Japan’s electricity sector is undergoing a significant transformation, primarily driven by the imperative to enhance interregional connections. The goal is to meet Japan’s carbon neutrality targets by 2050 under its Green Growth Strategy through the Achieving Carbon Neutrality initiative, which necessitates decarbonising the power generation base and increasing the share of renewable energy sources (RES) in the nation’s generation mix. These changes are particularly crucial due to Japan’s unique challenges, including a heavy reliance on liquified natural gas (LNG) imports, geographical constraints limiting RES expansion, and a lack of cross-border transmission interconnections.  

Japan’s oil imports are at risk due to their growing dependence on the Middle East for nearly 95 per cent of their oil supply. This vulnerability is exacerbated by global oil market uncertainties caused by the Russia-Ukraine and Israel-Hamas tensions. All these reasons have made it more imperative for Japan to diversify energy sources and reduce reliance on volatile fuels.

Under its carbon neutrality strategy, Japan emphasises the extensive adoption of RES besides encouraging innovation in the pursuit of new decarbonisation technologies for power generation, such as hydrogen and ammonia, as well as thermal plants with carbon capture, utilisation and storage (CCUS) technology. Japan has set a target of generating approximately 10 per cent of its total electricity output from offshore wind (OSW) farms, particularly in Hokkaido, Honshu and Kyushu. To facilitate the transportation of electricity from these regions to urban centres such as Tokyo and Osaka, it is essential to establish a well-connected national grid.

Presently, Japan grapples with inadequate grid connections across regions, leading to challenges like solar farms in Kyushu having to curtail generation due to grid limitations. To address this issue, the Ministry of Economy, Trade, and Industry (METI) has collaborated with utility companies to enhance grid connections. Recently, in 2023, it also published a draft Wide-Area Grid Long-Term Policy (master plan for wide-area interconnection system) to outline the direction for the development and renewal of wide-area interconnection systems at the national level for more than 10 years. Under this, Japan’s Organization for Cross-regional Coordination of Transmission Operators (OCCTO), which regulates the supply and demand of electricity nationwide, calls for an investment of JPY6 trillion to JPY7.9 trillion for the development of Japan’s transmission and distribution (T&D) networks by 2050.

Hence, Japan is on the path to transforming its electricity sector through initiatives such as doubling regional electrical grid capacity, connecting various regions via new transmission lines and undersea cables, and facilitating OSW energy projects. The aim is grid integration of upcoming RES capacity, facilitating power interchange between regions, and increasing interregional flexibility. The report forecasts that more electricity will be transmitted from Hokkaido and Kyushu, which generate substantial RES, to areas such as the Tokyo metropolitan area, which consumes a lot of electricity.

Power sector overview

In recent years, Japan’s electricity sector has experienced a significant transformation. A reformation of the industry occurred with the full liberalisation of the retail market in April 2016, which led to the introduction of a new licensing system for electricity business operators, resulting in three primary categories: electricity generation, T&D and retailing. These categories are stringently regulated by the METI through its Agency for Natural Resources and Energy.  The 10 general electricity utilities that have historically been engaged in power supply since 1951 are now called “former general electricity utilities”.

Though the generation segment as of April 2022 had 1,038 entities, approximately 80 per cent of capacity was controlled by J-Power and the Japan Atomic Power Company Limited. In the T&D sector, 10 utilities (nine utilities spun out from the former general electricity utility) have been conducting business as general electricity T&D businesses; three companies, including J-POWER Transmission Network Company Limited, are conducting business as electricity transmission utilities; and 36 corporations including Sumitomo Joint Electric Power Company Limited are operating as specified electricity T&D utilities. To manage all these utilities, OCCTO was established in April 2015 as a government-authorised organisation that all electricity utilities are required to join. It aims to promote cross-regional transmission network development, enhance supply and demand adjustments, and ensure national energy supply resilience, both in normal and emergencies.

Japan’s electricity supply system

Source: OCCTO

Existing infrastructure

As of 2022, Japan had an installed capacity of 2,97,089 MW of which 63 per cent or 1,88,247 MW was thermal, 17 per cent or 49,924 MW was hydro-based, 11 per cent or 33,083 MW was nuclear-based and finally, 9 per cent or 25,835 MW was renewable-based.

The 2011 Great East Japan Earthquake and the subsequent Fukushima nuclear incident had a profound impact on Japan’s electricity system following which all nuclear power generation was temporarily halted. As a result, nuclear power now plays a minor role in Japan’s power generation mix. On the thermal front, natural gas has emerged as the primary fuel source for electricity generation, closely followed by coal, while the share of oil in the energy mix has been decreasing.

Figure 2: Japan’s installed generation capacity by source, as of 2022 (%)

Total installed capacity: 297,089 MW
Source: Japan Electric Power Information Center, Inc. (JEPIC); Global Transmission Report

Future Plans

In line with the country’s carbon neutrality goal, Japan’s Sixth Strategic Energy Plan, which was approved by the Cabinet in October 2021, aims to control electricity demand at 864 TWh in fiscal year 2030 through rigorous energy conservation efforts, despite expected economic growth. In line with these targets, OCCTO has also anticipated a slight reduction of 0.1 per cent in peak demand and 0.2 per cent in annual electric energy requirement during 2023-32. This anticipated reduction in demand is mainly attributed to initiatives aimed at reducing electricity consumption, the widespread adoption of energy-efficient electric appliances, a shrinking population, and load-leveling measures.

The Strategic Energy Plan seeks to increase the share of renewables to 36-38 per cent by 2030, nuclear power is expected to contribute 20-22 per cent to the energy mix, while thermal power’s share will be minimised, with coal and LNG contributing 19 per cent and 20 per cent, respectively.

Table 1: Power generation capacity expansion plans up to 2031 by stages

Source: JEPIC; Global Transmission Report

The government is resolutely committed to RES as the primary source of electricity. To achieve this, Japan has introduced various mechanisms, such as feed-in tariffs (FIT) and feed-in premiums (FIP) to incentivise RES production, including solar, wind and other sources. OSW power holds significant potential, and Japan is actively promoting it as a means to transition to RES. The government has also established rules for exclusive sea area use and designated offshore zones for wind power projects. The auctioning process for projects has evolved to facilitate market entry for a wider range of enterprises and expedite project launches. Ongoing discussions explore amendments to bidding rules to further support the development of OSW projects.

The way forward

Japan is currently in the process of developing its blueprint for next-generation power networks. While this roadmap is still evolving, the reforms and initiatives that have been undertaken and are in the planning stages are anticipated to contribute to the establishment of a robust power grid capable of facilitating the nation’s decarbonisation objectives. The country is also in talks with other countries to reduce its dependency on imported fuels. Net net, Japan is taking proactive measures to achieve its carbon neutrality goals.