The Japanese Energy Market, An Update

As a nation with limited natural resources, energy is always an important topic – and therefore industry – in Japan. In the aftermath of the Fukushima Daiichi incident following the Great East Japan Earthquake of 2011, Japan’s energy policies have been truly brought to the forefront. Currently of interest are several recent policy decisions which will affect the market and have the potential to create opportunities for British businesses.


At the start of November the Tokyo Electric Power Company (TEPCO) and Chubu Electric teamed up to combine their gas businesses, becoming the world’s single largest LNG customer, importing 39 million tonnes of LNG per year. Japan is already the largest importer of LNG with 37% of global demand, this new alliance will account for 16% of said global demand.

Prices for LNG in Asia remain stubbornly high, despite predictions that supplies will double by 2020. Considering its national trade deficit from importing fuel to replace nuclear power, Japan is particularly keen to reduce LNG prices. It seeks to do so by accessing new supplies, notably US shale, as well as constructing a pipeline (a long-term and so far undefined goal), liberalising the gas market and establishing an Asia trading hub in Japan to improve price transparency and encourage greater contract flexibility.

Renewable Energies

The Ministry of Economy Trade & Industry (METI)’s new and renewable energy subcommittee had been discussing ways to cope with weak grid connection to enable utilities to increase the amount of renewable energy purchased. However, at the end of September, five utilities (Kyushu, Shikoku, Okinawa, Hokkaido and Tohoku) announced that they would stop accepting new applications for the purchase of electricity from renewable energy projects due to fears of power transmission capacity shortages. On 17 October, Kyushu Electric decided to restart buying geothermal and hydropower, while suspending the purchase of solar and wind power.

METI’s subcommittee plans to review its feed-in-tariff (FIT) for the renewable energy market this year. This is in order to reduce the artificially high number of entrants to the solar market which resulted from the FIT’s introduction in 2012. Within the subcommittee is a grid connection working group who have shown interest in learning from overseas. Injecting the UK’s policy design and business experience on grid development could be an effective way to encourage wider deployment of renewables in Japan. Watch our video interview between British Ambassador Tim Hitchens and Head of Energy and Climate Change Richard Oppenheim New Climate Economy Report and Opportunities in Japan for up to date analysis and to find out more about opportunities in the market; you can also visit our dedicated Energy page.


In keeping with Prime Minister Abe’s policies, Japan’s nuclear reactors are to be restarted gradually after all 48 fell idle following the Fukushima Daiichi incident of 2011. Political approval was granted on the 7th November for two reactors at Sendai Nuclear Power Plant to be restarted. Although political approval has been achieved, the technical side of the process and final ok by the regulator remain hurdles, meaning February 2015 is the earliest likely restart date. However, two further reactors could be granted initial safety approval soon which would mean 4-6 power stations could be running by summer 2015.

Each reactor restarted displaces around one million tonnes of Japanese LNG demand, saving $750m annually on Japan’s LNG bill – a significant boost for the economy. Not only that, but nuclear restarts could enable Japan to reduce carbon emissions by a further 10% by 2030.

The restart of nuclear reactors brings potential commercial opportunities for the UK; equally decommissioning experience is in demand for projects such as closing the Tokai reprocessing plant due to excessive retrofitting costs. You can learn more about how the UK has already assisted with nuclear decommissioning in our video UK Decommissioning Support at Fukushima Daiichi. Visit our dedicated Nuclear page for up to date news and opportunities in the sector.

Source: Climate Change and Energy Team, December 2014