Energy Security Benefits of Accelerated Energy TransitionIn the Context of the 2026 Strait of Hormuz Closure Crisis

Renewable Energy Institute today released the report "Energy Security Benefits of Accelerating the Energy Transition: In the Context of the 2026 Strait of Hormuz Closure Crisis."

Since the energy crisis of 2022, Japan has experienced sharp increases in fossil fuel prices and has responded by allocating massive energy subsidies totaling JPY 13.6 trillion (USD 95.2 billion) between FY2022 and FY2025. At the end of February 2026, the Strait of Hormuz was effectively closed following U.S. and Israeli strikes against Iran. More than 90% of Japan’s crude oil imports had been transported through the Strait. In response to the crisis, the government released strategic petroleum reserves and reinstated energy subsidies that had previously been suspended.

While energy subsidies may be unavoidable as a temporary measure to protect households and industries from sudden energy price spikes, they are ultimately palliative rather than curative. By shielding consumers from price signals, subsidies weaken incentives for energy conservation and the adoption of alternative energy sources. They also preserve the structural vulnerabilities of a social system dependent on fossil fuels. As long as reliance on imported fossil fuels remains the root cause of energy insecurity, a fundamental solution requires structural transformation.

What if Japan had accelerated its energy transition in response to the 2022 energy crisis? To what extent could the impact of the 2026 energy crisis triggered by the closure of the Strait of Hormuz have been mitigated?

This report addresses that question using a power supply and demand simulation model to quantify the energy security benefits of accelerating structural transformation. The analysis demonstrates how expanding renewable energy and promoting electrification could have reduced Japan’s vulnerability to fossil fuel supply disruptions and price shocks.