Japan's Energy Transition toward Carbon Neutrality by 2050

The 58th Annual US-Japan Business Conference Energy and Infrastructure Breakout Session

October 1, 2021

Yasuo Tanabe

Councilor, The Institute of Energy Economics, Japan

Managing Director, The EU-Japan Centre for Industrial Cooperation

2050 Carbon Neutrality Goal and Revised 2030 Energy Mix Target

➢ October 2020, PM Suga declared net-zero GHG by 2050 goal.

➢ December 2020, updated in June 2021, Green Growth Strategy covering 14 sectors, e.g. offshore wind, fuel ammonia, hydrogen, nuclear, mobility/battery

➢ April 2021, PM Suga announced 46% GHG reduction target in 2030

➢ May 2021, CN 2050 is enacted (Law on Measures to Cope with Global Warming) by consensus

➢ July 2021, draft Basic Energy Plan and draft 2030 Energy mix draft announced

➢ currently under public comment

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Path to 2050 CN through 2030

2

Decarbonized electricitysources

Consumer110 mill ton

Industry280 mill ton

Transport200 mill ton

Electricity440 mill ton

Electricity

Consumer

Industry

Transport

2019

1.03 bill ton

2030

（46% reduction compared to 2013, total GHG emission)Continue challenge up to 50% reduction

2050

Emission reduction + Removals = net zero

（▲100%）

Plantation, DACCs, etc

➢ Mainstreaming renewable energy.

➢ Re-establishment of the nuclear energy policy

➢ Reduce the ratio of thermal power generation based on the premise of stable supply.

➢ Hydrogen/ammonia power generation

➢ Intensively promote energy efficiency policy both by regulation and support.

➢ Realize a hydrogen-based society

➢ Electrification by decarbonized power

➢ Pursue options: hydrogen, ammonia, CCUS/CR

➢ Use carbon removal technologies for leftover.

➢ Efforts for the utilization of renewable energy as the major power

➢ Use of nuclear power➢ Pursue options:

hydrogen, ammonia, CCUS/CR

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provisionary transcript

values are the amounts of CO2 derived from energy

Hydrogen

Electrification

Synthesis fuelmethanation

Biomass

Source: METI

3

Energy Transport/Manufacturing Home/ Office

Offshore wind powerWind turbines, parts, floating wind turbines

Ammonia fuelCombustion burner(as fuel in transition periodto hydrogen-powered society)

HydrogenTurbines for power generation,hydrogen reduction steel-making, carrier ships, water electrolyzers

Nuclear powerSMR (Small Modular Reactor), nuclear power for hydrogen production

Mobility and batteryEV (electric vehicle), FCV (fuel cell vehicle), next generation batteries

MaritimeFuel-cell ships, electric propulsion ships, gas-fueled ships

Carbon RecyclingConcrete, biofuel, plastic materials

Housing and building, Next generation PV(perovskite solar cell)

Resource circulationBiomaterials, recycled materials, waste power generation

Lifestyle-related industryLocal decarbonization business

Logistics, people flow and infrastructureSmart transportation, drones for logistics, fuel-cell construction machinery

Foods, agriculture, forestry and fisheriesSmart-agriculture, wooden skyscrapers, blue carbon

Semiconductor and ICTData centers, energy-saving semiconductors (demand-side efficiency)

AviationHybrid electric, Hydrogen-powered, Aircraft

Source: METI

14 sectors in the Green Growth Strategy

4

Revised Energy Mix in 2030Primary Energy Supply

Energy Demand Primary Energy Supply

363M kL

489M kL

An ambitious deeper conservation

by 62M kL (-18%)

Hydrogen&Ammonia

1%

430M kL

Elect-ricity

Heat&Fuels

FY2013

Elect-ricityAbout30%

326M kL

Heat&Fuels

About70%

FY2030As of FY2015FY2030 FY2030 FY2030

As of 2015

Elect-ricityAbout28%

Heat&Fuels

About72%

self-sufficiency

About30%

self-sufficiency

About24.3%

Source: METI

Renewables20%

Nuclear10%

Natural gas20%

Coal20%

Oil30%

Renewables

13-14%

Nuclear10-11%

Natural gas18%

Coal25%

Oil33%

• The self-sufficiency rate is about a little over 30% on a comprehensive energy statistics basis and about a little under 30% on an IEA basis.• Note that the integrated energy statistics have been revised since the formulation of the Long-Term Energy Supply and Demand Outlook in 2015, and the actual figures for FY2013 as the starting point for the FY2030 estimates are different, so

simple comparisons cannot be made.

Economic Growth 1.4% / YearPopulation -0.6%Passenger Volume -2% 280M kL

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Revised Energy Mix in 2030 (2)Power Mix in 2030

Source: METI

Electricity Demand Power Mix

1,024 TWh 1,065 TWh

930-940 TWhAn ambitious deeper conservation

by 230 TWh (-20%)

Economic Growth 1.4% / YearPopulation -0.6%Passenger Volume -2%

FY2013 FY2030 FY2019 FY2030FY2030

As of FY2015FY2030

As of FY2015

989.6 TWh

980.8 TWh870

TWh

Renewables

Nuclear

Coal

Oil

18%

6%

37%

32%

7% 2% 3%

19%

20%

20-22%

36-38%

20-22%

22-24%

Hydrogen&Ammonia

1%Non-fossil fuel24%

Non-fossil fuel59%

Non-fossil fuel44%

Fossil fuel76%

Fossil fuel41%

Fossil fuel56%

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Challenge: Renewables◼ 330-350TWh in 2030 by the current and the additional stronger policies◼ Toward 2050 is unknown horizon. A variety of challenges face, kW and kWh.

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Solar PV (residential) Solar PV (mega) On-shore wind

Off-shore wind Biomass Geothermal

Hydro (S&M) Hydro (large) Power generatic

Current and additional possible stronger policy

Right axis

Left axisOthers

Sine qua non✓ Balancing and inertia✓ Economics

kWh challenges✓ Nationwide transmission

lines✓ Energy storage and

demand side measures

kW challenges✓ Securing lands✓ Securing sea area

Source: IEEJ

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Challenge: Nuclear (1) Existing Plants

Source: IEEJ

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Challenge: Nuclear (2) Innovation⚫ Through NEXIP and other programs, METI supports various types of nuclear reactor

technologies including international cooperation projects.

⚫ The Japan Atomic Energy Agency (JAEA) possess important test facilities.

Small Modular LWR

•Smaller size, modular type•Passive safety

➡ ✔ Affordable capital cost✔ Smaller EPZ

Fast Reactor

•Sodium-cooled reactor•Fast neutrons

➡ ✔ Effective use of resources

✔ HLW management

High Temperature Gas-cooled Reactor

•Helium gas-cooled reactor (chemically stable)

•Coated particle fuel

•Very high temperature

➡ ✔ Heat/hydrogen use

✔ Smaller EPZ

Joyo: Experimental Fast Reactor

HTTR:Experimental HTGR

JAEA’s Facilities

France

Fast reactor R&D cooperation based on simulations andexperiment

U.S.

Versatile Test Reactor(VTR) cooperation

U.K.

High-temperatureGas-cooled Reactor

International CooperationSource: METI

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Challenge: Hydrogen & Ammonia

⚫ Basic Hydrogen Strategy (2017)

✓ First comprehensive national strategy

✓ H2 as a future energy option toward 2050

✓ Goals : making H2 affordable

➢ Cost: $10/kg ⇒ $3/kg by 2030 & less than $2/kg by 2050

➢ Scale up: up to 3 Mts by 2030 & around 20 Mts by 2050

【Supply】

【Demand】 ・・・

3 conditions for realizing affordable hydrogen

① Inexpensive feedstock (unused resources, renewables)

② Large scale H2 supply chains

③ Mass usage (Mobility ⇒ Power Generation ⇒ Industry)

⚫ Key Technologies

• Electrolysis System• Gasification + CCS

• Energy Carrier(LH2, MCH, NH3, etc.)

• Fuel Cells (Mobility, Generation)• H2-fired Generation

Production UseTransportation

Source: METI

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Challenge: Technology & Innovation

It is important to accelerate innovation and prepare for the next generation of further actions.

In order to realize the practical use of next-generation low-carbon technologies, it is important to accelerate technology development and promote demonstration facts on the scale of 90 billion dollars by 2030. To

achieve this, more international cooperation is essential.Source: IEA

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Challenge: Cost

Source: IEEJ

Power generation

RE: % Nuclear: % H2/ Ammonia: %CCUS

power: %Electricity cost

JPY / kWh

Reference Case 1,350 TWh 54 10 13 23 24.9

RE: 100% 1,050 TWh 100 0 0 0 53.4

RE innovation 1,500 TWh 63 10 2 25 22.4

High nuclear 1,350 TWh 53 20 4 23 24.1(Max nuclear 19.5)

H2 innovation 1,350 TWh 47 10 23 20 23.5

High CCUS 1,350 TWh 44 10 10 35 22.7

Demand transformation

1,350 TWh 51 10 15 24 24.6

2050 Electricity cost analysis by scenario

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Challenge: Carbon Pricing

1. Carbon Tax⚫ appropriate tax level⚫ system design in consideration of fairness and international competition⚫ realignment with existing tax systems

2. Emission Trading⚫ Cap level of covered sectors⚫ system design in consideration of fairness and international competition⚫ emission prices(Cap and Floor)

3. Common⚫ domestic price level in preparation of CBAM⚫ availability of other offset programs(e.g. J Credit, JCM)⚫ allocation of revenue⚫ low-income people and remote local area

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Challenge: International CooperationAETI and JUCEP⚫ Japan announced “Asia Energy Transition Initiative (AETI)” in the Special

Meeting of ASEAN Ministers on Energy and Minister of Economy, Trade andIndustry of Japan on June 21, 2021

⚫ This initiative includes a variety of support for the realisation of various and pragmaticenergy transitions in Asia, and each country welcomed it at the meeting.

１．Support drawing roadmaps for energy transitions

２．Presentation and promotion of the concept of Asia Transition Finance

３．US$10 billion financial support for renewable energy, energy efficiency, LNG, CCUS and other projects

４．Technology development and deployment, utilizing the achievement of Green Innovation fund

(e.g.）Offshore wind, Fuel-ammonia, Hydrogen etc.

５．Human resource development, knowledge sharing and rule-making on decarbonisation technologies

➢ Capacity building of decarbonisation technologies for 1,000 people in Asian countries

➢ Workshops and Seminars on energy transitions

➢ Asia CCUS network

Source: METI

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Challenge: International CooperationJUCEP

<Key Cooperation Areas>1. Renewable Energy: Geothermal, wind, solar, hydropower, and critical minerals

2. Power Grid Modernization: Grid stability, energy management technology including battery storage, and

transmission

3. Nuclear Energy: Advanced technologies such as small modular reactors and light water reactors.

4. Decarbonization technologies: CCUS/Carbon Recycling and other abatement technologies, as well as advanced

fuels like ammonia, hydrogen, and others

⚫ JUCEP was newly established under the two partnerships of the “Japan-U.S.Competitiveness and Resilience (CoRe) Partnership” and the “Japan-U.S. ClimatePartnership on Ambition, Decarbonization, and Clean Energy” announced at the Japan-U.S. summit meeting in April.

⚫ JUCEP is a framework to help Indo-Pacific countries utilize clean, affordable and secureenergy technologies to accelerate decarbonization while promoting a stable energysupply and sustainable growth. Through cooperation under JUCEP, we will continue tocontribute to the realization of the "Free and Open Indo-Pacific (FOIP)" by supporting thedevelopment of an open, competitive and transparent energy markets.

Source: METI

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Conclusion

➢ Japan's goal of Carbon Neutrality 2050 and 46% reduction 2030 is high hurdle.

➢Toward 2030, existing technologies have to be utilized with utmost political, industrial and public efforts.

➢Toward 2050, Japan, as a technology leader, has to contribute to the world with new technology development.

➢For global emission reduction on cost-effective basis and technology development, international cooperation is key.

➢Article 6 of Paris Agreement (Market Mechanism) has to be implemented.