Renewable Ambitions
Japan has detailed ambitious plans for the wider deployment of renewable energy sources throughout the economy. Yet energy experts caution that Tokyo is unlikely to reach those targets unless policy changes are made.
Japan aims to mix up power, but are the targets achievable?
Japan has detailed ambitious plans for the wider deployment of renewable energy sources throughout the economy, with the government in October 2021 announcing the Sixth Strategic Energy Plan and setting a target of between 36 and 38 percent of the nation’s power coming from renewables in 2030.
That would be about double the 2019 level and significantly above the previous 2030 goal of up to 24 percent.
Japan’s target renewables mix would include up to:
- 16 percent from solar
- 11 percent from hydropower
- 5 percent from wind
- 5 percent from biomass
- 1 percent from geothermal
The contribution from nuclear energy was left unchanged, at between 20 and 22 percent. This will require a minimum of 30 reactors to be operational.
The targets tie in with the Clean Energy Strategy, unveiled by the government in May 2022, announcing an ambitious 46-percent reduction in greenhouse gas emissions in fiscal 2030 and carbon neutrality by 2050.
And, given the impact of instability involving Russia and in the Middle East, the two traditional primary sources of energy for Japan, combined with the yen at 10-year lows against other leading currencies, it would be in Japan’s best interest to dramatically reduce its reliance on imported energy.
Yet energy experts caution that Tokyo is unlikely to reach those targets as progress in the development of renewables has slowed, with fewer large-scale solar projects, delays in offshore wind generation, and local resistance hampering the acceleration of other technologies, such as onshore wind and geothermal power.
“Private capital markets are ready to invest in Japan, and both multinational and Japanese firms have developed technology and human resource pools to hit targets,” points out Andrew Statter, a partner at the Titan Consulting Group and head of its GreenTech division.
“However, policies and subsidies are unclear, and there are conflicts between ministries that are causing questions for investors while potentially profitable asset types, such as large-scale agrisolar, are not yet eligible for project financing,” he told The ACCJ Journal. “All of which puts a huge pause on the potential accelerated development that industry is ready to deliver.”
Japan needs to go beyond the “what” in its policies and clarify the “when,” “where,” and “how” to encourage investment, Statter said.
Favorable Winds
Turning to specific energy resources, Statter said offshore wind is critical as Japan has geographical and physical limitations on the volume of onshore renewables that can be developed. “With vast ocean resources, offshore wind is the ideal renewable technology which is proven and scalable to give Japan a shot at hitting renewable energy targets,” he said. “Key here is the need to accelerate floating offshore wind, as Japan’s waters become very deep quite close to shore.”
Statter also sees a secondary benefit to Japan’s expansion of floating technology. The country could become a technology exporter on a regional scale as Asia–Pacific markets embrace the technology.
Akira Amano, country manager of Invenergy Wind Development Japan GK, agrees on the importance of offshore wind to the nation’s overall energy goals, pointing out that “Japan has the right resources to become a global leader in renewable energy, especially offshore wind.”
He also concurs that significant challenges need to be navigated for the renewables sector to thrive.
“In order to accelerate progress and meet our nation’s goals, there will need to be long-term regulatory certainty, increased transmission capacity to deliver energy to customers, and long-term planning to address challenges like cost uncertainty.
Amano also noted that, with strong leadership, Japan can accelerate the build-out of clean energy and meet its energy goals in a timely manner.
Rocky Foundation
If the authorities are serious about making the most of offshore wind, Amano said, a number of regulations need to be revised, not least the unbundling of generation, transmission, and distribution at existing electricity utility companies to get rid of unfair competition. The sector also needs the authorities to increase the price for renewable energy certificates, he added.
Hideyuki Ohnishi, regional general manager for GE Renewable Energy in North Asia, agrees that Japan needs to make the most of its exclusive economic zone—one of the world’s largest—for offshore wind.
“The wind conditions, the speed and quality of the wind, is much better when you go to the seaside,” said Ohnishi. “In the mountains, there is turbulence and such, and average wind [speed] is not as strong. So, it is important for us to go to the places where we have better wind.”
Yet there are challenges, particularly in laying the foundations for turbines.
“We have to install big wind turbines in the sea, where the depth differs,” he explained. “Wave and seabed conditions have an impact. The geosurface is very important. Rocks and related conditions impact our design, and it’s not easy in terms of technology.”
Equally, the investment required to get the blades turning is significant, and projects must be considered in the long term.
The Japanese government is also pushing for 60 percent of the components in offshore wind farms to be manufactured locally.
General Electric started working with Toshiba in 2021, initially focusing on the nacelle at the top of the tower that houses all the critical components of the turbine. Construction of the nacelle is now largely done by local labor and with components utilizing the local supply chain, all of which will have a long-term benefit for the community, Ohnishi added.
Lofty Aims
While the government’s 2030 targets can be achieved as battery storage and grid technology improve, in tandem with innovations in the use of the grid, the 2050 targets are “a real moonshot,” Ohnishi admitted. “The 2050 goal is very, very challenging, but a majority of us have agreed to aim for it,” he said.
The Japanese government has also been a vocal advocate of hydrogen as an effectively limitless source of energy in the future, although questions are being asked as to whether this is the most appropriate path.
“Generally speaking, I think the industry and international impression is that Japan’s hyper focus on hydrogen to solve all problems has been outsized and unrealistic,” said Ken Haig, vice-chair of the ACCJ Energy Committee. “It is also too future-focused, relying on technologies that will not become commercially viable or scalable until well after 2030.”
Haig noted a comment made by former ACCJ President Glen Fukushima in a recent Kyodo News opinion piece: “Japan’s support for innovation in green hydrogen, perovskite technology, and offshore wind is the right move,” said Fukushima, “But METI should take a ‘yes, and’ approach by also immediately boosting funds to deploy existing clean energy technologies like solar and wind power—technologies that have already proven successful for Japan.”
Whatever the source, the renewables sector agrees that Japan’s need for home-grown energy is only going to intensify. The Sixth Strategic Energy Plan is billed as a rethink of regulations that have thus far inhibited development; for developers, the elimination of red tape cannot come soon enough.
Japan’s Energy Alignment Goals
For several decades, Japan has executed a successful strategy of importing its energy via long-term contracts and relationships. Meanwhile, renewable electricity supply has expanded greatly under the feed-in-tariff and feed-in-premium systems, known as FIT and FIP. But current circumstances pose a challenge that necessitates a new approach.
Charting a route to greater energy independence and net-zero
It has been 11 years since the Great East Japan Earthquake and Tsunami triggered a nuclear disaster in Fukushima that would change the country’s energy landscape. Today, another energy shock is upon us, with the cost of imported energy commodities driving electricity prices to their highest level in a generation.
Japan’s electrical system was strained nearly to breaking point this summer, and the outlook for winter energy supplies remains unclear. At the same time, the crisis presents opportunities to reevaluate priorities, redirect investments, and focus on decreasing Japan’s exposure to international energy markets while also driving decarbonization.
Additional opportunities are arising as Japanese businesses—on a global and domestic level—are chasing aggressive carbon-reduction goals that will necessitate a massive increase in installed renewable energy capacity in the country.
For several decades, Japan has executed a successful strategy of importing its energy via long-term contracts and relationships. Meanwhile, renewable electricity supply has expanded greatly under the feed-in-tariff and feed-in-premium systems, known as FIT and FIP. But current circumstances pose a challenge that necessitates a new approach.
We are in a very difficult position due to these and other factors, with the global energy marketplace never having been as competitive as it is now and the security of energy suppliers in question.
Aggressive Carbon Reduction Goals
Japan’s carbon reduction goals have been described by observers as bold and ambitious, and marked by three key milestones.
The first is Japan’s commitment, under the United Nations Framework Convention on Climate Change, to reduce greenhouse gas (GHG) emissions by 26 percent from 2013 levels by 2030.
The second is to promote the development of innovative technologies by 2050. They would enable Japan to contribute to the global reduction of accumulated atmospheric CO2 to a level the Japanese government has dubbed Beyond-Zero.
The third and most ambitious milestone, unveiled by former Prime Minister Yoshihide Suga in 2020, is for Japan to achieve net-zero GHG emissions by 2050. This would set the nation on a course to becoming carbon neutral in just 30 years.
But with the first milestone just 92 months way, action is needed now.
Demand for Change
Today, Japan-based corporations and international companies, including many members of the American Chamber of Commerce in Japan (ACCJ), are leading the market towards decarbonization.
This can be seen from the sheer number of companies taking part in key corporate environmental initiatives. And, while nuclear energy is likely to play a role in a low-carbon future, many Japanese companies have already committed to increasing their consumption of renewable energy.
Japan represents one of the top three participating countries in each of the following global efforts:
- CDP (formerly the Carbon Disclosure Project): a reporting framework for carbon emissions
- RE100: a push by companies to use 100 percent renewable electricity in their operations
- The Science Based Targets initiative: a pathway for companies committing to specific carbon reduction targets
- The Task Force for Climate Related Financial Disclosure: a framework for divulging climate-related risks
There is also the Japan Climate Leaders’ Partnership, in which 217 companies, including World Kinect Energy Services, participate.
Time to Align
To meet the goals of these organizations, participants require direct access to renewable electricity supplies. This can be achieved by a variety of pathways, including the tracking and tracing of environmental attributes.
Unfortunately, in Japan, the main system for tracking, auditing, and trading environmental attributes—called non-fossil fuel certificates (NFC)—is one of the most complex procedures in the world. Simplifying the system and bringing it more in line with international standards, such as the International Renewable Energy Certificate system, could help companies in Japan report their progress on reducing carbon emissions with greater confidence.
“Simplifying the system and bringing it more in line with international standards, such as the International Renewable Energy Certificate system, could help companies in Japan report their progress on reducing carbon emissions with greater confidence.”
Another key tool for reducing electricity-related carbon emissions is the renewable corporate power purchase agreement (CPPA). This enables a corporate end user of electricity and a developer to reach a long-term agreement on renewable energy for one or more projects.
CPPAs are considered a high-quality pathway to reducing carbon emissions and can help to drive private capital into the energy system. The ACCJ Energy Committee has been working closely with stakeholders to identify and reduce barriers to CPPAs.
Japan needs to improve its policy allowing renewable energy to connect to the grid as well as expedite the approval process for new projects which will provide short-term benefits.
For longer-term benefits, physical grid improvements will need to continue in an expedited and transparent manner, while including flexibility to integrate new technologies and grid-level storage.
Benefits for All
Whether supporting our clients with a CPPA or supplying energy attribute certificates, increased investment in renewable energy resources benefits not only the end user, but also the nation on its road to net-zero.
We recognize that the Government of Japan is making an effort to address these issues, but it needs to move faster to ensure that the nation remains at the forefront of evolving international standards.
In addition, Japan must consider and support to the fullest an array of technologies—including wind and geothermal—to meet future demand.
We want to see Japan be successful, and we invite ACCJ members to become more involved in the Energy Committee to help support the expansion of renewable energy opportunities in Japan.
Deepening Africa–Japan Business Ties
While the number of Japanese companies active in Africa has doubled over the past decade to more than 900, Japan continues to lag the European Union, the United States, China, and India. The Ministry of Economy Trade and Industry (METI) is focused on encouraging Japanese businesses to support sustainable growth in Africa through projects that address vital social needs, leverage digital transformation, provide technical skills training, and boost renewable power generation.
Investment in people, innovation, and sustainable energy to play a key role at the TICAD 8 conference
Dots for’s Carlos Oba (third from left) and Emmanuel Agossou (far left) in a village close to Zagnanado, Benin.
On August 27 and 28, the Republic of Tunisia will host an international conference dedicated to deepening the economic ties between Japan and the 54 nations that make up the continent of Africa. Japan has taken the lead in the Tokyo International Conference on African Development, otherwise known as TICAD, since 1993, when TICAD 1 was held in Tokyo. Meetings take place every three years, and the Tunisian gathering—TICAD 8—is only the second to be held in Africa.
While the number of Japanese companies active in Africa has doubled over the past decade to more than 900, Japan continues to lag the European Union, the United States, China, and India. The Ministry of Economy Trade and Industry (METI) is focused on encouraging Japanese businesses to support sustainable growth in Africa through projects that address vital social needs, leverage digital transformation, provide technical skills training, and boost renewable power generation.
TICAD 8 comes as foreign direct investment in Africa more than doubled between 2020 and 2021 to about $83 billion, according to a report by the United Nations Conference on Trade and Development. This underscores the vital and timely role of Japan–Africa relations ahead of the upcoming gathering of African leaders, development partners, and international and regional organizations, along with representatives of the private sector.
As former METI Minister Koichi Hagiuda told attendees of a TICAD 8 preview event, “Japan sees three key catalysts for partnership opportunities with Africa.” He went on to highlight how compelling demographics mean one in four people will be African by 2050 and noted that a digital revolution is driving a thriving startup scene. He added that, as Africans seek alternative ways to grow their economies, the opportunities for green growth projects will increase.
Digital Revolution
Carlos Oba is a good example of how Japanese expertise is helping fuel digital startups in Africa. He is co-founder of Dots for Inc., a tech startup launched in October 2021 with a mission to provide internet access to 200 million people living in rural areas of West Africa by 2030.
While it was a trip through Tanzania in East Africa that opened Oba’s eyes to how people living in rural areas are being left behind as the digitalization wave sweeps through larger towns and cities, Dots for’s initial projects have been in West Africa, beginning with Benin in December 2021 and Senegal the following year.
Emmanuel Agossou, the Dots for country manager in Benin, said the challenges are daunting. “Most of our clients are farmers, often with just primary-level education and small incomes from farms and fisheries—though we also have a few university students, graduates, and teachers,” he explained. “They live in villages where there is almost no electricity and no—or very weak—mobile network coverage and internet.”
That lack of universal online access is fueling a rapidly widening disparity between rural and urban areas of Africa, and Oba was prompted to action when he realized major digital players would be reluctant to invest based on low foreseeable profits.
Dots for was awarded just over $300,000 in seed money from two projects initiated by METI: AfDX and J-Partnership. The funding has enabled Oba and his co-founder, Sho Nakata, to develop d.CONNECT, a distributed wireless network communication infrastructure that brings the internet to African villages at extremely low cost. This is accomplished through Wi-Fi routers equipped with mesh network technology, which cuts out dead zones and can provide uninterrupted Wi-Fi.
Residents connected to the village wireless network can use their smartphones to access services and digital content stored on a server also installed in the village. Oba envisions a “smart village,” where users can use online platforms for distance learning, telemedicine, and crowd work. Not only is this meant to improve overall convenience, but the ability to access government and corporate digital services may also boost income and quality of life.
Residents of a village close to Zagnanado, trying out smartphones
“As the Dots for services expand, villagers will get strong internet connectivity and digital platforms to boost their business, education, and work opportunities,” Agossou said. “Young people may be able to work remotely from their village homes, without the need to trek to the big cities, where they would be forced to live apart from their families.”
The system is operated on a subscription basis, targeting users who can see the prospective advantages and are prepared to commit to making ongoing payments. According to Agossou, Dots for employs local agents in or near villages who promote the services either face-to-face with farmers or in village meetings that include young people and village heads. The emphasis is on explaining the advantages of the service to the community as well as to those looking to run businesses, he added.
The service has been successful in helping men and women aged 23 to 45 find steady jobs, Agossou said. But the reality of life in an African village remains harsh, and he notes that payment challenges exist for villagers with small incomes as well as university students and new graduates who have yet to find employment. As a result, Dots for is testing a lower-fee business model to boost client interest.
Based on forecast population increases, and the rising desire to be connected, the need for the company’s offerings is likely to extend to other African nations.
“Dots for services have a huge potential market, and I can see the model expanding from Benin to many other French- and English-speaking African countries, such as Côte d’Ivoire, Ghana, and Nigeria, to name just a few,” Agossou noted.
Sharing Skills
Japan is also committed to providing high-quality technical training to 5,000 young Africans over the next three years.
In Kenya, METI is cooperating with the Kenyan Association of Manufacturers (KAM) to promote training for human capital in the Kenyan manufacturing industry. METI seeks not only to raise technical levels throughout the entire Kenyan manufacturing industry, but to enhance the Japanese presence in the former British colony.
In February, METI dispatched a specialist team to Kenya, which conducted a 10-day guidance program. A further eight-day program was directed by similar specialists in June.
In May, representatives of the Kenyan Ministry of Industrialization, Trade and Enterprise Development, together with KAM, were sent to Thailand, where they took part in third-party training conducted by Japanese experts.
Among KAM’s client companies is Nairobi-based Plast Packaging Industries Ltd., a family-run business involved in the manufacture of environmentally friendly plastic bottling, packaging, and printing products. The company participated in a technical guidance program during which Japanese experts installed sensors on factory equipment and instructed program participants on how to apply the gathered data.
“Japanese technology has helped us monitor our production capacity on a real-time basis,” said Group Chief Executive Officer Mary Ngechu.
The sensors were installed at the Plast Packaging production line without disrupting operations. As a result, production efficiency has improved. This should also have a knock-on impact on sales, she added.
Ngechu has been impressed with the devotion of the Japanese engineers. “The Japanese team are committed to ensuring any project they spearhead goes to completion and that the companies benefit,” she said. “They have offered immeasurable support to me and my family in our business, and we look forward to partnering with them in different areas.”
Mary Ngechu
A METI team visited Plast Packaging in May 2022.
Future Power
At the Second Japan–Africa Public-Private Economic Forum, held on May 3 in Nairobi, participating countries reaffirmed their commitment to green energy. Given the number of African states, and the different issues they face, there is no one-size-fits-all solution to green-energy requirements. METI’s stance is that the most realistic approach is for each nation to select the path that best suits its needs.
To solve the challenges of limited supply and higher costs for electricity, due to power generation through heavy fossil fuel use and power importation from neighboring countries, Toyota Tsusho Corporation has conducted studies financed by METI on the feasibility of solar power generation with battery storage in several countries, including Zambia, Angola, Eritrea, and Benin. One possible approach using this method is to store power generated during the day in batteries and discharge this energy at night.
Against the backdrop of a rapidly growing population, the Egyptian government is targeting the supply of 20 percent of electricity from renewable sources by 2022 via initiatives that include onshore wind power created with support from Japan.
Toyota Tsusho and its subsidiary, the renewable-energy company Eurus Energy Holdings Corporation, in partnership with France’s Engie and Egypt’s Orascom Construction PLC, have developed the 262.5-megawatt Ras Ghareb Wind Energy project. The wind farm is located on the west coast of Gulf of Suez, 260 kilometers southeast of Cairo. This project raised $320 million of limited recourse financing, of which the Japan Bank for International Cooperation (JBIC) provided $192 million as overseas investment loans. The remaining $128 million came from commercial lenders Sumitomo Mitsui Banking Corporation and Societe Generale as loans covered by Nippon Export and Investment Insurance (NEXI) Overseas Untied Loan Insurance.
The Ras Ghareb Wind Energy project is the first independent wind-power production project in the country. After reaching financial close in December 2017, it began commercial operation in October 2019—two months ahead of schedule. With 125 wind turbines, it continues to generate enough electricity to power 500,000 Egyptian households.
In December 2019, a €110 million project-financing loan agreement for the Taza onshore wind farm in Morocco—led by Parc Eolien de Taza, the shareholders of which are EDF Renewable and Mitsui & Co., Ltd.—was signed by JBIC, the Bank of Africa, Sumitomo Mitsui Banking Corporation, and MUFG Bank, Ltd. The funds provided by the latter two commercial banks were insured by the state-owned export credit agency NEXI. The electricity generated by the project will be bought by Office National de L’Électricité et de l’Eau Potable, Morocco’s public electricity and water company.
Wind power is beginning to play a key role in the energy mix of nations such as Egypt and Morocco.
Kenya has committed to the realization of a green, hydrogen-based society as it looks to reduce its reliance on fossil fuels and has established a working group led by the Ministry of Energy. A strategy and roadmap are currently being drawn up, and institutional design and development of pilot projects will follow.
Japan’s public and private sectors are expected to work together to lead the development of greener energy resources. For the 2022 fiscal year, Toyota Tsusho and METI have decided to implement a feasibility study on green-hydrogen value chain development in Kenya. This study aims to pursue the formation and commercialization of pilot projects which lead to a green economy. The goals of such projects include unlocking the potential of green hydrogen as a new energy source through various industries, such as freight and passenger transportation, port cargo handling, steelmaking, fertilizer manufacturing, and alternative fuel and electricity storage solutions.
Financial Foundation
Project finance is risky in some respects. The special-purpose vehicle set up to run the project has limited underlying capital, and repayment of loans is funded only from project proceeds, which can take years to come to fruition. Such long-term finance risk is higher in developing countries.
One way to mitigate risk is to have loans insured by organizations such as NEXI, which provides coverage for loans made by private-sector Japanese banks to overseas businesses in which Japanese companies participate. NEXI was founded in 1993 and, according to a NEXI International Relations Group spokesperson, a high-level African focus has been in place since TICAD 1, which was held the same year in Tokyo.
In December 2020, NEXI insured a $520 million loan made to the African Export-Import Bank (Afreximbank) by Mitsubishi UFJ Bank, Ltd. and Mitsubishi UFJ Trust and Banking Co., Ltd. as support for the Pandemic Trade Impact Mitigation Facility (PATIMFA) for African countries affected by the Covid-19 pandemic. Through the PATIMFA program, the money is being widely used to support medical care, hygiene, environmental, and educational projects in Africa.
The spokesperson also revealed that NEXI has decided to participate in a telecommunications project in Ethiopia—jointly conducted by Sumitomo Corporation and Vodafone Group Plc of the United Kingdom—which began in May. The project will be reinsured by the African Trade Insurance Organization (ATI) based on a memorandum of cooperation concluded in 2019 at TICAD 7 in Yokohama.
Leading up to TICAD 8, NEXI is planning to host joint webinars with Afreximbank and ATI as side events to introduce these projects in more depth, the spokesperson said.
Tunisia is in an optimal position to host TICAD 8 given its unique geographical advantage as the gateway to the continent, as well as being an important partner for Japan in the Middle East and Africa. The conference has won the broad support of the African states, and Japanese Prime Minister Fumio Kishida is scheduled to attend. Tunisian President Kais Saied will chair the conference—a role which he is scheduled to share with Macky Sall, president of the Republic of Senegal and chairperson of the African Union.
Backed by more stable funding sources for clean energy projects, high-level training facilities, and the rapid uptake of digital services across the continent, TICAD 8 is on its way to securing a firmer and more deeply founded relationship between Japan and Africa as we move toward 2050.
