, says Bloomberg New Energy Finance
LONDON & TOKYO & NEW YORK--(BUSINESS WIRE)-- The crisis at the Fukushima Daiichi nuclear reactors, and sudden gap in Japan’s power capacity, should prompt the country to adopt a bold, seven-point plan for its future energy mix. Research by Bloomberg New Energy Finance shows that Japan has much better options than simply increasing its reliance on fossil-fuel generation.
The Fukushima disaster caused Japan to lose 20% of its nuclear electricity supply. Nuclear produced 300TWh of power in 2010, and before the March tsunami, the plan was for this to increase by nearly 50% to 447TWh by 2019. Japan had made aggressive commitments to reduce carbon emissions, and despite broad targets for renewable energy, the reality was that these depended largely on plans for new nuclear power stations - plans which, in May, Prime Minister Naoto Kan announced would be scrapped entirely. So Japan finds itself not just dealing with a supply crunch, but having to develop an entire new energy policy on the fly, from the ground up.
“Our analysts have put together a seven-point plan for Japan’s future energy strategy,” said Michael Liebreich, chief executive of Bloomberg New Energy Finance. “We believe the plan would contribute to a reinvigoration of Japan’s economy, as well as allowing it to meet energy needs and hit its carbon emission targets.”
In brief, these are the seven:
1. |
Target world leadership in energy efficiency. |
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Japan responded aggressively to the threat posed by last century’s oil shocks. As a result, by 1990 it was the world leader in several key clean energy technologies, including batteries, heat pumps, fuel cells, mass transportation and solar power. Since 2000, Japan’s leadership has been overtaken by Germany, Denmark, Spain, China, and in some cases the US. | ||||||
Japan should now embark on a crash programme of energy efficiency in industrial, commercial and residential applications. Creating large pools of demand for LEDs, building automation systems, smart grids and other efficiency technologies should be accompanied by programmes to support the supply side, so Japanese companies can become export powerhouses to help fund the investment. In particular, technologies for “peak shaving” – shifting demand to eliminate the need to build new power stations – should be given the highest priority, and Japan should aim to be the first G20 country with universal connection to a truly smart grid. | ||||||
2. |
Obtain accurate cost data. |
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It is absolutely vital that the authors of Japan’s new energy strategy base it on real current costs of clean energy solutions, and their likely evolution. It is not well-recognised that solar PV today is competitive with retail electricity prices in a number of markets, and will be competitive in many more by 2015. This year’s best new wind farms will be producing power at $68/MWh without subsidies – competitive with new coal plants, once plants cover their capital costs and pay for proper pollution control. The old certainties of centralised power stations, baseload requirements, redundant grids, and high-cost renewables need to be set aside. | ||||||
3. |
Pass a feed-in tariff. |
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In Japan today, there is a need for speed – restoring the country’s electricity supply is urgent. A feed-in tariff should be the policy-maker’s weapon of choice in giving momentum to a clean energy roll-out. Supported by a residential-scale PV buy-back programme and installation subsides, Japan’s annual installation doubled last year. However last year Germany installed 7.5GW of PV, against a bit shy of 1GW in Japan. There is a feed-in tariff bill already on the floor of the Diet (parliament); the bill covers, beyond residential-scale PV, biomass, small hydro, geothermal, commercial-scale PV and wind. Ideally, the bill would have a grandfather clause so it falls away in two years, and/or a cap on volume, or an auction for the rights to qualify for certain tariffs. But the overriding priority is for action, without delay. | ||||||
4. |
Eliminate barriers to clean energy roll-out. |
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Barriers to the quick roll-out of clean energy must be removed. Reducing risks, eliminating legislative and planning bottlenecks, creating markets quickly through public sector procurement, is vitally important. The planning process in Japan is extremely tortuous, holding back the geothermal and wind sectors in particular. Now would be a good time to reform it. Wherever the costs of clean energy technologies are higher in Japan than elsewhere, wherever projects are harder to implement, find out why and bring together the stakeholders to sort out the problem. | ||||||
The huge potential of Japan’s geothermal sector, and the obstacles facing it, are examined in a Bloomberg New Energy Finance insight note published to clients on 2 June, entitled Could The Answer to Japan’s Energy Gap Lie Right Under Its Feet? |
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5. |
Restructure power markets. |
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Despite much debate about liberalisation, Japan’s power markets are more rigid than almost any other. Given the extremity of the challenge, the priorities must be innovation, flexibility and rewards for problem-solving – but the system is biased towards protecting the status quo. In particular, Tepco – one of the world’s largest privately-owned utilities, with 24m customers – bears massive liability and needs the full support of the national government. Now would be a good time to advance a broader reform agenda on energy – and would have knock-on effects on Japanese industrial and economic dynamism. Examples include deregulation of supply, incentives to bring in new participants, net metering, funding support for use of new technologies, support for micro-grids and off-grid living, creative mechanisms to reward demand management and large volumes of local renewable power resources. | ||||||
6. |
Start to rebuild trust in nuclear power. |
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It will be hard to erase the images of Japanese toddlers being checked for radiation by masked inspectors. But from an engineering standpoint, there is no reason why nuclear power cannot meet a significant and even growing part of Japan’s energy needs. The nuclear industry practically invented the science of risk management, and has at its disposal techniques to understand and manage risk with clinical thoroughness. What is required is a root-and-branch overhaul of the Japanese nuclear industry’s safety culture. Out must go the clubby atmosphere, the links with politicians, tolerance for sloppiness, prevarication, incompetence and cover-ups. In must come independence, transparency, whistle-blowing, ruined careers and even prosecutions. |
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7. |
Fire up gas generation to bridge some of the gap. |
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Inevitably, ramping up renewables and rebuilding trust in nuclear power will take years. In the short term, Japan needs quickly to increase its ability to import natural gas and increase gas-fired power capacity, beyond 2010’s figure of just over 60GW. From the point of view of its carbon emission targets, additional gas-fired generation makes more sense for Japan as a stop-gap than increased coal- or oil-fired output. | ||||||
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