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BNEF Accuses Japan’s Government Of “Wishful Politics”

A new white paper from Bloomberg New Energy Finance has accused Japan’s proposed pathway to 26% emission reduction as “wishful politics,” despite the reduction target itself being a realistic possibility.

The white paper is the first real news Bloomberg New Energy Finance (BNEF) has made since their The Future of Energy Summit 2015 back in early April. The key takeaways from the new white paper are the apparent discrepancies between the figures and outlook provided by Japan’s government, and analysis done by BNEF.

Most notably, Japan’s outlook includes nuclear generation accounting for 20% to 22% of electricity supplied by 2030, which will require at least 38 GW of operating capacity.

However, according to BNEF, “only 26 GW of capacity would be operational under even the most optimistic restart scenario,” which on its own already makes Japan’s proposed targets suspect. Specifically, according to BNEF, nuclear energy generation will not account for more than 10% of Japan’s electricity by 2030, and 13 reactors would need to receive extensions beyond their 40-year operational lifetime to achieve the government’s projections — that, or new nuclear capacity would need to be built, which is in direct contradiction to the government’s current decision not to build any new nuclear capacity.

Comparison of nuclear’s share of electricity generated (TWh, normalised %) 

BNEF-7

 

However, nuclear isn’t the only discrepancy BNEF found within Japan’s energy projections.

Japan’s government has also predicted a relatively minor role for renewable energy, based on the inherent false assumption that renewables cannot succeed without economic support mechanisms such as feed-in tariffs. As a result, Japan’s government projected solar PV to account for 7% of energy generation in 2030, whereas BNEF is predicting it will reach at least 12%.

Comparison of renewables share of electricity generated (TWh normalised, %)

BNEF-8

Interestingly, BNEF points out that, as it stands currently, Japan’s residential rooftop solar systems cost on average approximately 50% more than those in countries like Germany and Australia. Both countries saw PV systems drop in price after support schemes like feed-in tariffs were reduced, making the rooftop PV market in both Germany and Australia fully competitive with retail electricity prices.

Average residential PV system capex, $/W (DC) 

BNEF-10

BNEF notes that “there is every reason to expect Japan will not follow a similar trajectory, unless additional regulatory burdens are applied to prevent uptake of rooftop solar PV.”

There were also some differences in the role of fossil fuel generation. Governmental projections for the role of thermal sources is set at 56%, down significantly from 2013’s 87%. However, BNEF projections suggest that thermal generation will account for 65% of all electricity supplied — the biggest difference lying in the role of gas.

Currently, the Japanese government projects the role of gas and coal to be essentially equal, 27% and 26% respectively, with oil bringing up a measly 3%. However, BNEF projections show coal only producing 23%, and gas producing 42% — and oil nothing.

Comparison of fossil fuel powered generators share of electricity generated (TWh normalised, %)

BNEF-9

“Analysing the market trends and current official government policy results in a significantly different electricity generation mix than the government’s outlook suggests,” explained Ali Izadi-Najafabadi, head of Japan analysis at Bloomberg New Energy Finance. “Still, our projections show emissions associated with electricity will fall by 28% in 2030 compared to 2013, making the government’s emissions target realistic, if it is willing to let current market trends follow their course.”

Some may wonder why there is such a discrepancy between BNEF’s analysis and the projections made by Japan’s government. Additionally, there is the common-sense question of, “Doesn’t Japan know better what they are going to accomplish?”

However, as noted in the conclusion to the white paper, the BNEF authors remind readers that “outlook projections can certainly become influenced by political preference as it appears to be in this case.” They continue:

It would be unrealistic to expect a subcommittee under the Ministry of Economy Trade and Industry’s Agency for Energy and Natural Resources ie, an entity both with executive as well as regulatory powers, to produce an outlook free of political considerations.

In the end, as the authors note, outsourcing these outlooks to a political arm “without any executive or legislative powers” may be in the best interest of all involved. As Bloomberg notes in its press release, “Overall, the government’s outlook appears to be an attempt at reconciling competing goals of achieving a lower-emission generation mix while at the same time protecting the politically favored technologies of coal and nuclear.”

All figures provided by Bloomberg New Energy Finance and Japan’s Ministry of Economy, Trade and Industry

 
 
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