What should be Japan’s future energy mix?

The Yomiuri Shimbun

Koji Nomura

The Yomiuri ShimbunKoji Nomura, a professor at Keio Economic Observatory, spoke with The Yomiuri Shimbun about the balance in the overall mix of power sources. The following is an excerpt from the interview.

Q: What are the challenges Japan faces in terms of renewable energy?

Nomura: In the new Basic Energy Plan that was decided on July 3, the government intends to position renewable energy, such as solar and wind power, as “major power sources.” I think there are few people who oppose the expansion of renewable energy, but many challenges exist in terms of cost and other issues, and it’s important to maintain the balance in the overall mix of power sources.

[In 2015, the government set the 2030 goal for the nation’s energy mix with the proportion of renewable energy at 22 to 24 percent, nuclear power at 20 to 22 percent (which was about 30 percent before the 2011 Great East Japan Earthquake) and the rest to be covered by thermal power generation.]

Nomura: This breakdown has been maintained in the new Basic Energy Plan. The problem is the high cost of power generation with renewable energy. In 2016, solar energy intended for use by operators in Japan cost almost twice what it does in Europe, at about ¥290,000 per kilowatt. Against this background is the fact that there is little suitable land for large-scale solar power generation facilities and it is difficult to secure sufficient labor, therefore, construction costs are likely to remain high.

The proportion of electric power generated by renewable energy was about 10 percent in 2010 and currently it is about 15 percent. However, as the cost of renewable energy is added to electric utility fees consumers pay, the public burden for renewable energy power generation is already ¥2 trillion a year. The burden of renewable energy power generation on an ordinary household in fiscal 2017 accounted for about 10 percent of their total yearly electric bill.

There is the possibility that the price of solar panels could drop due to technological innovations or some other reasons, but there is also the problem of land-use costs that are difficult to decrease. In order to raise the target proportion for renewable energy to 24 percent, it is inevitable for the public to shoulder further burdens. The rise in the electricity price leads to a drop in the potential growth rate, an indicator of a nation’s economic capability.

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Nuclear power still has place

Q: What are some differences between Japan and the rest of the world in terms of the atmosphere concerning renewable energy?

A: Germany is an example of a world leader in terms of renewable energy. In 2015, the percentage of Germany’s renewable energy exceeded 30 percent of total energy, with a 2030 goal of the source accounting for more than 50 percent.

However, the public burden is large. An average household paid about €18.5 (about ¥2,400) per month in fiscal 2016. The cost is ¥750 in Japan in fiscal 2018. What makes these prices acceptable in Germany is the situation where the weak euro makes the economy the “sole winner” [in Europe].

In addition, Germany is connected to an enormous electric power grid with countries that border it. Even if Germany runs short of electric power with renewable energy, it can receive energy supplies from surrounding nations. Surrounded by the sea, Japan’s energy environment is different from that of Germany, so it is impossible to compare them directly.

If we consider it imperative to cope with global warming, I think the role of nuclear power, which does not emit greenhouse gases, will continue to be large.

[In the new Basic Energy Plan, the government positions nuclear power as an “important baseload energy source,” but intends to reduce the dependence on it as much as possible.]

Q: How do you view the current situation surrounding nuclear power in Japan?

A: Taking into account the accident at the Fukushima No. 1 nuclear power plant, it is natural that the government is having difficulty obtaining public understanding on constructing power plants or additional reactors. However, it is important to make tenacious efforts to obtain understanding from local governments and residents, such as by proposing replacing conventional reactors with state-of-the-art small reactors in sites where reactors are scheduled to be decommissioned. Similarly, the government must support efforts by nuclear power operators to reduce their risk. In promoting the restart of reactors and decommissioning, the government is required to pass on nuclear technology and personnel to future generations.

There are many countries all over the world that need nuclear power. They are countries such as China, India, emerging economies in Asia, which are expected to increase the demand for electrical power with their economic growth. Highly safe next-generation nuclear power is in high demand in these countries, and the role that Japan should play in technological development and other aspects is large.

Global warming measures

Q: What has happened in Italy?

A: Following the 1986 Chernobyl disaster in the former Soviet Union, Italy shut down all its nuclear power plants until 1990. The country depended on alternative power sources such as natural gas supplied through pipelines from Russia, Algeria, Libya and other countries. As a result, looking at the proportion of each source in the overall mix of power sources, thermal power generation with liquefied natural gas, petroleum and others grew to 85 percent in 2007. This was under an expectation that fuel prices would move stably.

However, the crude oil price jumped by about three times in the period from 2005 to 2008, and LNG, which was linked to oil prices, increased as well. The electricity fees in Italy doubled in the 2000s. The country has marked negative growth for the past decade. The dependent rate of thermal power generation is about 60 percent in Italy, even now. There are major risks to consolidating energy resources.

Q: Moving forward, what sort of energy mix should Japan aim for?

A: Japan is the largest importer of LNG in the world. Since the 2011 earthquake, the dependence on thermal energy generation increased due to the suspension of nuclear power generation. For that reason, LNG-producing countries took advantage of this and Japan was forced to purchase their LNG at higher prices, dubbed the “Japan Premium.”

Recently, China has suddenly been increasing its LNG imports to lessen its dependence on coal, leading to a sudden rise in spot prices.

From the perspective of global warming measures, thermal energy based on coal and petroleum is viewed with a critical eye all over the world. However, it is important to utilize thermal power generation to a certain extent, while promoting a shift to cutting-edge power plants that release minimal greenhouse gases.

For Japan, which is not able to import electric power supplies, it is indispensable to use various power sources in order to diversify the risks.

— This interview was conducted by Yomiuri Shimbun Staff Writer Kenya Hirose.

■ Koji Nomura / Professor at Keio Economic Observatory

Nomura, 47, received his PhD in business and commerce from Keio University. He has served as a member of the subcommittee of the government’s Advisory Committee for Natural Resources and Energy among other roles. He took up his present post from April 2017.Speech

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