Renewables Update

Japan's Renewable Energy Future

14 February 2014 Eric Martinot, Senior Policy Advisor, Japan Renewable Energy Foundation

I’ve been working in the renewable energy field for the past 25 years, and living in Japan for the past 5 years. That combined experience tells me one thing: Japan can easily lead the world in renewable energy. What is most needed is a change in thinking, a change in mentality. The Japanese people must understand that renewable energy can do everything that nuclear power can do--with the same functionality, the same reliability, and the same support for Japan's economy.

Most people in Japan, like many around the world, still think about renewable energy like it was 1995 or 2000. That is, their thinking is “out of date” with the reality of renewable technology development, costs, markets, investments, and economic benefits. That reality is already clear in countries that are leading the global energy transition—like China, Denmark, Germany, India, and the United States. And thinking is also “out of date” with future projections of even conservative institutions.

The longer Japan waits to join today’s leaders, the farther behind it falls. Investment is one good measure. Global investment in renewable energy reached about $250 billion in 2013. In Japan, investment was about $35 billion, far behind the United States and China.

A variety of policies to support solar power at national and local levels in Japan have been effective over the past two decades. And the recent national “feed-in tariff” is accelerating investment in wind and biomass as well as solar. In Japan, as around the world, the profitability of renewables is becoming apparent and undisputed.

The key remaining barrier to Japan’s leadership in renewable energy is an outdated electric power sector that has changed little over the past fifty years. There are no real markets or competition and little independent oversight. Japan’s electric power companies maintain a monopoly stranglehold that prevents the innovations needed. Indeed, among all developed (OECD) countries, only Mexico and Japan have not restructured their electric utility sectors over the past 30 years.

In countries with high shares of solar and wind, it is becoming clear that electricity markets have to change in fundamental ways. One emerging feature of markets is greater emphasis on “flexibility” as an attribute with market value. Markets must allow a balance of centralized and distributed generation to competitively co-exist in a fair and integrated manner, especially growing shares of distributed solar power. And new business and policy models must be proven that allow peer-to-peer and local-scale energy service businesses to profit from already-proven opportunities.

It is a persistent myth in Japan that the variability of wind and solar can’t be managed except with expensive energy storage. This is not true. The lights do not have to go out with high shares of renewable energy. There are a dozen other options for balancing large shares of variable renewables on power grids that do not involve energy storage, that are much cheaper, and that are already being used around the world today.

One good example is “demand response,” where power demand is modulated over minutes and hours in response to variations in supply, through smart controls and “aggregator” business models. In the U.S., demand response capacity already exceeds 10% of the total power grid. Enrolled industrial and commercial customers receive lucrative monthly payments. Japan, with its engineering sophistication and record of energy efficiency, could easily integrate demand response with renewable energy.

The business opportunities in Japan are huge and go well beyond the solar and wind industries themselves. Most opportunities are actually for established companies – for example building materials and information technology. But these opportunities will be fully realized only if Japan changes its thinking and embraces a renewable energy future.

Dr. Eric Martinot is a senior policy advisor to JREF. His pioneering 2013 publication, Renewables Global Futures Report, is available at www.martinot.info/gfr and a Japanese translation is available at www.isep.or.jp/gfr.