Japan: Energy Resources

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Electrification rate (2004):  100%

Electricity transmission in Japan is divided in two regions each running at a different mains frequency. Eastern Japan runs at 50 Hz; Western Japan runs at 60 Hz. This originates from the first purchase of generators from AEG for Tokyo in 1895 and from General Electric for Osaka in 1896. This frequency difference partitions Japan's national grid; and the limitations of these links has been a major problem in providing power to the areas of Japan affected by the Fukushima nuclear accidents.

“Smart grid” has been introduced in order to realise efficient use of power as Japan actively increases the introduction of new energy in electric power generation.

Energy procedure

Japan aims to raise the share of renewable energy in its energy mix to 10% by 2020, to alleviate global warming, diversify energy sources, and promote environment-related industries. The government is developing sustainable standards for biofuels to reduce greenhouse gases. The target is to increase the share of biofuels to 3% of gasoline-equivalent sold in Japan by 2020. This is expected to reduce greenhouse gases and encourage the introduction of the next-generation of biofuel technologies (such as celluloid and algae).

Japan is implementing a system of feed-in tariffs, where electric power companies are obliged to buy electricity generated from renewable sources at a certain price. Utilities are required to pay attention to the burden to consumers, and implement measures for stabilizing the power grid.  

Energy debates

Japan’s Nuclear Energy Policy is under review following the Fukushima Daiichi Nuclear Power Plant Disaster. As of the end of May 2012, all (50 units excluding 4 units at Fukushima Daiichi Nuclear Power Plant to be decommissioned) nuclear power plants in Japan have stopped operation for the periodical inspection (once in 13 months, regardless of the Fukushima Daiichi Nuclear Power Plant Disaster). The Japanese Government is carefully evaluating the safety of all the existing nuclear power plants including those under periodical inspections. IAEA review team concluded that this procedure was generally consistent with IAEA Safety Standards. The same crisis has prompted an overall review of Japan’s energy strategy, and in late 2011, the government also began the separation of the functions of regulation and promotion of nuclear power—as outlined in the Energy Policy Framework section.

On 11 March 2011, a 9.0 magnitude earthquake struck off the coast of Sendai, Japan, triggering a large tsunami. The earthquake and ensuing damage resulted in a shutdown of 6,800 MW of electric generating capacity at four nuclear power stations that have a total capacity of 12,000 MW (some plants previously offline for maintenance) A series of accidents and/or “cover ups” prior to 2011 had already affected the public stature of nuclear power adversely despite the government’s promotion of nuclear power as economic, clean and stable energy source and the claim by the Federation of Electric Power Companies in Japan that nuclear power makes a great contribution to Japan's energy security by reducing its energy imports requirement by approximately 440 MMbbl/d per year and decreasing Japan's CO2 emissions by about 14% per year

Damage and the radiation leak at the Tsunami-hit Fukushima Daiichi nuclear plant has shattered the public confidence in the safety of atomic power and forced the country to review from scratch the country’s energy policy, which previously had aimed to increase and rely on nuclear power as energy supply. Previous prime minister, Naoto Kan, pledged to scrap nuclear power in the future and vowed to boost renewable energy to at least 20% of the country’s electricity supply in the 2020s

The “Act on Purchase of Renewable Energy Sourced Electricity by Electric Utilities” was approved at the 177th session of the Diet in August 2011. This Act introduces a feed-in tariff for renewable energy and obliges electric utilities to purchase electricity generated from renewable energy sources (Solar PV, Wind power, Hydraulic power, Geothermal and Biomass) based on a fixed-period contract with fixed price. It will start on 1 July 2012. Costs incurred by the utility in purchasing renewable energy sourced electricity shall be transferred to the entire electricity customers, who pay the “Surcharge for renewable energy” in general proportional to electricity usage

While the feed-in tariff scheme shows the government’s effort to reduce reliance on nuclear power after the Fukushima nuclear crisis, it is crucial to find a balance between encouraging investment and limiting the costs to end-users, to whom utilities are allowed to pass the costs. In addition, Japan’s recent history of short-lived governments and the implied risk of a change of policy by a future administration will be an immediate concern for investors.

It was also reported in October 2011 that a panel of cabinet ministers in charge of energy and environmental issues will make a list of recommendations to call on the government to ease rules on building geothermal, wind and hydraulic power plants to boost renewable energy use. Once the recommendations are made, the government aimed to realise such deregulation steps during this fiscal year to 31 March 2012.

In January 2013, the Japanese government confirmed plans to build the largest wind power installation in the world, ten miles from the coast of Fukushima. The 1 GW facility is expected to be completed by 2020, and will use innovative “floating” turbine structures, anchored directly to the continental shelf below rather than based on the sea bed, in order to provide greater resistance to environmental disasters, such as earthquakes, typhoons and tsunami.  

Energy sources

Total installed electricity capacity (2012): 225.667 GW

Japan was the third largest generator of electricity in the world after the USA and China.   The share of RES in generating electricity in Japan fell from over 20 % in the 1970s to about 10 % in 2006. The declining share reflects the fact that electricity from hydro lagged behind the overall growth of electricity generation. Nevertheless, hydro still had the largest amount of renewable generation at 83,295 GWh, followed by primary solid biomass (15,079 GWh), municipal waste (6,837 GWh), geothermal (2,752 GWh), wind (2,623 GWh), solar PV (2,251 GWh) and industrial waste (472 GWh) in 2008.

Nuclear power generation once played a major role in Japanese power generation, due to the stability of supply and the lack of greenhouse gas emissions. Currently, the Japanese nuclear power sector has been put into a state of suspension, following the 2011 Fukushima nuclear disaster.

Total electricity generation (2011/12): 955 GWh. Thermal: 78.9% Hydroelectric: 9.0% Nuclear: 10.7% Renewables: 1.4%

Total primary energy supply (2009): 471,992 Mtoe Crude Oil: 39.2% Coal/peat: 21.5% Gas: 17.1% Nuclear: 15.4% Oil Products: 3.2% Comb. Renew & waste: 1.4% Hydro: 1.4% Geothermal/solar/wind: 0.8%

Japan possesses only modest indigenous energy resources and imports almost all of its crude oil, coal and natural gas requirements to sustain economic activity. It is only 16% energy self-sufficient.

Regulatory roles

Setting the rules for transmission network access and arbitration. It is important to ensure that such important tasks are undertaken by a body where the incumbent utilities do not have a significant influence. Therefore, much will depend on the design of the new body and its interface with the regulatory department of METI.

Competition

Electricity market The liberalisation of Japanese markets for electricity is being gradually carried out, continuing a process begun in1995. In that year, the concept of independent power producers (IPPs) was introduced. The goals of electricity market liberalisation in Japan are, in part, to induce reductions in Japan’s historically very high retail electricity rates, and to improve customer service, through the introduction of competition, while maintaining protection of other public interests such as universal service, supply reliability, ‘‘energy security’’, and environmental protection. And in 2007–2008, full market liberalisation was discussed, but it was decided not to open the market for residential customers, because of insufficient competition with markets segments that had already been opened. Instead, the regulating authority would focus on establishing rules for a sounder competitive environment, and would examine the effect of those rules for 5 years from 2008.

Electricity market is monopolized by 10 major electric utilities that are vertical integrated and are strictly regulated by METI.

Oil and gas market Private Japanese firms dominate the country’s large and competitive downstream oil sector, as foreign companies have historically faced regulatory restrictions. But over the last several years, these regulations have been eased, which has led to increased competition in the petroleum refining sector. Chevron, BP, Shell, and BHP Billiton are among the foreign energy companies involved in providing products and services to the Japanese market as well as being joint venture partners in many of Japan's overseas projects.

To date, Japan has taken three steps to liberalise the gas market:

The Gas Utilities Industry Law was amended in 1995. The law allowed industrial customers with contracted amounts of more than 2 million cubic metres per year to directly negotiate prices with suppliers.

The Gas Utilities Industry Law was further amended in 1999. The deregulation for large volume supply was extended by lowering the annual contract volume to 1 million cubic metres per year and over. Regulations for third-party access for the supply of large volumes of natural gas were also established.

In June 2004, the Diet passed the amended Law on the Gas Utilities Industry that stipulated that customers with the contracted amount of 0.5 million cubic metres per year could freely choose suppliers. The law was further amended in April 2007, and those customers with contracted amounts of 0.1 million cubic metres per year are allowed to choose their suppliers.

While the previous regulations limited investment in the gas sector, the reforms enacted in 1995 and 1999 helped open the sector to greater competition and a number of new private companies have entered the industry since the reforms.

Energy efficiency

Japan continues to pursue energy efficiency improvements as a cornerstone of its energy policy.  As a result, energy intensity in terms of TPES per unit of GDP is the lowest among IEA countries when market exchanges rates are used. Since the oil shock of the 1970s, the economy has achieved an energy intensity improvement of around 30%. However, since the mid-1980s, this improvement has leveled off somewhat. The government is now aiming for an improvement of at least 30% in terms of final energy consumption per unit of GDP by 2030 compared with 2003.

Since 1973, Japan’s imports of oil have decreased despite a doubling of tits economy. The average fuel economy for vehicles in Japan is 47 mpg, double that of the United States. On the manufacturing side, the country is a model of energy efficiency and sustainability. Paper mills, for example, use their own waste and other alternative energy for 38 % of their energy.  Japan’s steel industry uses energy 20% more efficiently than the United States and 50% more so than China.

Total energy consumption in 2008 was 22.3 quadrillion Btus, of which oil accounted for the largest share at 45%, followed by natural gas at 18%, nuclear at 11%, hydroelectricity at 3% and other renewable at 1%. Japan is the third-largest consumer of nuclear power in the world after the USA and France. Hydroelectric power and renewable energy account for a relatively small percentage of total energy consumption in the country.

Industry

Energy Conservation Law: Comprehensive EE regulations on designated industries: financial incentives, standards in machinery, product labelling.  

Tax reductions and subsidies since 1970s.

Law on Rational Use of Energy (last amendment 2009): benchmarks for  energy-intensive industries, including energy management.

For large industries >500kW: restriction of electricity (consumption 15% less compared with same period in the previous year). Penalties are imposed for each hour in which the target is not met. Some are shifting operations to evenings/weekends.

Utilities

Low-interest loans for CHP installation.

Promotion of ESCOs.

Every 13 months nuclear plants are shut down to undergo routine maintenance.

Transport

Top Runner program (est.1998): freight and passenger vehicle EE standards.

Green taxation for vehicles (until April 2015).

EE regulations on carriers and consigners.

Transportation demand management.

Telework and modal shift.

Residential

Top Runner programme: EE standards for products. Reviewed every 2/3 years. 23 categories by 2009.

EE standards for buildings and houses and annual reporting on EE measures.

National EE labelling and Energy Star label.

Retailer assessment system (2003).

Home energy management systems: Kyocera.

Broad range of financial EE incentives.

Public

Nationwide institutional system for EE: Energy Conservation Centre and NEDO.

Green Procurement Law.

Capacity concerns

In light of the country’s lack of sufficient domestic hydrocarbon resources, Japanese energy companies have actively pursued participation in upstream oil and natural gas projects overseas and provide engineering, construction, financial, and project management services for energy projects around the world. Japan is one of the major exporters of energy sector capital equipment and has a strong energy research and development program that is supported by the government.

The March 2011 earthquake in Northeastern Japan caused a shutdown of at least 1.2 million bbl/d or 26 % of the then-current capacity. As of March 2012, only two of the country’s then-54 nuclear reactors were operational, which has had an immeasurable impact on the security of electricity supply in the country, particularly in increasing the reliance of the Japanese economy on imported coal and natural gas for power generation. Following the December 2012 elections, the new administration of Prime Minister Shinzo Abe has broadly been in favour of recommencing nuclear power generation in the country, despite widespread and vocal public opposition to the plans. However, rural communities, in particular those close to nuclear power installations, which are often major employers in their local areas, have been found to be broadly in favour of a full nuclear restart for the country. The current administration also believes that a strong nuclear power sector will enable a stronger and more thorough economic recovery in the country, which is the major stated aim of the current government.

As of January 19th, 2013, the average shutdown duration for Japan’s 51 nuclear reactors was 26 months, with the last reactor to generate power having been the Tomari-3 installation, which was shut down on the 5th May 2012.  

Government agencies

The Council for Science and Technology Policy (http://www8.cao.go.jp/cstp/index.html) is the top decision-making body in Japan energy research and development. The members include the Prime Minister, the Minister of Economy, Trade and Industry and other ministers, along with knowledgeable stakeholders. In addition, there is also the Research and Development Subcommittee under the Industrial Structure Council that serves as an advisory body to the Minister of Economy, Trade and Industry. Japan’s energy technology strategy is developed by this subcommittee.

Additional responsibilities lie with particular government ministries including: The Ministry of Economy, Trade and Industry (METI), which has a focus on funding renewable energy, energy efficiency, the rational use of fossil fuel and power generation (including nuclear power), and technologies relating to climate change.

The Ministry of Education, Culture, Sports, Science and Technology (MEXT), has a focus on nuclear research and development and basic research in universities and institutes.

Energy regulation role

NA  

Ownership

Electricity market Japan’s electricity industry is dominated by 10 privately-owned, integrated power companies that act as regional monopolies, accounting for about 85% of the country's total installed generating capacity. The largest of these is the Tokyo Electric Power Company (TEPCO) (http://www.tepco.co.jp/), which accounts for 27% of total power generation in the country. These companies also control the country’s regional transmission and distribution infrastructure.

Other significant operators in the electricity market are the Electric Power Development Company (known as J-Power) (www.jpower.co.jp/), formerly a state-owned enterprise that was privatised in 2004, and previously the Japan Atomic Power company (JAPC, www.japc.co.jp), whose four reactors have not been in operation since mid-2011. J-Power operates 16 GW of hydroelectric and thermal power plants. It has also been involved in consulting services for electricity production and environmental protection in 63 countries, mainly in the developing world, since 1960.

Oil and gas market The Japan National Oil Corporation (JNOC) managed the economy’s stockpile business until 2003. JNOC provided financial and technical assistance to the Japanese oil industries for their oil and natural gas exploration and development, both domestically and abroad. In 2004, JNOC’s profitable business units were spun off into new companies in order to introduce greater competition into Japan’s energy sector. Many of JNOC’s activities were taken over by a state-run enterprise, the Japan Oil, Gas and Metals National Corporation (JOGMEC) (http://www.jogmec.go.jp/), established in February 2004 by the merger of JNOC and Metal Mining Agency of Japan, based on the Specially Designated Public Corporation Rationalisation Plan. JOGMEC is charged with aiding Japanese companies involved in exploration and production overseas and promoting commodity stockpiling domestically.

New companies were formed, of which the 2 largest are Inpex (www.inpex.co.jp), now Japan’s largest oil and gas company, and the Japan Petroleum Exploration Company (Japex) (www.japex.co.jp). Both companies carried out successful initial public offerings on the Tokyo Stock Exchange, although the Japanese government maintains an equity stake in each firm.

Natural Gas market Inpex and other companies created from the former Japan National Oil Company are the primary actors in Japan’s domestic natural gas sector, as in the oil sector. Inpex, Mitsubishi, Mitsui, and various other Japanese companies are actively involved in domestic as well as overseas natural gas exploration and production. Osaka Gas, Tokyo Gas, and Toho Gas are Japan’s largest retail natural gas companies, with a combined share of about 75% of the retail market. Japanese retail gas and electric companies are participating directly in overseas upstream LNG projects to assure reliability of supply.  

Degree of independence

METI’s regulatory department does not have a separate budget or autonomy in the management of human resources.

Energy debates

Japan participates in the Asia-Pacific Partnership on Clean Development and Climate (APP), a co-operative network of seven major countries in the region that collectively account for more than half of the total global emissions (Japan, Australia, Canada, China, India, Korea and the United States). The partnership strives to reduce CO2 emissions on a global scale.

The APP has established task forces for the 8 sectors that cover about 60 % of the partners’ energy consumption and CO2 emissions, namely aluminium, buildings and appliances, cement, cleaner fossil energy, coal mining, power generation and transmission, renewable energy and distributed generation, and steel.   

Energy framework

Basic Act on Energy Policy The Basic Act on Energy Policy was enacted in June 2002 and seeks to set out the country’s fundamental and overall energy policy direction after approval of the Diet. The core principles of Japan’s energy policy are:

Energy security,

Adaptability to the environment, and

use of market mechanisms.

The law directs the government to draft a Basic Energy Plan based on these principles to formulate energy demand related policies in a long-term and comprehensive manner and to review the Plan ever three years.

The Basic Energy Plan was established in 2003. It indicated comprehensive basic guidelines for future energy policies and affirmed continuous promotion of nuclear as the core energy source. The Plan was revised in 2007. In June 2010, the revised Strategic Energy Plan of Japan was formulated in consistent with the “New Growth Strategy”. It articulates the fundamental direction of energy policy in Japan, based on the Basic Act on Energy Policy above. The basic points of view in energy policy are energy security, environmental protection and efficient supply. In the revision, two new points of view were added, namely energy-based economic growth and reform of the energy industrial structure. Japan will fundamentally change its energy supply and demand system by 2030 through achieving several targets:

Doubling the energy self-sufficiency ratio, and the self-developed fossil fuel supply ratio, and as a result, raising its “energy independence ratio” to about 70%;

Raising the zero-emission power source ration to about 70%;

Halving CO2 emissions from the residential sector;

Maintaining and enhancing energy efficiency in the industrial sector ay the highest level in the world; and

Maintaining or obtaining top-class shares of global markets for energy-related products and systems.

By achieving these targets, domestic energy related CO2 emissions will be reduced by 30% or more in 2030 compared to the 1990 level, if policies are promoted sufficiently.

Special Measures Law on Use of New energy, etc., by Electric Utilities (known as the Renewable Portfolio Standard (RPS)) The 2003 Renewable Portfolio Standard (RPS) seeks to increase new energies in the field of electric power. A part of the hydroelectric and geothermal power generation is designated as the target power sources in the RPS law. It established procurement quotas to increase the volume of electricity generated from RES (excluding hydro) from 7,3 billion kWh in 2003 to 12,2 billion kWh in 2010 (equivalent to around 1% of total electricity generation). Under the RPS law, an obligation rate is assigned to each of Japan’s ten electric utilities, along with new entrants such as power producers and suppliers (PPSs). In 2007, a target of 16 billion kWh was set for 2014, while the obligation rate applied to each utility to achieve the target was set as a percentage of its electricity sales in the previous year. The Japanese RPS allows for trading between utilities.  As in other RPS models, Japan separates the so-called “green” portion of electricity generation as a specific product form the electricity itself. Renewable electricity generators create green RPS credits form their generation and can sell the credits in the RPS market while selling the electricity to the power market, to different buyers.

New National Energy Strategy In 2006, the New National Energy Strategy was launched containing a program of action to 2030 placing considerable emphasis on achieving energy security. Its five targets are further EE improvements of at least 30%; increasing the share of electric power derived from nuclear energy to more than 30%–40%; reducing oil dependence in transport to about 80%; raising Japanese investment in oil exploration and development; and reducing oil dependence below 40%.

The Strategic Energy Plan was revised again in 2010. It is required to be reviewed at least every three years, and to be revised if needed. In this revision, two new principles—‘energy-based economic growth’ and ‘reform of the energy industrial structure’—were added to the three existing principles of ‘energy security’, ‘environmental suitability’ and ‘economic efficiency’.

The Strategic Energy Plan aims to fundamentally change the energy supply and demand system by 2030 and has set ambitious targets for 2030:

Doubling the energy self-sufficiency ratio (18% at present) and the self-developed fossil fuel supply ratio (26% at present) and as a result, raising Japan’s ‘energy independence ratio’ to about 70% (38% at present)

Raising the zero-emission power sources ratio to about 70% (34% at present)

Halving CO2 emissions from the residential sector

Maintaining and enhancing energy efficiency in the industrial sector at the highest level in the world

Maintaining or obtaining top-class shares of global markets for energy-related products and systems.

Energy Conservation Frontrunner Plan (2006) The Energy Conservation Frontrunner Plan sets a strategy to achieve the EE target of the National Energy Strategy through strategic planning in the medium and long term. It establishes a plan to develop energy conservation technology and to develop and disseminate benchmarking, so that the energy conservation effect can be quantitatively verified.

In 2010, the revised Strategic Energy Plan set these initiatives:

Enhancing Japan’s energy efficiency (already the highest level in the world) through introducing the most advanced technologies for replacing equipment in the industrial sector

Making net-zero-energy houses available by 2020 and realizing net-zero-energy houses as the average across the economy by 2030

Setting compulsory energy-saving standards for houses and compiling compulsory standardization targets

Replacing 100% of lighting with highly-efficient lamps (including LED and organic EL lighting) on a flow basis by 2020 and on a stock basis by 2030

Introducing new integrated standards for energy consumption in all buildings for implementation in two years

Enhancing support and regulatory measures (including top-runner standards) to increase the take-up of energy-saving consumer electronics, energy-saving information technology equipment, heat pump water heaters, fuel cells, hybrid construction machines and other highly efficient equipment

Raising next-generation vehicles’ share of new vehicle sales to up to 50% by 2020 and up to 70% by 2030 by mobilizing all possible policy measures.

In 2011, following the temporary shutdown due to periodical inspection of nuclear power plants the Japanese Government began a significant review of its Strategic Energy Plan. The review consisted of a number of key questions about the future status of the nuclear power industry in the country, including how quickly a transition to renewable or conventional sources of energy can occur, including the energy security implications of such a move; would the current industry structure facilitate or hamper widespread introduction of renewables, and would the government introduce measures to foster decentralisation in the electricity sector.

Feed-in tariff system Indirectly related to the RPS, some solar PV also receives direct assistance similar to feed-in tariff.  The rate for solar PV was JPY 19 to JPY 23 per kWh in 2006. Under the excess power purchasing menu, electric utilities voluntarily purchase excess power primarily from residential generators that self-supply and sell excess power back to the grid. 

Research and development Boosting the use of RE depends in part on technological advances, an area where Japan excels.  Although total research and development (R&D) outlays on energy fell slightly between 1996 and 2006, Japan’s R&D on renewables more than doubled over that period. Clean energy investment in Japan totalled less than $1 billion in 2009, placing it in 15th position. Japan is a leader in solar capacity, with 1.7 GW backed by feed-in tariffs. Japan has ambitious targets to source 28 GW from solar and 5 GW from wind by 2020.

Cool Earth 50 In 2007 the Government announced a cooperative initiative with major greenhouse gas emitters to reduce emissions by 50% from current levels by 2050. The actions required to achieve these goals are set out in the Cool Earth Innovative Energy Technology Program, which includes the Innovative Energy Technology Roadmap and the Technology Development Roadmap.

Fukuda Vision The federal government originally established a long-term energy goal to install 4.82 GW of PV by Fiscal Year 2010. Although this goal is likely to be unachievable, it has been replaced by more ambitious "vision" created by the former Prime Minister Fukuda in June 2008. The Fukuda Vision of energy and environmental policy in Japan includes a long-term GHG reduction target and effective policy measures. They include: a long-term GHG emissions reduction target of 60-80%, relative to current levels by 2050; in the medium term, a reduction of GHG emissions by 14% by 2020, relative to 2005 levels as a feasible largest reduction; a target that “zero emission electricity” (such as generated from renewable and nuclear resources) be more than 50% of total generation by 2020, up from the current level of about 40%; amongst others. To achieve the “zero emission electricity” target, increasing the cumulative PV installed capacity by 10 times, from the 2005 level, to 14 GW by 2020 and by 40 times to 53 GW by 2030 are planned. The former Prime Minister also pledged to install PV systems on 70% of newly built homes by 2020. To align with the Fukuda Vision, federal agencies such as METI have re-launched subsidy programs for the residential market from 2009.

In response to the Fukuda Vision, three policies toward more renewable energy have been announced. The Ministry of Economy, Trade and Industry (METI) restarted a subsidy for installation of solar PV panels in January 2009. Income tax credits for installation of solar panels at the same time as renovation of a home were to begin in April 2009. A policy similar to a ‘feed-in tariff’’ is also being implemented.

In 2009, the Aso government announced a national GHG reduction target for the post-Kyoto regime to reduce national GHG emissions to15% below 2005 levels by 2020. Additional policies, such as a doubling of the PV installation target from 14 GW in 2020 to 28 GW in 2020 were also announced.

Japan ratified the UN Framework Convention on Climate Change (UNFCCC) on 28 May 1993 as an Annex I party, and the Kyoto Protocol on 4 June 2002. Japan’s greenhouse gas emissions reduction commitment under the Kyoto Protocol to the UNFCCC is to achieve a level of CO2 emissions only 2.3% higher than1990 levels by 2012, planned in the Kyoto Protocol Achievement Plan.

In order to fulfill the commitment, one of the focuses of current climate change policies is on development of nuclear energy. METI’s report “Japan’s Nuclear Energy National Plan” confirmed policies including continuing to meet at least 30-40% of electricity supply even after 2030 by nuclear power generation.

Reliance

In 2009, Japan was the world’s third largest oil consumer after the United States and China and almost all of the oil was imported. The bulk of the imports (84.5% in 2009) came from economies in the Middle East such as the United Arab Emirates, Saudi Arabia, Iran, Qatar and Kuwait. In 2009, the primary oil supply was 198.267 Mtoe, a decline of 10.9% from the previous year. In 2007, Japan imported about 96% of primary energy supply. Japan has a few operating oil and gas wells and some reserves of both oil and gas, but less than 2% of Japan’s oil and gas needs are produced domestically. The bulk of the imports (86% in 2007) came from economies in the Middle East such as the United Arab Emirates, Saudi Arabia, Iran, Qatar and Kuwait.   Japan is endowed with only limited coal reserves (350 million tonnes). Japan is the world’s largest importer of steam coal for power generation, pulp and paper and cement production, and of coking coal for steel production. Japan’s main steam coal suppliers are Australia, Indonesia, Russia, China, Canada, the United States, and South Africa, etc. Coking coal is imported from Australia, Indonesia, Canada, the United States, Russia, and China, etc.

Natural gas resources are also scarce in Japan. Domestic reserves stand at 20.9 billion cubic metres, and are located in Niigata, Chiba and Fukushima prefectures. Domestic demand is met almost entirely by imports of liquefied natural gas (LNG), which come from Indonesia (20.1% of imports in 2009), Malaysia (19.5%), Australia (18.5%), Qatar (12.0%), Brunei Darussalam (9.4%), the United Arab Emirates (7.9%), Oman (4.0%) and others. In 2009, LNG imports to Japan comprised 35.4% of total world LNG trade. Natural gas is mainly used for electricity generation, followed by reticulation as city gas and use as an industrial fuel.

Natural gas resources are also scarce in Japan; and Japan is the world’s largest importer of liquefied natural gas (LNG). Domestic demand is met almost entirely by imports of (LNG), which come from Indonesia (20% of imports in 2007), Malaysia (19%), Australia (17%), Qatar (12%), Brunei Darussalam (10%), the United Arab Emirates (8%), Oman (5%) and others. In 2007, LNG imports to Japan comprised 39% of total world LNG trade.

Role of the government

The Ministry of Economy, Trade and Industry (METI) (http://www.meti.go.jp/) is responsible for formulating Japan’s energy policy. Within METI, the Agency for Natural Resources and Energy (ANRE) (www.enecho.meti.go.jp) is responsible for the rational development of mineral resources, securing stable supplies of energy, promoting efficient energy use, and regulating electricity and other energy industries. The Nuclear and Industrial Safety Agency (NISA) (www.nisa.meti.go.jp/) is responsible for the safety of energy facilities and industrial activities, while the Ministry of Foreign Affairs (MOFA) (www.mofa.go.jp) formulates international policies.

Regulatory framework

Energy Conservation Law (The Act on the rational Use of Energy) is the pillar of Japanese energy conservation policies. The Law was enacted in 1979 in the light of the oil shock and covers all sectors, including energy management in manufacturing, commercial and transportation sectors, energy efficiency standards for vehicles and appliances (Tor Runner Programme), energy efficiency standards for houses and buildings.

In consideration of the large increase in the energy consumption amount in the private sector, the law was revised in 2008 to strengthen measures to enhance energy efficiency, including those for commercial sector. Also in this revision, sectoral approaches used in domestic regulation were introduced, to be implemented as of April 2009.

Based on the intensified need to sophisticate the energy supply structures, METI passed the Law Concerning the Promotion of Use of Non-fossil Energy Sources and Effective Use of Fossil Energy Materials by Energy Suppliers (Law Concerning Sophisticated Methods of Energy Supply Structures) in July 2009 to promote the use of non-fossil energy sources and effective use of fossil energy raw materials by energy suppliers such as electricity, oil and gas business operators.

In addition, the Law Concerning the Promotion of Development and Introduction of Non-Fossil Energy (Non-Fossil Law) was revised from the Oil Alternative Law.

The aim of the bills is to ensure stable energy supply to Japan by reviewing current alternative-energy policies and facilitating the use of non-fossil energy sources and the effective use of fossil energy materials.

Japan has been lowering its dependence on oil through alternative-energy policies pursuant to the Act on the Promotion of the Development and Introduction of Alternative Energy (the Alternative Energy Law), which was instituted in response to the oil crisis.

In August 2011, the Act on Purchase of Renewable Energy Sourced Electricity by Electric Utilities was passed by the Diet (the Japanese parliament). This Act will take effect on 1 July 2012. This Act obliges electric utilities to purchase electricity generated from renewable energy sources (solar photovoltaic, wind power, hydraulic power, geothermal and biomass) based on a fixed period contract with fixed price. Costs incurred by the utility in purchasing renewable energy sourced electricity shall be transferred to all electricity customers, who will pay the “surcharge for renewable energy” at a rate proportional to their electricity usage.

Electric utilities are obliged to allow grid connections and execute contracts as required for the purpose. The feed-in tariff (FIT) rate and contract period are to be determined according to factors such as the type, form of installation and scale of renewable energy sources. The contract rate and period shall be notified by the Minister of Economy, Trade and Industry and will be based on the recommendation of a newly established independent committee. To promote the generation of renewable energy sourced electricity, special consideration shall be made of the profit of the renewable energy sourced electricity suppliers when decisions are made about the FIT rate for three years from the enforcement of the Act.

Environmental taxes A number of reforms have been introduced to make the tax system more environmentally friendly:

Households were given tax credits for energy-saving measures, including solar panels, until 2011.

Firms are allowed to take immediate depreciation on investment in facilities that produce energy-saving products, such as solar panels, until 2011,

The automobile tax was cut by 25% to 50% depending on vehicle’s environmental performance.

The motor vehicle tonnage tax and the automobile acquisition tax were reduced or exempted in 2009 for environment-friendly automobiles until 2011.

Regulatory barriers

The country’s goal of creating a low-carbon society has made it essential to take measures directed at each stage at which energy is supplied and used.

Energy regulator

The Ministry of International Trade and Industry (MITI), established in 1951 was reorganized to the Ministry of Economy, Trade and Industry (METI) in 2001 and has separated its policy-making and regulatory functions into two different departments, clarifying its functions in these areas.

The Agency for Natural Resources and Energy is a sub-division of the METI that has set forth Japan's New National Energy Strategy. The Agency is actively working to realize this strategy.  

Renewable energy

Solar energy In 2006, Japan produced more than half of the world’s solar panels and ranked second in the world in generating energy by photovoltaic facilities, with almost one-third of the total. By the end of 2008, cumulative 2,140 MW of PV systems have been installed in Japan, mainly on residential homes. Japan was the sixth largest country market for solar photovoltaics in 2008. In that year, a further 230 MW of solar photovoltaic energy was installed in the country.

Wind energy Introduction of wind power generation systems is progressing rapidly in areas with good conditions. Japan has fewer regions suitable for the installation of wind power generators than many other countries due to its topographical features. Large-scale wind-farms continue to be constructed, mainly in Hokkaido and Tohoku. The total installed capacity was about 1,850 MW at the end of 2008; and the target for 2010 was 3 GW. Feed-in tariffs for wind projects became available on the 1st July 2012, and their inception has boosted wind energy production by 8.2 percent, according to the Japan Wind Power Association.

Hydropower Japan had installed hydroelectric generating capacity of 22 GW in 2008, accounting for about 8% of total capacity. Hydropower accounts for about 20% of the capacity of the electric power plants in Japan, and has been effectively used together with thermal and nuclear power as one of the important power sources. It is a power generation method making the best use of geographic characteristics of Japan. Japan has an estimated 34 GW of hydroelectric reserves, of which about 65% have already been tapped. The Japanese government has been promoting small hydropower projects to serve local communities through subsidies and by simplifying procedures. There are also a number of large hydropower projects under development, including the 2,350 MW Kannagawa plant due online in 2017 and the 1,200 MW Omarugawa plant due online in 2011. While additional development of hydropower could boost the country’s energy security, it is not expected to account for much additional power capacity in coming years and has suffered from some drought conditions recently.

Biomass One of the major sources of renewable is biomass, which is used in wide area, namely electricity, gas and fuel for transportation. Raw materials are derived from forest resources, residues of agricultural products and foods, as well as sewage sludge. The government is promoting the utilization of biomass to address climate change to promote the development of agriculture and forestry, based on the revised 2006 Biomass Nippon Strategy which includes the establishment of 300 Biomass Towns that will rely exclusively on biomass. By July 2009, 218 towns had been recognized.

Biofuels In 2007, the government announced a roadmap aimed at increasing the annual production of biofuels (ethanol and diesel) from the 2006 level of around 5,000 to 6,000 kilolitres within a few years. However, the high cost of biofuels suggests some caution in promoting this energy source.

Geothermal Geothermal is a power generation method making the maximum use of land located in volcanic zones. Japan has a total potential capacity of 2,470 MW.