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Power issues have plagued Japan for the past decade, and the resource-poor country is reliant on imports for nearly 90% of its energy needs, with high usage of fossil fuels. However, the country’s energy transition efforts are a bright spot for investors, as Japan renewables sector is receiving a boost from the government.
A recent meeting between Prime Minister Fumio Kishida and ministers of other departments saw a pledge to increase the supply of hydrogen sixfold from the current level to 12 million tons by 2040. This is part of a planned amendment to the Basic Hydrogen Strategy introduced in 2017.
Based on data from the International Energy Agency (IEA), coal, oil, natural gas, nuclear power and hydroelectricity are the country’s main sources of electricity generation. Biofuels and Solar PV have one of the smallest shares in the energy mix of Japan.
However, the new plan intends to attract 15 tn yen (~$113 bn) in investments from public and private sectors over the next one and a half decades for the hydrogen sector. Japan previously announced it aims to achieve net-zero emissions by 2050, and hydrogen is being viewed as a central aspect of attaining this target.
Scope of Japan renewables sector
The higher investment in Japan renewables sector will come in the form of green bonds, or GX economic transition bonds as the Japanese are calling it, a new type of sovereign debt which will be issued for the first time later in April. “It is necessary to utilize GX bonds and prompt investment from the private sector,” Kishida said during the meeting.
The Japanese government is planning to issue GX bonds worth about 20 tn yen (~$151 bn) starting from the second half of 2023. Several companies are already setting up hydrogen fueling stations across the country to boost the use of hydrogen-powered vehicles. Separately, the automotive and steel industry is also planning to use green hydrogen for manufacturing purposes.
Another aspect that was discussed in this meeting between Kishida and other ministers is the use of next-generation perovskite solar cells by 2030.
Perovskite solar cells are currently not commercially viable because of their limited lifetime and high degradation, but are much cheaper to manufacture, easier to fit on curbed surfaces and have better performance as well.
As per a report by Nikkei Asia, the government is planning to support the mass production of these new type of solar cells, and will support Japan renewables firms to build supply chains.
Currently, conventional solar panel production is largely concentrated in China, so Japan will have to develop its own manufacturing bases for these new type of flexible solar panels.
Perovskite solar panels were first invented in Japan, and several companies and research institutes are already developing the new technology to make it commercially viable.
Earlier this year, Tokyo Metropolitan government said that it is starting joint research with Sekisui Chemicals for perovskite solar cells. Japan is pinning its hopes on domestic production of these photovoltaics as they use iodine, a material which is available in abundance in the country.
Some of the Japanese companies which are currently leading in the research and development of perovskite solar cells are Panasonic, Toshiba, Sekisui Chemicals, NGK Insulators, and the privately-held EneCoat Technologies, among others.
“Whilst it will still take time to develop, the combination of policy change and new product offerings will boost liquidity and encourage more new market entrants,” Bob Takai, Executive Advisor at the European Energy Exchange (one of the top Japanese energy derivatives trading platforms) told UK-based advisory firm HC Group.
