Challenges and actions for the Japanese energy industry

24th January 2018

News ArticleAsiaInfrastructure

Deregulation and depopulation are critical emerging issues facing the Japanese energy industry in addition to the impact of new trends such as decarbonisation, digitalisation and decentralisation.

In light of this, the Japan Energy Association, the Council’s Japanese member committee, invited five key energy players to deliver presentations at their annual meeting under the theme ‘Challenges and Actions for the Japanese Energy Industry’.

They explored the role of coal and natural gas, and the challenges facing the manufacturing and petroleum industries, and electricity market.

 Mr Michihiro Kitawaza Chairman, Japan Electrical Manufacturers’ Association, identified three tangible actions for tackling issues facing the manufacturing industry. He called for a strategy on sustainable development enabling domestic and overseas market expansion by innovation; as well as a strategy for energy and the environment focusing on the country's future energy mix and how to  stay below the 2.0C greenhouse gas emissions target proposed at COP21 in Paris. He also stressed the need for a creation of a new manufacturing and service industry in the wake of industry 4.0.

In Japan coal accounts for 30% of primary energy and 40% of electricity generation globally. Mr Masayoshi Kitumara, Chairman, Japan Coal Energy Center, highlighted countries (Canada, France, UK, and the Netherlands), that have decided to abolish coal fired thermal power generation and banks that have become reluctant to invest in coal- related projects. Mr Kitumara believes that Japan could contribute by distributing clean coal technologies globally.

Domestic oil demand in Japan has decreased by 30% after peaking in 1999. Recently, the share of heavy oil decreased with the share of gasoline and kerosene increasing. However, it is estimated that the share of oil in 2030 will be around 30%. Oil production/consumption globally is currently about 100 million barrel per day. Current oil prices range between range between 55 and 65 dollars per barrel, which fluctuation mainly dependent on geopolitical risks and natural disasters.

Japanese petroleum companies have been forced to curtail their refinery plants and form a merger. Because of this, the number of primary distribution companies has decreased from 17 to 6 in the past three decades.

Mr Yasushi Kimura President, Petroleum Association of Japan, announced the country will seek more productivity and overseas export expansion to enhance the sector’s competitiveness internationally.

After the unfortunate events in Fukushima, natural gas now plays a key role in Japan in compensating lost nuclear generation and accounts for 25% of  domestic prime energy, 30% of which is used for city gas. Liberalisation of Japan’s city gas retail market began in April 2017, with new and existing market players starting to provide a wide variety of new services.

Mr Tsuyoshi Okamoto, Chairman, Japan Gas Association, commented: Japan needs to thoroughly focus on the ‘heat’ demand which accounts for 60% of total energy consumption.”

The event, which convened 180 delegates, ended with a presentation by Mr Satoru Katsuno Chairman, Federation of Electric Power Companies of Japan, on the status of the electricity industry and subsequent challenges it faces due to the events in Fukushima. It has been nearly two years since Japan deregulated its energy industry making it the world’s largest deregulated electricity market. He argued that utilising innovative technologies such as smart meters, ongoing reformation of the energy sector and continuous testing should be carried out to gauge real customer benefit.

Join the World Energy Council

Engage in strategic dialogue with the energy leaders of today and the future, build capabilities and help shape the energy future.