Full report
Published: 28 June 2023

Fostering Effective Energy Transition 2023


Country analysis

Key progress on ETI

Japan ranks 27 out of 120 countries on the ETI 2023, with relatively stable overall ETI, system performance and transition readiness scores over the past 10 years. At a natural disadvantage due to its high dependence on energy imports, Japan maintains high scores on the secure dimension within system performance through the diversification of energy sources as well as import counterparts. The country has notably accelerated within the sustainable dimension, primarily by reducing the energy intensity of its economy, a result of sustained efforts to enhance energy efficiency and productivity across different demand sectors. The enabling environment for energy transition in Japan has steadily improved, evidenced by strong regulation and political commitment, infrastructure, and investments in human capital and education. The recent announcement of net-zero targets provides further momentum to the energy transition but will require sector-specific roadmaps, including for hard-to-abate sectors, with interim milestones to ensure timely progress.

Key imperatives and policies in place

Following the 2011 Fukushima disaster and the country’s heavy reliance on imported fossil fuels at a huge cost, several policies were introduced to increase Japan’s use of renewable energy sources, while also promoting energy efficiency and conservation to secure its energy transition. This is reflected in the country’s high ETI scores on regulation and political commitment. The Sixth Strategic Energy Plan, released in October 2021, set a target for renewables to account for 36-38% of Japan’s energy mix by 2030.78 This decision accelerated the deployment of solar, wind, and hydropower.79 To meet the target, the total installed capacity would need to increase by 94 GW, with the majority coming from solar photovoltaic. Japan is a densely populated country, however, with limited available land for large-scale renewable projects. To overcome these challenges, Japan established itself as a leader in floating solar power, utilizing its inland lakes and reservoirs for this purpose.80 In December 2022, the country announced its plan to restart nuclear power plants to help address its shortage of energy and pursue low-carbon development.

Feed-in tariffs were introduced in 2012 to promote the development of solar, wind and biomass. The tariffs for solar started at more than JPY 40/ kilowatt-hour (kWh) in 2013 and were reduced steadily to JPY21/kWh for 2020-2021 to encourage greater cost competitiveness while also reducing the financial burden on consumers.81 In addition, an auction system for renewable energy projects was introduced to further promote cost efficiency and competitiveness. Japan’s grid infrastructure, which was traditionally designed for centralized power generation from large power plants, requires significant upgrades (transmission and distribution losses have increased 16% since 2014).82 As a result, the government is focused on developing a more distributed and diverse energy system, which includes microgrids, energy storage systems and demand response technologies, while also providing subsidies and other incentives to support the development of energy storage projects.

To encourage energy efficiency and conservation, the Top Runner Programme was implemented to set energy efficiency standards and encourage manufacturers to develop more efficient products, reducing Japan’s reliance on imports and improving its energy security. To further limit its emissions, Japan also imposes a carbon tax on fossil fuels used by power companies and industrial facilities, and a carbon emissions trading system for large emitters, with a commitment to increase the carbon tax rate over time and expand the emissions trading system to cover more industries and facilities.

What’s next?

Japan’s energy transition differs from other countries due to its lack of natural resources and space for renewables as well as its historical reliance on nuclear power. While the country has become a global pioneer in hydrogen and has made important progress towards developing an efficient, resilient and sustainable energy system, a report by the IEA83 examines Japan’s energy issues and recommends solutions to help the country attain a secure, affordable and sustainable energy future. The solutions cover accelerating the use of low-carbon technologies, removing regulatory barriers to encourage investments in zero-emissions electricity and improve power system flexibility, and increasing competition in its energy markets.

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