Nation’s leading energy experts, business leaders and academics will be invited to contribute
The earthquake and tsunami that hit Japan’s Fukushima Daiichi nuclear facility in March 2011 devastated the plant and surrounding areas. But the ensuing emergency also cracked apart the ambitious strategy that Japan had laid out for its energy future. This envisaged expanding the role of nuclear from just under one-third of electricity generation to one-half by 2020. In the post-Fukushima policy environment, sticking to this plan is impossible. But, with scant indigenous natural resources to rely on, how is the world’s third-largest economy likely to meet its future energy needs?
The Economist Intelligence Unit will publish a paper in March next year that will seek to answer this question. The paper, sponsored by GE Japan, will include the EIU’s latest assessment of Japan’s energy supply and demand in the long term, and analysis of different forms of electricity generation, their likely relative contribution to Japan’s future energy supply, and their costs and benefits.
The paper will be based around analysis of the following core issues, either in the form of essays by leading experts in the field or in-depth interviews on the topic:
· Japan’s energy strategy: historical and future perspectives. Japan is a resource-poor nation that has long struggled with the dilemma of how to ensure its energy security. The nuclear disaster is the latest in a long line of challenges—including the oil shock of the 1970s—that have forced a radical rethink of the energy mix, putting the focus back on the need for imported fuel sources. This section will seek expert analysis of the implications of Japan’s long-term historical search for energy security, with reference to the political, diplomatic and economic implications of various solutions Japan has adopted in the past and is likely to adopt in future.
· Prospects for and challenges to the broader adoption of renewable energy. The government has made increasing the contribution of renewable energy supplies a key policy goal. But so far, wind, geothermal and solar power are relatively underused in Japan. In part this is because subsidy inefficiencies still make hydrocarbon and nuclear power more affordable. This section will seek analysis of the future prospects for renewable energy in Japan, analysing barriers to adoption, potential resolutions, and the relative merits of alternative sources of generation.
· Energy efficiency and the Japanese consumer. The summer of 2011 demonstrated the remarkable forbearance of the Japanese consumer in coping with an enforced reduction of energy supply. In the long term, how can consumers—particularly households—continue to improve energy efficiency in what is already a very efficient energy using nation? Can smarter grids and more renewable energy help? This section will examine the long-term needs of Japanese consumers and ways in which they will adapt to Japan’s changing energy systems.
· Industry and Japan’s energy supply: maintaining a competitive energy landscape. The summer of 2011 saw radical changes in business practice as companies were forced to adapt to reduced energy supply. But in the long term how will Japanese business energy demand develop? Can businesses get more energy efficient and how? Are they prepared to adopt more renewable sources of energy? What are the implications for competitiveness if electricity costs increase? What do businesses think is missing from Japan’s energy policy, and what key improvements are necessary to support healthy growth of the industry?
· The distribution challenge: lessons from abroad. Securing Japan’s future energy system must include reforms to distribution as well as generation. Issues with the current network—including the status of its regional suppliers, technical barriers to unifying grids in the east and west, and infrastructural bottlenecks—were exposed in the aftermath of the March 2011 tsunami. How can these be resolved and what will Japan’s grid look like in future? Is a “smarter grid” feasible? How can examples from other countries provide insight into Japan’s bid to reform distribution? This section will take a long-term, comparative perspective in analysing the future of electricity distribution in Japan.
· Japan’s best-mix energy strategy: international perspectives. This section will first examine the concept of “best mix” and the importance of finding the optimum strategy for Japan’s long-term energy strategy. It will take an international perspective, examining the evolving energy mix of certain countries with potential lessons for Japan (both in terms of best-practice and illustrative problems).
---------------------------
PREVIEW: The EIU view
By Martin Adams, EIU Energy Editor
Japan’s long-term energy strategy is a matter of intense and rapidly shifting debate. What follows is intended to give a flavour of the EIU’s core assumptions about the likely course of developments in this dynamic arena. A fuller version of our views will be laid out in the forthcoming report.
Central to our view is the assumption that, for the rest of this decade and into the next, nuclear power will continue to satisfy a significant portion of Japan's electricity demand. Certainly, its role will gradually decline from pre-Fukushima levels. A poll by the Asahi Shimbun newspaper in September found that 77% of the electorate wanted nuclear gradually phased out. But businesses' frustration with the protracted closure of dozens of power plants following the natural disasters has been palpable, and Japan’s current leadership is keen to see them reopened. The signs are that a sudden wholesale rejection of nuclear by the central government is off the cards.
After all, policymakers tasked with reshaping energy policy do so in an enormously difficult economic environment. The vast cost of decommissioning waves of reactors (only the US and France have more) is but one argument against forced closures; the nuclear lobby is a strong proponent of atomic power’s cost-competitiveness with other energy sources. It is likely that in most cases, therefore, existing nuclear plants will resume operations and ageing reactors will close at the end of their natural lives. We foresee a gradual drop in the reactor numbers over the course of this decade and beyond as old reactors are shuttered. Our forecast is 30.6 gigawatts (gw) of nuclear capacity in 2020, down from 47.7 gw in 2010—a significant revision from the 61.2 gw forecast before Fukushima.
So what will plug the gap? Much attention recently has focused on the hope that renewable energy and energy efficiency will fill much of it. There are reasons to view this with caution, however. On energy efficiency, Japan has a superb record, but that will make it harder to eke out new gains. For renewables, meanwhile, cost remains a serious obstacle—which is one reason why presently they provide only a tiny amount of Japan’s power. A new renewables bill passed in August obliges utilities to buy power from renewable sources, but the feed-in-tariffs that will be paid for this electricity have not yet been set. As many other developed-world governments are cutting such incentives, will Japan stump up the funds to promote rapid expansion of alternative energy? Or to effect the needed overhaul Japan's grid?
In our view, the most probable scenario is that, although renewable energy will continue to grow, it will remain a small percentage of generation at the end of this decade. (Beyond this, assuming a revamp of grid infrastructure and that the cost of renewables continues to fall, the share of renewables in generation could rise more briskly.) Renewable energy will therefore play a small part in substituting for Japan’s planned nuclear build-out before 2020.
EIU forecast: Japan electricity generation in 2020, % of total | |
Combustible fuels | 81.5 |
Coal | 33.4 |
Natural gas | 34.2 |
Oil | 17.9 |
Nuclear | 10.3 |
Hydro | 6.7 |
Non-hydro renewables (Including geothermal, solar, tide/wave/ocean, wind) | 1.59 |
Total | 100.0 |
This leaves climate-warming fuels to step into the breach. Notably, Japan's liquefied natural gas (LNG) imports have surged following Fukushima. We anticipate that natural gas demand in Japan (already the biggest market for LNG) will rise by 30% between 2010 and 2020. Petroleum products and coal consumption will each grow by nearly 20%. The logical conclusion is that progress towards creating a low-carbon economy will, for now, disappoint. A pledge by the ruling Democratic Party of Japan, made before natural disaster struck, to cut carbon emissions by 25% by 2020 compared to 1990 levels will not be fulfilled. Rather, emissions from burning fuel will edge up by around 10% over the course of this decade. At the same time, Japan will rely increasingly on fossil-fuel imports, threatening to harm its energy security.
Fukushima has for many revealed the perils of relying on atomic energy. But the dramatic events of March are likely to have set Japan on a less green, less energy-secure path over the course of this decade.
---------------------------
The paper will be available free of charge at: http://www.businessresearch.eiu.com
Press enquiries
Joanne McKenna, press liaison, +44 (0)20 7576 8188; joannemckenna@eiu.com
David Line, editor, +852 2585 3873; davidline@eiu.com
About the Economist Intelligence Unit
The Economist Intelligence Unit (EIU) is the world's leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organisations around the globe, inspiring business leaders to act with confidence since 1946. EIU products include its flagship Country Reports service, providing political and economic analysis for 195 countries, and a portfolio of subscription-based data and forecasting services. The company also undertakes bespoke research and analysis projects on individual markets and business sectors. More information is available at www.eiu.com or follow us on www.twitter.com/theeiu
The EIU is headquartered in London, UK, with offices in more than 40 cities and a network of some 650 country experts and analysts worldwide. It operates independently as the business-to-business arm of The Economist Group, the leading source of analysis on international business and world affairs.
About the sponsor
GE (NYSE: GE) works on things that matter. The best people and the best technologies taking on the toughest challenges. Finding solutions in energy, health and home, transportation and finance. Building, powering, moving and curing the world. Not just imagining. Doing. GE works. For more information, visit the company's website at www.ge.com.
