The Journal The Authority on Global Business in Japan

Last month marked the sixth anniversary of the Great East Japan Earthquake and Tsunami of March 11, 2011, and the subsequent nuclear disasters. Those events forced a series of dramatic changes in Japan’s energy policy, on which are based many green business opportunities in the country.

Prior to March 11, more than 50 nuclear reactors provided about 30 percent of Japan’s electric power, and many new reactors were planned. Six years later, with a new, more independent safety regulator, a slew of new safety requirements, and trillions of yen invested in upgrades, only three reactors are fully “restarted”—two in Kyushu and one in Shikoku. Two more reactors in Kansai started briefly, but have been blocked by court injunctions for much of the past two years.

Additional reactors should restart this year, but the process has been far slower and more expensive than the government and utilities expected. Indeed, it seems likely that by 2030 nuclear power will reach only a 10 percent share, about one-half of the government forecast.

While the nuclear situation places a heavy burden on the utilities and consumers, it opens new business opportunities for creative ways to meet Japan’s electricity needs, including renewable energy of all types, liquefied natural gas imports recently started from the United States, investments in energy efficiency technology, and new business models for energy storage and demand response to cut peak usage.

Whether any of these opportunities result in long-term, profitable businesses will turn largely on how successful Japan is in implementing the deregulation and unbundling of parts of its electric supply system.

Japan’s 2012 feed-in-tariff (FIT) system for renewable energy has offered a range of business opportunities for foreign equipment manufacturers, developers, and financiers of renewable power projects (page 14). FIT requires an electric utility to enter into a long-term power purchase agreement (PPA) with the renewable power generator. FIT caused a sudden boom in solar photovoltaic (PV) systems, and Japan became the second-largest market globally for solar PV installations in 2013, 2014, and 2015. As a result, solar PV provided 4.3 percent of Japan’s electricity in 2016. For now, the Japan solar boom has ended, though many large projects remain underway.

Recently, the focus has shifted to wind power and biomass (plant material or animal waste). US manufacturers compete vigorously in Japan to sell wind turbines of all sizes. Several US developers are working on significant wind project portfolios in Japan, and could do much more if transmission capacity were available at a reasonable cost and schedule. Biomass fuel suppliers are promoting US wood pellets as a stable, environmentally sustainable source of fuel, and offer to license biomass-related technologies.

In sunny locations such as Chile and Mexico, recent solar PPAs have been announced at about ¥3 per kWh, cheaper than any other existing electricity source. Even in northern Europe, with higher wages and less annual sunlight than Japan, bids of under ¥6 per kWh now win solar PPA auctions. And in Texas, the heart of the US oil and gas industry, most new electric power capacity is solar PV or wind. Soon the question will be not whether Japan can afford more renewables, but whether it can afford not to implement renewable energy projects.

David G. Litt is a professor at the Keio University Law School and co-chair of the ACCJ Energy Committee
Japan’s 2012 feed-in-tariff (FIT) system for renewable energy has offered a range of business opportunities