Activity Report

November 19, 2012 Energy mix of the future

When it becomes dark at night, we turn on the lights with the flip of a switch. We talk to people on our mobile phones. We tap on a keyboard and our computer screen springs to life. Electricity is all around us in our daily lives, and in Japan, electricity generation takes up 42% of primary energy consumption. It is evident that our comfortable and convenient lifestyle is made possible by electricity, and procurement of energy sources for its production is an issue of utmost importance that has direct impact on our lives.

Various energy sources are used to produce electricity, and those used in Japan are petroleum, natural gas, coal and other fossil resources, renewable energy (hydraulic, wind, solar, and geothermal) and nuclear power. It is undesirable from a national security perspective to depend too heavily on one energy source, and so sources have historically been diversified. The proportion of various energy sources used in electricity generation is called ‘energy mix,’ and finding the right balance is crucial from the aforementioned perspective of national security, as well as economics and environmental protection.

It goes without saying that reducing the ratio of fossil resources in the energy mix is an important agenda in the fight against global warming, and Japan in recent history had been promoting nuclear power in order to reduce CO2 emissions while maintaining economic efficiency. After the accident at Fukushima Daiichi power plant in 2011, it appears inevitable for a large increase in the ratio of fossil fuels for the time being, but an urgent search is underway to find a new energy mix that greatly reduces the proportion of nuclear power. In the aftermath of the disaster, the “Act on Special Measures Concerning the Procurement of Renewable Energy by Electric Utilities” was established on August 26th, 2011, heightening anticipation for the large-scale introduction of renewable energy.

Following the Fukushima events in 2011, The KAITEKI Institute (TKI) conducted a study on the potential of wind and solar power generation in Japan. We sought to find out how much of the energy mix renewable energy can potentially account for, what is necessary for their large-scale introduction, and ultimately, what the ideal energy mix is for Japan’s future.

In our study conducted in 2011, we first calculated the maximum amount of renewable energy facilities that can theoretically be installed in Japan based on reports on renewable energy potential by the Ministry of Environment and NEDO (*1) and METI’s forecast for total energy demand for the year 2030 (*2). This showed that there could theoretically be enough solar power facilities installed to supply 28% of total electricity in the year 2030, and for wind power, when offshore wind turbines were also included, 347% of total electricity in 2030. However, the real numbers at the time of 2011 showed that solar and wind power combined was supplying less than 1% of total electricity. The main reason for this low number is that the cost of introducing renewable energy remains very high.

European countries have been implementing feed-in-tariffs (FIT) to overcome the barrier of cost for renewable energy and to drive forward its diffusion. FIT is a measure by which electric companies are obligated to buy a certain amount of electricity generated by renewable sources at a premium price set by the government. In turn, electric companies raise the price of electricity to their customers. The customers of the electric companies, that is, the public, pay higher electricity bills and thus are the ultimate bearers of the extra cost. In this way, the FIT attempts to have the cost of introducing renewable energy shared by all citizens.

The act established by the Japanese government mentioned above is an FIT, and taking this into account, we also conducted an estimation of the expected amount of renewable energy to be introduced by 2030 with the hypothesized that the cost for installation will come down. Our hypothesis stated the price for wind power installation to be 20% less than the current price and we predicted that the purchase price will be 20yen/kW. Results showed that if the FIT was kept in effect for 15 years, there would be enough wind power facilities installed to supply 19% of total electricity demand by 2030. For solar power, we hypothesized that production and installation cost for solar panels will come down by half, and purchase price will be set at 38yen/ kW. This showed that if the FIT were in effect for 15 years, enough solar power generators would be installed to supply 24% of total electricity demand in 2030.

The FIT for Japan came into effect in July, 2012. Actual purchase price for wind power was set at 20 yen/ kW and solar power at 42 yen/kW. The FIT is planned to be in effect for 20 years. Hence for the time being, it is expected that there will be a large increase in the introduction of renewable energy as the cost for installing facilities drop. However in the long-run, problems remain such as technological limitations to cost reduction and maintenance of the FIT (price setting, higher electricity cost borne by citizens). Furthermore, in order for wind power generation to proliferate, there is need for further development in social infrastructure such as electricity transmission networks, solutions to the problem of noise pollution, and completion of offshore wind turbine technology.

In the past, developments in the field of energy focused on pursuing efficiency, with progress seen in increasingly centralized large-scale thermal power generators and nuclear power plants. In contrast, renewable energy is headed towards a model of many dispersed small scale facilities. There are aspects to mass introduction of renewable energy that are not efficient, but the many drawbacks of conventional energy sources are well-noted, such as resource depletion, CO2 emissions, and with nuclear power, danger of radiation and nuclear waste disposal. When trying to discern the ideal energy mix for the future, we will still need to consider efficiency, but we will need to start putting even more emphasis on the perspective of security, environmental protection, and sustainability for society as a whole.

*1: FY2010 Study on renewable energy potential, Ministry of Environment, March 2011
Revision of Solar Power Generation Roadmap Towards 2030 (PV2030) Report for Exploratory Committee, New energy and Industrial Technology Development Organization, June 2009

*2: Outlook on long-term energy demand (proposal), Ministry of Economy, Trade, and Industry, Agency for Natural Resources and Energy, March 2008