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Opinion

Suga must seize the opportunity to change Japan's energy mix

Beginnings of a shift toward renewables is already evident

| Japan
A wind turbine and a hydrogen storage tank developed by Toshiba and others stand in Yokohama, pictured in July 2017: companies are responding to the changing preferences of consumers in search of lower carbon options.   © Getty Images

Nick Butler is a visiting professor at King's College London and a former senior executive at energy company BP.

The predominant response to Yoshihide Suga's rise to replace Shinzo Abe as Prime Minister of Japan is that continuity will prevail.

At the heart of the political system in Tokyo for many years, Suga does not appear to be a dedicated radical. When it comes to energy policy, however, circumstances are changing and could now force a fundamental shift in approach.

For the last 60 years, Japanese energy policy has been driven by the need to maximize energy security for an economy overwhelmingly dependent on external supplies. Lacking its own indigenous resources Japan relies on imports for 99.7% of its oil needs, 97.5 % of its natural gas, and 99.3 % of coal requirements. Overall the country was only 9% self-reliant in energy last year.

Until now this challenge has been met by using coal, which is available in unlimited quantities from secure suppliers such as Australia and by building a nuclear power sector to maximize the local production of electricity. The future of both is in question.

Nuclear power generation collapsed after the Fukushima accident and the reopening of Japan's nuclear facilities has been slow and painful with continuing local opposition. Two reactors were brought back onstream in 2015 but another 18 have still to secure approval to restart.

Hopes that nuclear power could be restored to its former level by the tenth anniversary of the accident next March have been dashed. Coal meanwhile is the focus of hostility from climate campaigners with Japan isolated as one of the few advanced economies still significantly reliant on coal as a source of electricity.

A boat tows a barge of coal across the port of Osaka, pictured in October 2017: Japan is isolated as one of the few advanced economies still significantly reliant on coal.   © Reuters

Economic and industrial imperatives are now being added to these existing concerns. Japanese companies committed to nuclear power are beginning to realize that their export market is drying up. Even if Japanese reactors are among the most reliable in the world, the demand for nuclear is being swept away by the availability of large scale, low cost wind and solar power. In the U.K. for instance Hitachi has now formally withdrawn from the competition to build one of the next generation of nuclear power stations.

Instead, they and other major Japanese companies including Toyota Motor and Mitsubishi Heavy Industries, are focusing on the next generation of power grids, energy storage projects and the development of electric vehicles -- all of which enhance the takeup of renewables. Even Tokyo Electric Power Co. Holdings, for many decades the company at the heart of Japan's nuclear industry, recently announced a significant diversification into the offshore wind business. In all cases, the companies are responding to the changing preferences of consumers in search of lower carbon options.

Many of the same companies are also watching with concern the development of energy policy in Europe -- a key market in which they have enjoyed great success in the past. The European Union's new Green Deal intended to deliver a zero net carbon economy by 2050 includes plans for "border tariff adjustments" against countries whose policies do not match their own environmental standards. Continued use of coal as a major source of power would put Japan on the wrong side of any such tariffs.

Japan could of course turn to increased use of oil and natural gas, but even if prices are low at the moment, instability in the Middle East and the ability of China to preempt supplies in times of crisis does not make either option attractive.

The beginnings of a response area already evident, if not yet expressed as a change of national policy. The latest plans announced in June target investment of $100 billion over the next ten years which would lift the renewables share of the Japanese power generation business from 18% today to 27% or even more within the next decade. Plans to use hydrogen, initially imported from Australia have been advanced in the last few months -- potentially enabling the decarbonization of sectors such as heavy industry and freight transportation.

In parallel, Toshiba is leading a consortium of Japanese companies in developing so-called "green hydrogen" produced from renewables rather than hydrocarbons. Meanwhile, the local government in the area containing the Fukushima plant has announced a plan to power the region with 100% renewable energy by 2040, starting with 20 large scale solar and wind farms to be built on abandoned farm land and in mountainous areas in the region.

The desire for energy security will unquestionably remain the driving objective for Japanese energy policy, but the means of delivering that security looks set to change. If not a radical, Suga is a pragmatist. Perhaps to his own surprise, he could turn out to be the leader under whom Japan's focus on coal and nuclear energy is swept away and replaced by a broader and greener mix.

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