Japan’s Long-term Energy Plan Shoots for Ultimate Balance in Economics, Environment and Safety

July 9, 2015

What is 3E + S? It is neither a mathematics problem nor chemical equation. It is Japan’s latest long-term energy plan, which was released by Japan’s Ministry of Economy, Trade and Industry (METI) on June 1stf for review. The draft plan aims to establish an optimum energy mix by the year 2030.

The three Es stand for the first letters in Energy Security, Economic Efficiency and Environment and the letter S stands for Safety. Safety is crucial to the energy plan in the wake of the world’s worst nuclear disaster since Chernobyl when the devastating tsunami and earthquake hit northeast Japan in 2011. Since the disasters, Japan’s electricity generation mix has drastically changed.

The fear of nuclear power plants led to the shutting down of 54 of the nation’s nuclear reactors, which used to provide about 30 percent of the nation electricity. To make up for the loss of electricity supplied by nuclear means, Japan turned its heads toward coal and Liquefied Natural Gas (LNG). The nation’s sharp increase in fossil fuel demand caused the price of LNG, linked to crude oil import price, to soar.

The transition from nuclear to fossil fuels caused the nation’s energy self-sufficiency percentage to plummet to a mere 6 percent and Japan’s greenhouse gasses to hit an alarming record high in 2013. The increase cost of fossil fuel imports and the nationwide feed-in tariff (FIT) program has also increased electricity prices by 30 percent for industry users and 20 percent for residential consumers.

New Plan to Reverse the Effect of Fossil Fuels

The 3E + S plan aims to reverse the effects brought by the increased consumption of fossil fuels. Japan specifically wants to improve its self-sufficiency to 25 percent above the pre-disaster level. It also hopes to control and reduce electricity cost for the nation’s industry to gain back a competitive advantage while reducing greenhouse gas emissions to the same level as the Western nations.

3E + S = Optimum Energy Mix for Japan?

In theory, to achieve the optimum “3E + S,” the nation plans to implement thorough energy efficiency measures to reduce overall electricity consumption, maximize renewable resources, improve the efficiency of fossil fuel-fired power generation systems, and reduce dependency on nuclear power for safety.

If Japan expands domestically available renewable energy, it can improve self-sufficiency and reduce CO2 emission. However, if Japan wants to reduce the cost of electricity, it may need to control the amount of high-cost renewable and expand low-cost fossil-fueled power. Furthermore, revitalizing nuclear power plants can be an option to improve self-sufficiency, reduce CO2 emission and possibly reduce the cost of electricity.

Japan needs to arrive at a right balance between Energy Security (self-sufficiency), Environment (CO2 reduction) and Economic (Cost of electricity) while still keeping safety as a number one priority.

In the energy plan, Japan’s electricity generation mix in 2030 comprises of 22 to 24 percent of renewable, 20 to 22 percent of nuclear, 27 percent of LNG, 26 percent of coal and 3 percent of oil. The share of renewable more than doubled from the 2011 disasters while the share of oil drastically got reduced from 8 percent to 3 percent.

Source: METI

Within the renewable section of electrical generation, hydropower accounts for the largest share (8.8 percent to 9 percent), followed by solar photovoltaic (PV) with 7 percent, then biomass with 3.7 percent to 4.6 percent.

The plan calls for maximizing deployment of renewable to replace existing nuclear and fossil fuel power. Geothermal, hydro and biomass power, which can produce stable supply, will be used as a replacement for nuclear power. Solar and wind power, which are intermittent and variable by nature, will also partially replace fossil fuel power.

The plan, however, notes that deployment of renewable, specifically PV and wind, will be limited within the amount of financial burdens that ratepayers can bear to support the nation’s FIT program. Japan spent over 9 trillion yen on fuels and 0.5 trillion yen on payments for the FIT in 2013.  In 2030, the fuel cost is expected to be down to 5.5 trillion yen while the FIT payment will increase to about 4.0 trillion yen.

The plan also specifies to deploy geothermal, hydro and biomass power first, then intermittent power of solar and wind. Between solar and wind, wind has a priority since it has a lower FIT payment than solar.

With the constraint of the FIT payments, the nation will be able to generate 236.6 to 251.5 TWh of electricity from the mix of renewable.

To reach the 2030 goal, the largest capacity addition will come from PV of 64 GW (9 MW from residential and 55 MW from non-residential systems), followed by hydropower (mostly large-scale) of about 49 GW and wind of 10 GW.

Public Comments Seek More Renewables…Or Not

The METI opened for public comments on the 2030 energy plan. About 19,000 comments were submitted by public within 30 days of the release of the plan.

The nation quickly divided into two groups: Those who seek more renewable and those who ask for less.

The Japan Renewable Energy Foundation (JREF) stated that the METI’s goal to set a renewable share to 22-24 percent in 2030 is too pessimistic.  JREF believes that it will be possible for the nation to cover 45 percent of its electricity needs by renewable like other G7 nations. It recommends increasing the renewable portion to at least 30 percent under the Energy Plan.

The Japan Federation of Bar Associations (JFBA) stated that the plan should not consider revitalization of nuclear power and increase deployment of distributed renewable energy systems that are safe and reduce CO2 emissions.

The Japan Chamber of Commerce and Industry (JCCI) stated the goal to reduce electricity procurement costs should be much higher to remove a competitive disadvantage that the domestic industry has experienced for the last several years. It also stated that the nations’ FIT policy, which has supported a massive amount of PV capacity, rather than well-diversified renewable mix, is a cause of the rate increase and will bring further financial burden to ratepayers. The JCCI believes that the nation has to stop the rate increase as soon as possible. To do so, the nation needs to put a limit on new PV capacity, set a limit on PV system size, and cut FIT payments for PV.

With consideration of the public comments, the Cabinet will decide to approve the nation’s energy target by the middle of July.

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