Comment Japan at an Energy Crossroads: Choosing Competitiveness Through RenewablesOn the Cabinet Approval of the Japan's 7th Strategic Energy Plan

in Japanese

(original Japanese version released on 18 February 2025)

The Japan's 7th Strategic Energy Plan has been approved by the Cabinet on 18 January 2025. Renewable Energy Institute has quantitatively demonstrated and presented various arguments that more than 90% of electricity can be supplied by renewables in 2040, which will result in a low-cost and self-sufficient energy supply¹². We believe that the 40-50% share of renewables in the 7th Strategic Energy Plan is not sufficient for Japan to be a competitive site for business operation.

The power generation mix in the approved 7th Strategic Energy Plan requires large amounts of hydrogen, ammonia, and CCS to decarbonize thermal power generation, which is to provide 30-40% of the power. This will make the cost of power generation higher than in the scenario with more than 90% renewables³.

We at Renewable Energy Institute are renewing our commitment to advancing high-quality research, proposals, and dialogue-based collaboration to ensure that reality surpasses the government's plans. We are working together with companies and local governments aiming to accelerate realistic and early decarbonization and achieve nature positivity, with those pioneering agrivoltaics emerging across Japan, with those striving to overcome challenges to realize offshore wind power, and with those dedicated to revitalizing communities by harnessing Japan’s abundant renewable resources—solar, wind, geothermal, hydro, and biomass.

1. Renewable-Centered Power System is Low-Cost

Many countries around the world are aiming for a power generation mix centered on renewables, as seen in their 2030 targets, five years from now (Figure 1).

Figure 1  2030 Targets for Renewable Electricity Ratio (%) in countries with ambitious targets

The reason for this is obvious. Renewable electricity is low cost (Figure 2) and can be produced by domestic natural resources.

Figure 2  Global Benchmarks for the LCOE of New Solar PV, Wind, and Nuclear 2024

In the government committee for the Strategic Energy Plan, there has been an argument against higher rate of renewable energy as the “integration cost” would be high even if the generation cost itself is low. However, according to IEA Wind Final Report⁴, “integration cost” is not recommended to be considered anymore by policymakers and other stakeholders as shown the quote below.

“It was previously common to try to estimate a so-called integration cost of wind power. All the methods have been found to have serious drawbacks (Milligan et al. 2012; Milligan & Kirby, 2009; Milligan et al. 2011; Müller et al., 2018). [...]⁵ Instead of trying to add a system integration cost to the generation cost (LCOE), policymakers and other stakeholders should assess the total system costs and benefits for the entire system for different scenarios.”

We compared the power generation mix in the Renewable Energy Institute’s 2040 scenario and the recently approved Strategic Energy Plan (Figure 3), as well as the associated power generation costs (Figure 4). When looking at the energy system as a whole, even if we use unit costs excluding policy expenses as calculated by the Power Generation Cost Verification Working Group and include the costs of transmission lines, pumped storage, and batteries (the rightmost orange section), the power generation cost under the Renewable Energy Institute’s scenario remains lower than that of the Strategic Energy Plan scenario.

Figure 3  Electricity Generation Mix of approved SEP (Strategic Energy Plan) and REI scenario

Figure 4  Levelized Cost of Electricity (LCOE) in SEP and REI scenario^6 7

Renewable-centered power systems are likely to be the least expensive, even when “integration costs” are taken into account as a whole. It is for this reason that the energy transition to renewable-centered power systems is aimed at in many countries around the world.

2. Renewable-Centered Power System can Lead to High Self-Sufficiency of Energy and Food, Including Green Hydrogen

Japan, as a country that imports most of its consumed energy, renewables have advantages simply because they are domestically produced. In addition, many countries, including China, Europe, Australia, Brazil, and the United States under the Biden administration, have begun a race to maximize the domestic and regional economic opportunities that the energy transition will bring as a matter of national policy⁸. Although China has already shown overwhelming competitiveness in commodities such as solar panels and storage battery cells, it is expected that Japan's precision technology will contribute to the world while providing economic opportunities as more precise control is required in the future. To achieve this, wouldn’t the fastest path be to massively deploy solar and wind power domestically and master the technology ahead of other countries?

According to our scenario in which more than 90% of electricity in 2040 will come from renewable energy sources, the country will achieve a self-sufficiency ratio of about 75% in primary energy as a whole. The self-sufficiency rate in the approved 7th Strategic Energy Plan is 30-40% even if nuclear power is included, which means that the exposure to geopolitical risks is still high.

Figure 5  Primary Energy Structure in approved SEP (Strategic Energy Plan) and REI scenario

In a world where renewable energy accounts for more than 90% of the power generation mix, the surplus renewable electricity can be used to produce green hydrogen. By 2040, the supply chain for offshore wind power construction is expected to be well-established, enabling even greater hydrogen production toward 2050.

Agrivoltaics power generation has the potential to stabilize farmers' income and resume agricultural production by installing solar power on abandoned farmland. It is expected to increase food self-sufficiency as well as energy self-sufficiency, and to create attractive employment opportunities for young people in rural areas.

3. To Nurture the “Seeds” of the 7th Strategic Energy Plan

Although the share of renewables in the power generation mix in 2040 is low compared to other developed countries, it is the largest share for the first time as renewables as a whole. In order to accelerate this momentum, and to ensure that Japan's impressive technological capabilities contribute to global decarbonization and economic prosperity, strong policy support is needed. This is because, in addition to renewable energy facilities, the decarbonized society that many countries around the world are aiming for will require infrastructure such as power transmission lines and energy storage devices to utilize renewable energy, and technological capabilities will be required for how to operate such infrastructure. Leadership from the national and local governments is essential for building the infrastructure, and a mechanism is needed to leverage broad knowledge to ensure that the right direction is taken.

As an independent think tank, Renewable Energy Institute will continue to provide fact-based analysis and policy recommendations so that Japan, Asia, and the world can continue to aspire for a net-zero, nature-positive, and thus prosperous economy and society. We will continue to discuss and make recommendations together with companies and other actors participating in the Japan Climate Initiative (JCI), SBTi (Science-Based Targets Initiative), and RE100, which are determined to make an economic transition to minimize the harm caused by dangerous climate change to current and future generations.