Japan's Seventh Basic Energy Plan: Challenges, Opportunities, and Future Directions

Every three years, the Japanese government drafts and revises its energy strategy to ensure the nation is adapting to an ever-changing world. With the new version of Japan’s Basic Energy Plan, the Seventh Basic Energy Plan, coming together, the country is setting a course aimed at energy security and economic prosperity.

As a densely populated island nation with limited usable land, Japan faces unique geographic and industrial constraints within the global energy transition. Japan structures its energy paradigm as a balance among three pillars: energy security, sustainability, and affordability. These three are more commonly known as the “energy trilemma.” Tokyo is updating its Basic Energy Plan based on this format.

Japan's Seventh Basic Energy Plan: An Updated Strategy for a Tumultuous World

The Seventh Basic Energy Plan will outline Japan’s energy strategy as the country seeks to achieve carbon neutrality by 2050. It is segmented into three sections: short, medium, and long-term objectives. The Plan will balance the needs for sustainable energy, affordability, and energy security in the face of growing domestic power demand and industrial decarbonization.

The short-term objectives focus on enhancing renewable energy production through innovative technologies. One project that has been highlighted is the Perovskite Solar PV: allowing solar energy capture on building facades. Officials and industry are also exploring floating offshore wind farms to overcome the challenges posed by Japan's deep seabed, which makes traditional wind farms difficult to install. A key factor of this will be to see whether these innovative pilot projects can be commercialized to realize longer-term industrial changes to energy production.

In the medium term, Japan plans to expand its energy infrastructure, including constructing new transmission lines from energy-rich regions like Hokkaido to more populated areas. In the transportation sector, Sustainable Aviation Fuels (SAF) and biofuels will contribute to decarbonization. Addressing intermittent renewable energy sources and dispatchable power sources, such as co-firing coal with ammonia and natural gas with hydrogen, will serve as a bridge until the country achieves full decarbonization.

Japan’s ultimate long-term objective is to transition to 100% low-carbon or renewable energy sources, like hydrogen, to meet the 2050 goal of decarbonizing the country. The transition will take time, however, as renewables like hydrogen are still more expensive than conventional fossil fuels. To prepare for the future, new gas-fired power plants are being designed to eventually operate on 100% hydrogen, with an interim phase of co-firing with natural gas.

The Role of Nuclear Power

Clean energy, particularly solar, offshore wind, and hydrogen/ammonia, will continue to expand, but it is unlikely to become Japan’s main source of energy by 2035. Innovation in transmission lines and floating offshore wind technology will take time to fully implement, and thermal power will still play a significant role, albeit with decarbonization measures in place. In the meantime, nuclear energy remains a key component of Japan's strategy to address its energy needs.

By 2035, Japan aims to restart the majority of its remaining nuclear power plants, potentially increasing the role of nuclear power in the country’s energy mix. Currently, 12 out of Japan's 33 nuclear reactors have been restarted, and plans call for additional restarts and extensions to plants’ operational lifetimes. Legislative changes have already been made to facilitate these extensions.

While there is growing support for restarting existing reactors, the construction of new nuclear plants remains a sensitive issue. Ongoing political debates over whether to build new reactors to replace those set for decommissioning have continued to dominate the energy conversation. With anti-nuclear parties like the Constitutional Democratic Party of Japan (CDP) and others winning seats in the most recent Japanese election, the future of nuclear remains unclear. This could delay or complicate certain policy decisions.

Hard-to-Abate Sectors and Carbon Removal

Reducing emissions from "hard-to-abate" sectors, such as industrial manufacturing and transportation, presents a significant challenge. New sources of clean energy will be necessary (e.g., hydrogen and ammonia), but Japan is also exploring carbon capture and storage (CCS) technology to mitigate emissions from industrial processes. CCS technologies will play a crucial role in reaching net-zero emissions. As carbon reduction alone is unlikely to suffice, Japan will need to invest in carbon removal technologies, such as direct air capture and biomass energy with carbon capture and storage (BECCS). Given Japan’s limited land and resources, many of these initiatives may take place outside of the country, with carbon credits being imported. This would lead Japan to place more emphasis on regional cooperation.

Regional Collaboration

Japan’s energy strategy is closely linked to regional cooperation – particularly with neighboring Asian countries. Japan will continue to rely on imports of liquified natural gas (LNG) from countries like Australia and Malaysia and will seek to establish partnerships for hydrogen and ammonia production. Cooperation is critical for building a robust hydrogen market in Asia, as was the case with the long-term development of the LNG market. In addition to LNG, Japan will collaborate with Southeast Asian nations to develop CCS projects that may store CO2 in dry wells and oil fields in Malaysia and Indonesia. Carbon credits are another area for cooperation, with countries like Indonesia and Malaysia offering opportunities to develop negative emissions projects. Working with like-minded partners to bolster the emissions trading system will foster international cooperation and collaboration.

Regional cooperation will not only help Japan achieve its carbon neutrality goals but will also create business opportunities for Japanese companies in areas like energy efficiency, hydrogen infrastructure, and carbon capture technologies. Southeast Asia's growing industrial sector presents numerous opportunities for Japanese companies to lead in these fields.

Financing the Transition

Japan’s government has pledged significant financial support to facilitate the energy transition. The introduction of the GX Transition Bond, alongside a 20-trillion yen pledge to support hydrogen and ammonia projects, reflects the scale of the investment needed. In addition, carbon pricing mechanisms are set to be introduced in 2026. These will help fund hydrogen and ammonia initiatives by passing on some of the costs to industries and consumers. The combination of fiscal policies and carbon pricing will support the long-term financing of Japan’s energy strategy.

Conclusion

The 2024 Japanese general election will undoubtedly impact the development of the Seventh Basic Energy Plan. With the ruling coalition of the Liberal Democratic Party and Komeito losing its majority, shifts in policy are bound to occur. This does not mean that the Seventh Basic Energy Plan will radically change, however. The core of the Plan – Japan’s multifaceted approach to the challenges it faces in the energy transition – will surely remain the same. By focusing on short-term innovations in renewable energy, medium-term infrastructure development, and long-term goals for hydrogen and nuclear energy (although the latter is currently in flux), Japan is positioning itself to balance its key pillars of sustainability, energy security, and affordability. Regional cooperation with Asian-Pacific nations, along with financing mechanisms like the GX Transition Bond and carbon pricing, will help with the supply and funding necessary to meet Japan’s ambitious plans for decarbonization.

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