“API Geoeconomic Briefing” is a weekly analysis of significant geopolitical and geoeconomic developments that precede the post-pandemic world. The briefing is written by experts at Asia Pacific Initiative (API) and includes an assessment of burgeoning trends in international politics and economics and the possible impact on Japan’s national interests and strategic response. (Editor-in-chief: Dr. HOSOYA Yuichi, Research Director, API; Professor, Faculty of Law, Keio University; Visiting Fellow, Downing College, University of Cambridge)

This article was posted to the Japan Times on January 3, 2022:

https://www.japantimes.co.jp/opinion/2022/01/03/commentary/japan-commentary/energy-security-decarbonization/

API Geoeconomic Briefing

January 3, 2022

Japan’s energy dilemma: How to achieve security alongside decarbonization

SHIBATA Narumi
Research Associate, Asia Pacific Initiative (API)

 

 

 

 

The COP26 climate talks in Glasgow, Scotland, held through mid-November, provided a stage for fierce fights between the United Kingdom and other European nations and emerging economies and coal-reliant nations over the phaseout of coal power by 2040.

Although Japan was also under strong pressure to make a commitment to end the use of coal, Prime Minister Fumio Kishida did not mention abolishing coal-fired power plants, reflecting Japan’s vulnerability in terms of energy supply.

The International Energy Agency (IEA) defines energy security as “the uninterrupted availability of energy sources at an affordable price,” but achieving energy security is an extremely difficult challenge for Japan, which relies almost entirely on imported energy sources.

Energy supports the basis of economic activities and securing stable energy supply is the key to national security — protection of people’s lives and property.

In spite of that, Japan is yet to develop a comprehensive strategy on energy, and the concept of energy security has not been widely recognized.

The Kishida administration is likely to revise the national security strategy, which presents medium- to long-term guidelines for defense and foreign policies, at the end of this year.

The current strategy, released in 2013, lists the following issues to focus on regarding energy:

• The rise of resource nationalism in resource-rich countries.
• Intensified competition among emerging economies to acquire energy and mineral resources.
• Advancing cooperation with Russia in all areas, including security and energy construction.
• Multilayered cooperative relations with the Gulf states, encompassing cooperation beyond resources and energy, including politics and security.
• Responding to environmental and energy issues.
• Actively utilizing diplomatic tools to secure stable supply of energy and other resources.

As it is becoming increasingly difficult to secure energy resources amid the current international situation, promoting resource diplomacy with Russia — a major producer of oil and gas — and the Gulf states is certainly important.

But will it be really possible for resource-poor Japan to respond to contingencies only with such a diplomatic policy?

Furthermore, because Japan has announced that it will target a 46% cut in its greenhouse gas emissions by 2030 from 2013 levels, the government needs to work comprehensively on energy security and climate-change policies as two sides of the same coin.

As Japan is facing pressure both at home and from abroad to shift from fossil fuels to a decarbonized energy system, it is necessary to consider what policies to adopt to achieve both energy security and decarbonization. But the current national security strategy does not appear to take this into account.

Now that Japan is working on the creation of a new national security strategy, it is critical that it comes up with multitiered policies for energy security.

 

Decarbonization and energy crisis

In October, the Cabinet approved the sixth basic energy plan, the latest version of the basic guideline for the government’s medium- to long-term policy on energy supply, which is revised every three years.

Its main goal is to significantly increase the share of power generation from renewable energy sources.The government aims to have renewables account for 36% to 38% of total power generation capacity in fiscal 2030, nuclear energy 20% to 22%, coal 19% and 1% for hydrogen and ammonia combined.

This means Japan is seeking to double the share of renewables in domestic electricity generation in fiscal 2030, which begins in April of that year, in comparison to the level of fiscal 2019.

Making renewable energy a main power source has now become a national long-term policy, but there are risks involved.

Europe, which leads global efforts to tackle climate change, was hit by a serious electricity shortage last year due to insufficient renewable electricity generation, bringing about soaring demand for electricity and skyrocketing energy prices.

Liquefied natural gas (LNG) prices have seen the biggest rise, resulting in the region increasing its dependence on Russia, which virtually has control over natural gas pricing.

The IEA has admitted that the energy crunch was caused partly by lower-than-usual availability of wind energy, noting that the situation is a reminder to governments of the importance of well-managed clean energy transitions.

The case of Europe offers an important lesson for Japan in expanding the use of renewable energy.

If wind or solar power becomes unavailable for several weeks, how will the country secure alternative energy supplies?

So far, Japan has not suffered an electricity crisis like in Europe, but the country experienced a tight supply situation last winter as bad weather led to the unstable performance of solar power generation, which came on top of an LNG supply shortage.

The industry ministry forecasts that the tight supply-and-demand situation will remain for some time, estimating that electricity demand in the area covered by Tokyo Electric Power Company Holdings Inc. may approach maximum supply this winter if Japan experiences a once-in-a-decade cold snap.

The Kishida administration has announced that the government will support domestic production of energy storage technologies such as storage batteries and hydrogen.

If it becomes possible to store electricity, it will help reduce the risks of depending on renewable energy sources. But as the country is facing the possibility of an energy crisis approaching, it is definitely necessary to hold on to the option of coal-fired thermal plants.

Nuclear energy also has potential as a stable alternative energy source.

The transition away from fossil fuels is a major shift in industrial structure that requires a great amount of time and investment.

That in itself is a difficult challenge, but if the process results in damaging the nation’s energy security in the near term, it would mean the sustainability of long-term decarbonization efforts will also be lost.

How should Japan cover the risks of adopting renewable energy sources that are unstable both physically and economically? The resource-poor country must maintain as many options as possible.

 

Nuclear energy

Nuclear power plants have the advantage of emitting almost no carbon dioxide during operation.

Moreover, since Japan has almost no fossil fuels, nuclear power generation — which doesn’t require fuel to be replaced at short intervals and which consistently generates a large amount of electricity from a small amount of fuel — is a precious energy source that can contribute to improving the nation’s energy self-sufficiency.

The nuclear meltdown at the Fukushima No. 1 plant in 2011, however, forced the government to drastically change its nuclear policy.

The meltdowns significantly damaged the lives of nearby residents, leading the public to lose trust in nuclear power generation and leaving a majority of the country’s nuclear reactors suspended.

However, Japan is yet to develop a method to secure a stable supply of a large amount of low-carbon electricity aside from nuclear energy.

European Commission President Ursula von der Leyen said that in order to cope with the serious energy crunch in Europe, “it is obvious that we need more renewable and clean energy.”

However, alongside renewables “we need a stable source, nuclear; and during the transition, of course, natural gas,” she said.

There is a possibility that natural gas and nuclear energy will be added to the European Commission’s so-called green taxonomy — a rulebook for investments including a list of energy sources considered beneficial to the climate.

Meanwhile, Canadian utility Bruce Power LP announced in November the issuance of green bonds to help fund an overhaul of nuclear reactors — the world’s first such move by a nuclear power plant operator.

Bruce Power plans to refurbish six of its eight power units, which is expected to cost several billion dollars. If some of the funding comes from green financing over the next decade, it will be the world’s first case of a nuclear power operator financed by green investments.

Although regarding nuclear power as something subject to green investments is controversial, investments in nuclear energy might increase if nuclear energy is recognized as a green energy source along with renewables.

Such cases indicate the fact that more countries are starting to once again view nuclear energy as a low-carbon energy source that offers stable supply, even suggesting a trend of nuclear power regaining its footing in some sense.

As the world is debating the conditions under which nuclear energy could qualify as contributing to sustainability, Japan might lose the chance to even join the debate if it remains unclear about how to shape the future of the energy source.

While countries like China and Russia are increasing their international presence through government-led efforts to develop small modular reactors — a next-generation reactor that is smaller and easier to cool and safer than a conventional reactor — Japan remains behind in this area as well because the government has not been clear on what to do with nuclear energy, and related developments are made mainly by the private sector.

Japan needs to depend on nuclear energy for the time being to achieve decarbonization and energy security, and now is the time for the government to face this issue.

The government must carefully explain to the public the importance of nuclear energy — which is low-carbon and can be supplied stably — to the nation’s energy security and make efforts to win people’s understanding.

 

Long-term strategy

In boosting energy security, it is necessary to aim for a trade-off by obtaining more energy with less carbon at affordable costs.

Japan, with little resources, should have as many energy source options as possible, including renewables, LNG, coal, nuclear, hydrogen and storage batteries, and find the best balance among them.

While making progress in decarbonization, the country must maintain a stable energy supply as a basis to support its economy.

The foreign and defense ministries had been mainly engaged in putting together the current national security strategy and the industry ministry, which is in charge of energy policy, had not been a part of the discussions.

However, energy policy forms the nation’s foundation, and the government and the private sector need to work together as one to create a national strategy, learning a lesson from the Fukushima nuclear disaster — a case which can be described as the nation’s energy security being threatened due to a vertically segmented administration system.

All parties should cooperate to come up with a medium- to long-term strategy, also taking into consideration collaboration with other countries, by acknowledging the fact that energy security holds an important position in economic and national security.

 

Disclaimer: The views expressed in this API Geoeconomic Briefing do not necessarily reflect those of the API, the API Institute of Geoeconomic Studies or any other organizations to which the author belongs.