Speaker 1: This is Dana Perkins and you're listening to Switched on
Speaker 1: the BNAF podcast. Prior to March of twenty eleven, Japan's
Speaker 1: energy sector looked significantly different from what it is now.
Speaker 1: Back then, a third of its overall power came from
Speaker 1: nuclear energy. However, in the aftermath of the earthquake and
Speaker 1: subsequent tsunami resulting in the Fukushima nuclear incident, the nation
Speaker 1: took the decision to shut down all of its nuclear
Speaker 1: reactors and reassess its reliance on this power source. Fast
Speaker 1: forward to twenty fifteen, when Japan started up two of
Speaker 1: its reactors again, but between then and now only a
Speaker 1: few more have been brought back online, leaving fossil fuels
Speaker 1: to fill in the energy generation void and raise Japan's emissions.
Speaker 1: So on today's show, we dive deeper into Japan's pathway
Speaker 1: to net zero and the future mix of their energy system.
Speaker 1: To get more perspective on this, I get to speak
Speaker 1: with Issue Kukuma and associate from bnaf's Tokyo office. Together,
Speaker 1: we discuss the energy technology Japan is looking to utilize
Speaker 1: as part of its drive to net zero and the
Speaker 1: unique circumstances such as land constraints that it has to overcome.
Speaker 1: We also discuss the nation's geothermal energy potential and why
Speaker 1: a meaningful rollout of this clean energy source is being
Speaker 1: blocked by an unexpected group, and lastly, Japan's reduced relationship
Speaker 1: with nuclear power and its potential role in the future.
Speaker 1: BNAF subscribers are going to be able to access BNF's
Speaker 1: Japan specific New Energy Outlook report by going to BNF
Speaker 1: dot Com, BNF go on the Bloomberg terminal, or BNF's
Speaker 1: mobile app. Now this report, the New Energy Outlook for
Speaker 1: Japan was actually based off of BNF's New Energy Outlook
Speaker 1: twenty twenty two, where we developed the economic transition scenario,
Speaker 1: which is without admissions constraints, as well as the net
Speaker 1: zero scenario subject to a carbon budget consistent with meeting
Speaker 1: the Paris Agreement goal. Using these scenarios, we're able to
Speaker 1: explore the implications for Japan's electricity, industry and transport sectors,
Speaker 1: along with the investment flows that are required to get there.
Speaker 1: As always, if you like this podcast, make sure to
Speaker 1: subscribe and you'll receive an update when we published future
Speaker 1: episodes and give us a review that'll make us more
Speaker 1: discoverable by others. But right now, let's jump into my
Speaker 1: conversation with issue about Japan and its new energy outlook. Issue.
Speaker 1: Thank you so much for joining us on the show today.
Speaker 2: Yeah, thank you so much for having me.
Speaker 1: We're here to talk about Japan and we want to
Speaker 1: understand everything about the energy system there, and you're actually
Speaker 1: speaking to us today from our office in Tokyo, which
Speaker 1: is great. Let's start at the beginning. You know, we're
Speaker 1: here to talk about the energy system, so can you
Speaker 1: explain the current state of play? What does the existing
Speaker 1: energy system look like in Japan?
Speaker 2: Japan's color anergy max with heavy rely on fourth of field,
Speaker 2: which explain why Japan's emission is too high and also
Speaker 2: explaining japan it's quite emission intensive and among all sectors,
Speaker 2: power sector is the largest source of emissions, which accounts
Speaker 2: for about forty percent of total emissions to Japan. And
Speaker 2: this is because japan a luxurity generation is mainly supplied
Speaker 2: by coal, gas and oil pop plants.
Speaker 1: What are Japan's different emissions targets?
Speaker 2: Yes, so I would like to highlight two major declbnization
Speaker 2: targets for Japan. For the first one is MDC targets,
Speaker 2: so this is more for the near term. So Japan
Speaker 2: is aiming to video some emissions by forty sixty percent
Speaker 2: in two the nand and thirty compared to twenty thirteen level,
Speaker 2: and the other one is netzero target, so this is
Speaker 2: obviously for the more long term, and Japan is pledging
Speaker 2: to achieve netzero by two the fifty and this has
Speaker 2: been legislated since two twenty one. So these two are
Speaker 2: the key decobnization targets for Japan.
Speaker 1: And we're going to talk a bit about history in
Speaker 1: terms of Japan's energy system and then also some of
Speaker 1: the changes we see in the future. But before we
Speaker 1: get into that, I want to know if you think
Speaker 1: that these emissions targets are ambitious.
Speaker 2: Yes, I believe so. So forty six percent emission reduction
Speaker 2: and also basically netro in two there and fifty these
Speaker 2: are very ambitious given what japan energy mix is currently
Speaker 2: looking like. So as I mentioned, japan energy mix is
Speaker 2: very I mentioned intensive, so Japan definitely needs to do
Speaker 2: more to achieve a netro or deploy more renewable or
Speaker 2: more decarbonization solutions in access rated manner.
Speaker 1: So it's going to take some work to get there,
Speaker 1: and before we think about the future, let's go to
Speaker 1: the past. So in twenty eleven, there is this event,
Speaker 1: the earthquake that then is now also synonymous with Fukushima,
Speaker 1: and what happened with that nuclear reactor where you had
Speaker 1: nuclear waste make its way all the way across the
Speaker 1: Pacific at one point and found in California. Can you
Speaker 1: explain how important nuclear used to be to the overall
Speaker 1: energy mix in Japan and where it sits right now?
Speaker 2: A nuclear pop plant used to account for one third
Speaker 2: of total electricity grmination. But the fucustion accident was definitely
Speaker 2: a huge turning point for japan electricity market cause after
Speaker 2: the accident, or nuclear reactors had to shut down, and
Speaker 2: since nuclear had to drop out from the power market
Speaker 2: in Japan, forth of your poplant needed to step in
Speaker 2: to fill in the gap, which increased the emissions in Japan.
Speaker 2: It's been over ten years since the focusing accident. Back
Speaker 2: in Japan, nuclear restart has been that is slow still,
Speaker 2: so by the end of twenty twenty two, only nine
Speaker 2: new Graatee reactors restarted, and this is quite small compared
Speaker 2: to before the accident because we used to or the
Speaker 2: Japan used to have around thirty nuclear reactors and last year,
Speaker 2: if you look at the contribution of nuclear pop plants
Speaker 2: or the nuclear power in japan electricity invention, it was
Speaker 2: less than ten percent when it comes to the annual generation.
Speaker 2: So compared to the one side of the electricity met
Speaker 2: by nuclea before the accident, the current electricity generation by
Speaker 2: nucleate really small.
Speaker 1: But you note that nine reactors have been restarted, and
Speaker 1: this is not a small undertaking to restart a nuclear reactor.
Speaker 1: But going forward are their plans to open more and
Speaker 1: what part of the energy mix would that actually comprise
Speaker 1: in the future.
Speaker 2: Yes, that's a great question. So the Japanese government actually
Speaker 2: has some new clear target and alexis regeneration and according
Speaker 2: to the current electricity mixed target, the government is aiming
Speaker 2: to increase the share of nuclear generation to twenty to
Speaker 2: twenty two percent of the total electricity generation in twenty
Speaker 2: and thirty. So this is basically one fifth of the
Speaker 2: total electricity generation and this is a quite big jump
Speaker 2: from what we're seeing the market. But BENF we don't
Speaker 2: expect the Japanese governments to meet this target because of
Speaker 2: the sole nuclear restart we have seen software and also
Speaker 2: the limited timeline until to the donally to continue the
Speaker 2: restart process.
Speaker 1: I don't know if that was the funniest statement you've made,
Speaker 1: but you can tell for those who are listening the
Speaker 1: issues actually recording from our office in Tokyo, and it's
Speaker 1: an open floor plan, so apologies for any background noise,
Speaker 1: but hopefully people in your office are learning a bit
Speaker 1: more about the power system in Japan today. So there
Speaker 1: we go. Everyone's listening to the recording, they're getting a
Speaker 1: sneak peak. So my next question really has to do
Speaker 1: with how people in Japan are reacting to this.
Speaker 2: Yeah, in the public, there're the mixed feeling. So obviously
Speaker 2: some people still worry about the safety of the nuclear power,
Speaker 2: and this is mainly because what they have seen in
Speaker 2: the past. But this is slightly changing these dates, so
Speaker 2: some people actually see the benefit of having nuclear power
Speaker 2: in Japan. Electricity mix because of increasing electricity retail prices
Speaker 2: that we are seeing in the market right now, because
Speaker 2: of the increase in the commodity prices.
Speaker 1: So let's talk about what the alternatives are if we
Speaker 1: don't bring a lot of nuclear power back online in
Speaker 1: order to reach these emissions targets that you've outlined, and
Speaker 1: I'm going to start with a really simple one. You know,
Speaker 1: it's an island nation. What is the potential for interconnectors
Speaker 1: with other nearby countries and for them to buy clean
Speaker 1: energy from surrounding states or is this something that they're
Speaker 1: going to have to build domestically.
Speaker 2: I think it's quite ambitious because obviously it's not like
Speaker 2: closest states island nations, So if you're trying to build
Speaker 2: an interconnection or like a power line or anything, it
Speaker 2: will require a huge investment, and on top of that,
Speaker 2: you have to kind of take an account for that
Speaker 2: your politics, let's say between Japan and Korea, or between
Speaker 2: Japan and China. So I think this could be a
Speaker 2: challenging topic.
Speaker 1: So now that we've established that Japan's really going need
Speaker 1: to be developing a lot of their power generation domestically,
Speaker 1: what let's talk about some of the options that actually exist.
Speaker 1: And I think it's maybe the best place to start
Speaker 1: is diving into the traditional renewable energy sources that we
Speaker 1: think of, which are wind and solar. So what are
Speaker 1: the options and kind of what's the outlook for wind
Speaker 1: and solar in Japan.
Speaker 2: Before talking about wind and solar specifically, I just wanted
Speaker 2: to highlight the organization of the power sector should be prioritized,
Speaker 2: especially in your term, I think in Japan, but also globally.
Speaker 2: And this is because renewablets are already matured and those
Speaker 2: renewable technology is already becoming cost competitive, and we know
Speaker 2: what need to do to clean out the power sector,
Speaker 2: which is basically deploying more common free power our pop
Speaker 2: plants and also fade out the emission intensive technologies. And
Speaker 2: when it comes to like the role of solent when
Speaker 2: Japan or these technology have the huge potential in Japan.
Speaker 2: For example, in one of the benf Fragship research in
Speaker 2: New Energy Outlook, which basically long term scenario exercise for
Speaker 2: Japan and also the global energy mix with it, the
Speaker 2: scenario exercise and modeled how the future energy mix needs
Speaker 2: to look like to meet the parents aligned net or target,
Speaker 2: and this scenario exercise basically confirmed that solar and when
Speaker 2: there desically the key for Japan's netual target. So according
Speaker 2: to our research, solar and win account for about eighty
Speaker 2: percent of total electricity into the fifty in our net scenario.
Speaker 2: And if we look at the wind. Actually the share
Speaker 2: is quite big. So the share of wind is over
Speaker 2: fifty percent of the total elexicity generation into the fifty,
Speaker 2: so this is quite big and because of that, I
Speaker 2: think Japan definitely needs to scale the renewables deployment in
Speaker 2: an accescerated manner. So in our network scenario that install
Speaker 2: the capacity of solar needs to be over four hundred gigabat.
Speaker 2: This is five times larger than what we are seeing
Speaker 2: the market today in a full wind, So the wind
Speaker 2: market in Japan is quite tiny. For right now, japanly
Speaker 2: has less than five gigot of wind projects installed, including
Speaker 2: both on show Win off Show Win. However, our net
Speaker 2: scenario shows that on shore wind instration needs to be
Speaker 2: over one hundred and ten gigabat and off show wind
Speaker 2: instration needs to be over one hundred and forty gigat
Speaker 2: in two theou and fifty, so you can see how
Speaker 2: big the jump needs to be for that win and
Speaker 2: also solar.
Speaker 1: So there have been a lot of changes to the
Speaker 1: energy mechs in Japan, and you noted that there was
Speaker 1: quite a bit of nuclear power, which is traditionally considered
Speaker 1: consistent based load power, which came offline, then replaced by
Speaker 1: heavy carbon emitting energy sources, and now looking into the future,
Speaker 1: perhaps a bit more nuclear certainly looks like quite a
Speaker 1: bit more wind. But then there is the fact that
Speaker 1: the wind doesn't always blow and the sun doesn't shine.
Speaker 1: Anybody listening to this podcast is very familiar with that.
Speaker 1: From a security a supply standpoint, what has been happening
Speaker 1: with the grid and has there essentially with the changes
Speaker 1: that have been taking place, have there been any issues
Speaker 1: around reaching peak demand?
Speaker 2: That's a great point. So I think in terms of
Speaker 2: energy security, Japan energy security is at risk, and this
Speaker 2: is because, as you mentioned, nuclear used to provide a
Speaker 2: quite huge channel of electricity in Japan. But after the
Speaker 2: focuss marks then Japan actually needed to increase the rely
Speaker 2: on on foth of field, which means Japan increase the
Speaker 2: rely on on the force of your imports. So when
Speaker 2: it comes to energy security, I think deploy more renewablets
Speaker 2: actually improved japan energy security. One huge benefit of installing
Speaker 2: more renewables in Japan. The other thing I'd like to
Speaker 2: highlight is over the last few years, especially between the
Speaker 2: twenty and to the twenty two, actually Japan has seen
Speaker 2: a tight power supply demand balance, and this is because
Speaker 2: Japan retired many fourths of your pop plants, not for
Speaker 2: the cogonization effort, but it was because many of the
Speaker 2: fourths of your pub plants the end of the lifetime.
Speaker 2: And because of that, in winter last winter, last summer,
Speaker 2: the Japanese government had to ask household and also businesses
Speaker 2: to conserve electricity during the peak hours in peak season.
Speaker 1: How did they go about asking people to conserve energy.
Speaker 1: Was it a blanket statement that you need to conserve
Speaker 1: or was it something like I know have happened in
Speaker 1: the state of California where they're getting next to peak
Speaker 1: demand and they've had to take certain amounts of electricity
Speaker 1: off the grid, and they essentially sent out a text
Speaker 1: message to everybody telling them for the next couple of hours,
Speaker 1: you need to reduce your consumption. Is it over a
Speaker 1: short period of time or a long period of time?
Speaker 1: And how is the Japanese government communicating with people?
Speaker 2: So I think it was like over day typically, so
Speaker 2: when the incident was said to happen, based on some
Speaker 2: of the electricity demand podcast and also the weather condition,
Speaker 2: typically the government asked a household and businesses to reduce
Speaker 2: electricity consumption or perhaps considered using the electricity during the
Speaker 2: non peak hours through websites and also some of the
Speaker 2: TV programs, and I think when the Japanese government requests
Speaker 2: to ask something to the businesses, typically this is like
Speaker 2: the message that the business must follow, and also into
Speaker 2: household I don't think we got the text messages, but
Speaker 2: still all the TV program was like showing the real
Speaker 2: time power supply demand balance.
Speaker 1: So it was a really effective demand side way of
Speaker 1: dealing with an upcoming peak energy demand issue.
Speaker 2: Yes, but also a supply side made a lot of
Speaker 2: efforts as well. For example, I think a lot of
Speaker 2: fourth of your pup plants ramp up quite a lot.
Speaker 2: And on top of that, Japan has quite a huge
Speaker 2: capacity of pumped hydro and pampto hydro actually saved the
Speaker 2: day because they have that quite long duration of the
Speaker 2: storage capacity that can be used.
Speaker 1: It sounds like a very dynamic system that's able to
Speaker 1: dial up and dial down various things which may be
Speaker 1: needed if you end up adding more renewable energy sources
Speaker 1: like wind, which do have intermittency. Let's talk about wind
Speaker 1: specifically though, because you point out that wind is likely
Speaker 1: to make up a good percentage of the supply in
Speaker 1: the future, and more than likely this is going to
Speaker 1: be dominated by offshore wind. What is the sea bed
Speaker 1: like directly surrounding Japan? And the question I'm really trying
Speaker 1: to get at here is are these very challenging projects
Speaker 1: or are these going to be the ideal circumstances for
Speaker 1: an offshore wind project, because certainly the depth of the
Speaker 1: ocean nearby can dramatically impact the overall costs.
Speaker 2: Well, I think of when there's a huge potential in Japan,
Speaker 2: and I think that's one of the key technologies that
Speaker 2: Japanese Garden are trying to push for the cognization. One
Speaker 2: challenge for the offshoal win in Japan is that typically
Speaker 2: sea bed or the ocean gets deeper right off the
Speaker 2: cost So in the sense the potential for the bottom
Speaker 2: fixth off your wind project may be limited compared to
Speaker 2: other countries. But at the same time, it also showcased
Speaker 2: the huge potential the bass potential of the full tea
Speaker 2: in off Showan, and that's one of the key areas
Speaker 2: where the Japanese company is actually trying to expand.
Speaker 1: Now are a lot of the investment opportunities into these
Speaker 1: projects being done by domestic Japanese companies or is there
Speaker 1: a lot of foreign investment.
Speaker 2: That makes up both domestic and overseas players. Obviously the
Speaker 2: Japanese players that are trying to tap into the potentials,
Speaker 2: but also from overseas developer perspective, they have a lot
Speaker 2: of experienses from overseas market, but at the same time
Speaker 2: they need some local players because Japan's tender process has
Speaker 2: a lot of implication, and also they need some support
Speaker 2: from domestic player for the outreach with a local player
Speaker 2: or the stakeholders.
Speaker 1: Are there any other challenges that are worth noting to
Speaker 1: this rollout and I'm thinking of one specifically because we
Speaker 1: did a show a few shows back so fairly recently
Speaker 1: about grids generally and grid connections. What is the state
Speaker 1: of the Japanese grid and essentially is grid connection and
Speaker 1: the associated cost of potentially expanding the connection to accommodate
Speaker 1: new renewable sources. Is that a big part or a
Speaker 1: big issue that might be standing in the way of
Speaker 1: more deployment in the future.
Speaker 2: Great connection is definitely one of the challenges that renewablet
Speaker 2: in Japan facing, Similar to the global trends, Many renewboat
Speaker 2: projects are waiting for the Great connections, and this is
Speaker 2: also similar to the global markets. But the low transparency
Speaker 2: around the Greek Connection costs and also the Great Connection
Speaker 2: timeline can be a huge development risk for the renewable
Speaker 2: energy projects in Japan.
Speaker 1: And of course timelines then impact whether or not a
Speaker 1: country is able to actually reach the targets that they've
Speaker 1: set because it's not just an overall carbon abatement target,
Speaker 1: it's by a certain year. And do you think that
Speaker 1: some of the process I guess involved with getting these
Speaker 1: projects online will be really dramatically impacting whether or not
Speaker 1: those targets are met.
Speaker 2: I think so. Some of the projects, especially the large
Speaker 2: scale are renewable energy project connecting those projects to the
Speaker 2: GRIT could take over three years, so if more projects
Speaker 2: are requesting for the Great Connection, this timeline could get delayed.
Speaker 2: So this GRET connection can be definitely a one challenge
Speaker 2: or could pose a huge challenge for the japantic carbonization targets.
Speaker 1: Are there other issues do you think would be worth
Speaker 1: bringing up that maybe I'm missing.
Speaker 2: One of the key challenges which is probably unique compared
Speaker 2: to other markets. The land constraints in Japan. So in Japan,
Speaker 2: I think related to the lands constraint, high cost of
Speaker 2: renewables are also like a big challenge for renewables, and
Speaker 2: this is because it's hard to reach the economies of
Speaker 2: scale in Japan due to the land constraint. And if
Speaker 2: I may another challenges related to a renewable diploment, it's
Speaker 2: probably the carbon pricing. So technically Japan has nationwide carbon
Speaker 2: pricing mechanism or more specifically nationwide carbon tax, but the
Speaker 2: current carbon tax is very low, so it is two
Speaker 2: hundred and eighty nine ym part ton of CO two,
Speaker 2: which is probably less than two dollars part on of
Speaker 2: COO two with the current exchange rate.
Speaker 1: Before we pivot to some other technologies, I actually want
Speaker 1: to know about the role of the Japanese government in this,
Speaker 1: because we have gotten to a place with the deployment
Speaker 1: of a lot of different energy sources at scale is
Speaker 1: going to require certain amount of support from government. It's
Speaker 1: just a statement of fact, and I want to know
Speaker 1: if the Japanese government, first of all, how it's organized,
Speaker 1: and whether or not there has a strong amount of
Speaker 1: support in terms of how the programs are actually laid
Speaker 1: out to actually then meet these net zero targets, because
Speaker 1: it's one thing to have a target, but it's another
Speaker 1: thing entirely for the government to have organized around actually
Speaker 1: obtaining it in practice.
Speaker 2: When it comes to the government structure in Japan, especially
Speaker 2: around the energy issues, the key ministry is the Ministry
Speaker 2: of Economy, Trade and Industry or METI. So when it
Speaker 2: comes to energy matters or energy policy, METI is the
Speaker 2: one who's discussing a lot of policy or incentive or
Speaker 2: perhaps I guess the penalty, the requirement for of energy
Speaker 2: projects and such. At the same time, when it comes
Speaker 2: to the cognization target, Minister of the Environment it's the
Speaker 2: one who's kind of setting up those targets. And I
Speaker 2: think they're the one also dealing with a lot of
Speaker 2: permitting and environmental impact assessment in Japan.
Speaker 1: And would you say that things are running reasonably smoothly.
Speaker 2: I mean METI is not the only one bafically famalizing everything.
Speaker 2: For example, for off show win, it involves a lot
Speaker 2: of ministry efforts and METI is not the only one
Speaker 2: who's like talking about these issues. METI collaborate with other ministries,
Speaker 2: including Minister of Environment and also other ministries in charge
Speaker 2: of ports because of show Win involves a lot of
Speaker 2: relationship with port owners and also the port infrastructure development.
Speaker 2: So I think collaboration is typically done really well.
Speaker 1: Now let's pivot to a technology that I think many
Speaker 1: of us actually think about when we think of Japan,
Speaker 1: but maybe not in such a literal sense, geothermal. When
Speaker 1: I think of geothermal in Japan, I actually think of
Speaker 1: these kind of almost idealic views of a bathhouse and
Speaker 1: the use of geothermal hot springs by several parts of
Speaker 1: the population. Geothermal energy is that something that is really
Speaker 1: quite ideally located for Japan and does it have a
Speaker 1: tangible future.
Speaker 2: That's a great point. So as many listeners are probably aware,
Speaker 2: Japan is well known for the hot spring industry or
Speaker 2: onsend industry. And the good thing is Japanese government is
Speaker 2: offering subsidy to geo thermal projects through feeling type scheme.
Speaker 2: But that challenge is, like we are seeing the quite
Speaker 2: limited deployment software and that's because of like high work
Speaker 2: and risks around the drilling, and also some challenges are
Speaker 2: on stakeholder engagement between developers and also the powerful hot
Speaker 2: spring industry who occasionally have misconception around the technologies.
Speaker 1: So let's start with the risks around the drilling. Can
Speaker 1: you just explain what some of those risks are and
Speaker 1: kind of what the worst case scenario could be.
Speaker 2: The first risk that I can come up is basically
Speaker 2: hard to estimate where the actual resource it is and
Speaker 2: also how big the resource is. And this is obviously
Speaker 2: like something the technology can help, but still it's not
Speaker 2: like you get one hundred percent correct to estimate or
Speaker 2: identify the resources of the geosalmal power or geosarmal resources.
Speaker 2: I think another challenge of land the drilling is this
Speaker 2: is also kind of related to the land constraint, but
Speaker 2: it's really difficult to bring some of the drilling equipment
Speaker 2: to some of the location with the high potential for giosarmal.
Speaker 2: So some of the equipment needs to be smaller than
Speaker 2: perhaps equipment in other countries, or some developers needs to
Speaker 2: bring those big equipment in a narrow road. So those
Speaker 2: are the big challenges for the drilling technologies.
Speaker 1: So it's hard to get the equipment in place, and
Speaker 1: then when you get there. You mentioned there is opposition.
Speaker 1: Talk to me a little bit about who is opposing this.
Speaker 2: Typically obviously that people who own the hot springs and
Speaker 2: also perhaps like running the tourism industry. The other one
Speaker 2: who could oppose to the idea of having geosarmal projects
Speaker 2: nearby because they think the geo thermal resources that the
Speaker 2: local industry is using for the host spring could be
Speaker 2: depleted because of having a geosomal project nearby.
Speaker 1: How are they going about opposing it? Is it protesting
Speaker 1: or is it putting pressure on the government.
Speaker 2: When developers come to the area, obviously they need to
Speaker 2: kind of explain what kind of the project they're planning
Speaker 2: to do in the area, and that include explaining the
Speaker 2: projects to the local industry. That's when the discussion gets
Speaker 2: a bit tricky because if the local players are opposed
Speaker 2: to the project, the project, if we cannot get approval
Speaker 2: from the municipalities, which will basically lead to the project cancelations, possibly.
Speaker 1: So very much at the local government level and getting
Speaker 1: them necessary permitting to get these projects even off the ground.
Speaker 1: So pivoting a little bit to another technology that is
Speaker 1: talked about so very often many parts of the world.
Speaker 1: What is the state of play of hydrogen in Japan?
Speaker 2: That's one of the most frequently asked questions from our
Speaker 2: so happy to go through that. So when it comes
Speaker 2: to hydrogen, Japanese government tends to pay attention to sectors
Speaker 2: where hydrogen use shouldn't be prioritized for decarbonization. For example,
Speaker 2: the Japanese government and also some big Japanese maker that
Speaker 2: tends to focus on hydrogen use for the fartinger vehicles
Speaker 2: or field cell vehicles, but according to our analysis, electric
Speaker 2: vehicles more economic ways to decominize the transport sector. And
Speaker 2: similarly for the power sector, the Japanese government and also
Speaker 2: some key electric utilities in Japan's pushing for the ammonia
Speaker 2: co firing technology existing core poplants. The idea is that
Speaker 2: for this ammoniacal FIGN technologies to reduce yourther mission by
Speaker 2: coi firing ammonia at existing core poplants because ammonia doesn't
Speaker 2: include carbon in its chemistry. However, our research actually found
Speaker 2: that this ammoniacal FIGN technology is very expensive and it's
Speaker 2: actually more much more expensive than renewables to decognize the
Speaker 2: base fload power. So our view is that Japan should
Speaker 2: deploy more venewables rather than trying to rely on ammonia
Speaker 2: confrone technologis and yeah, long story short, Japan and Japanese
Speaker 2: comments tend to pay attention to a wrong sector for
Speaker 2: the hydrogen use that set. One positive development we're seeing
Speaker 2: the market is that recent hydrogen strategy update in June
Speaker 2: into the tw twenty three this year, Japan actually updated
Speaker 2: the hygien strategy and expanded the focus of hydrogen consumption
Speaker 2: to other sectors including hard two upbate sectors. And as
Speaker 2: a part of the strategy update, Japan also added the
Speaker 2: new hydrogen demand target for forty. So Japan even before
Speaker 2: the update of the hygien strategy, Japan already had the
Speaker 2: hydrogen demand target FOROTO than thirty and fifty, but basically
Speaker 2: added the new interim target photo forty. And I think
Speaker 2: this addition is good because it basically showcased that Japan
Speaker 2: is committed to the hydrogen society. And I guess one
Speaker 2: last thing if I may here, is the hydrogen supply
Speaker 2: chain development. So Japanese company, then Japanese government actually looking
Speaker 2: into hydrogen imports rather than production of hydrogen domestically. And
Speaker 2: this is partially because of land constrained but also this
Speaker 2: is because other countries can produce hydrogen or ammonia cheaper
Speaker 2: than in Japan. So I think some of the key
Speaker 2: markets that Japanese companies and also Japanese government are looking
Speaker 2: into the source of the ammonia or hydrogen are like
Speaker 2: Australia or some region in the Middle East, and also
Speaker 2: possibly the US because of the Inflation Reduction Act.
Speaker 1: So it's very possible that they may be importing hydrogen.
Speaker 1: But of the domestically produced hydrogen, which sources do you
Speaker 1: expect to see it come from? Will it be renewable
Speaker 1: resourced or nuclear sourced?
Speaker 2: Domestic one? Possibly hydrogen sourced by renewables, but I know
Speaker 2: that some of the electric utilities in Japan are also
Speaker 2: discussing the possibility of hydrogen production using nuclear power. That
Speaker 2: could happen in Japan. But when it comes to the
Speaker 2: hydrogen imports, any hydrogen in as long as they are
Speaker 2: a low carbon Japanese companies interested in sourcing.
Speaker 1: So it's safe to say that the increased emphasis on
Speaker 1: hydrogen could potentially drive forward nuclear and renewables industries.
Speaker 2: Possibly yes.
Speaker 1: So next technology that I want to know whether or
Speaker 1: not Japan has its eyes on is carbon capture and storage.
Speaker 1: Is that something that's currently being looked at in a
Speaker 1: particular degree of detail.
Speaker 2: In Japan, this is one of the key area that
Speaker 2: Japanese government is also looking into. So the government is
Speaker 2: definitely trying to scale the FFIs market and the government
Speaker 2: set up the targets and also the government launched the
Speaker 2: lot map for CFS. So in the FFIs WorldMap, Japanese government,
Speaker 2: if I mean to have annual capture capacity of six
Speaker 2: to twelve million metric tons of FIO two by twenty
Speaker 2: and thirty, and right now in Japan, there are seven
Speaker 2: large scale CFS projects in the pipeline and according to
Speaker 2: our research, if you adapt all the capacity for these
Speaker 2: seven large scale CFIAS projects in upon the capture capacity
Speaker 2: will be thirteen million metric tonto field two. So this
Speaker 2: is quite in line with what the japanesecoman is trying
Speaker 2: to do or what they mentioned in the CFAs world Map.
Speaker 2: And also these projects should come online by jw th
Speaker 2: than thirty.
Speaker 1: So there's a lot happening that's actually changing the way
Speaker 1: that the Japanese grid well what it's comprised of. But
Speaker 1: then I want to think about future demand. So in
Speaker 1: a lot of parts of the world you see future
Speaker 1: demand really only increasing. And one of the things about
Speaker 1: Japan is actually low birth rates and a shrinking population,
Speaker 1: and my question really revolves around whether or not this
Speaker 1: will have an impact on decreasing energy demand in the future,
Speaker 1: and that the power system being built today maybe doesn't
Speaker 1: need to grow indefinitely, and reaching these net zero targets
Speaker 1: might in some ways be more attainable because you have
Speaker 1: a more predictable future energy demand.
Speaker 2: Well if there's something we actually covered in our new
Speaker 2: energy outlook. So one scenario is called economic transitional scenario,
Speaker 2: which is basically that baseline scenario for are modeling, and
Speaker 2: in that economic transition scenario, actually the electricity demand is
Speaker 2: expected to shrink over two thirty to twenty and fifty
Speaker 2: and this is because, as you mentioned, declining population, improvement
Speaker 2: and energy efficiency, but also a shift in economic structure
Speaker 2: from manufacturing industry to the service industry in Japan.
Speaker 1: My final question really then also drives back again to
Speaker 1: the Japanese population, whether or not you perceive that there
Speaker 1: is a lot of support for the net zero targets
Speaker 1: or is this something that's largely being implemented by the
Speaker 1: government and happening in the background.
Speaker 2: A lot of groups, including environmental groups, are definitely requesting
Speaker 2: higher targets. Japan's current venio bilergy target is thirty six
Speaker 2: to thirty eight percent of the total electricity generation into
Speaker 2: the DOND thirty but some feel this is too low,
Speaker 2: especially compared to other markets and also in terms of
Speaker 2: timeline to reach net throw. Some claims that Japan needs
Speaker 2: to take more aggressive actions to set the higher or
Speaker 2: more ambitious revenewable energy targets. So I think that's definitely
Speaker 2: something we are seeing the market. And actually next year
Speaker 2: to the twenty four if the year the Japanese government
Speaker 2: will revise its electricity mixed target, because the Japanese government
Speaker 2: is revising the country the electricity mix target every three years,
Speaker 2: so I think we are going to see more discussion
Speaker 2: and more opinions from different groups. So I'm looking forward
Speaker 2: to see how or what kind of targets that Japanese
Speaker 2: goverment is going to produce for the next update.
Speaker 1: Well Ishue, thank you so much for taking us through
Speaker 1: this incredibly wide tour of the energy system in so
Speaker 1: many different parts of what's happening in Japan. Hopefully we
Speaker 1: can have you back for a future show to dig
Speaker 1: into any one of these topics, because they are all
Speaker 1: each in their own right, very fascinating, Thank you so much.
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