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Japan: Clean energy to Japan, Trends and opportunities ,

2011/03/16

Clean energy to Japan

Trends and opportunities

The market

On 7 September 2009, Prime Minister Hatoyama confirmed that the Democratic Party of Japan (DPJ) would aim to reduce emissions by 25 per cent from 1990 levels by 2020, underlining that Japan would also depend on all other major nations joining in a fair and effective framework for regulating emissions.

The DPJ has also set goals of 30 % energy self-sufficiency by 2030 (and a second tier goal of 50 % energy self-sufficiency by 2100).  It is clear Japan must continue to diversify its broad energy mix which includes coal, petroleum, nuclear power, LNG, hydro-electricity and renewable energy. 

In general, the drivers to promote clean energy R&D and market introduction of technology in Japan are broadly divided into target setting, regulation, and support measures including subsidies and tax breaks. So far in Japan, almost all clean energy introduction targets are not mandatory.

Renewable Portfolio Standards (RPS) regulation and several support measures and initiatives have bolstered Japanese clean energy development. Under the RPS regulation, wind power and biomass (electric power and heat) were significantly promoted. Meanwhile, photovoltaic power was popularised by a subsidy system and is recognised as the most successful energy item in terms of Japanese policy. In many cases, subsidies for new energy introduction were established both by the central and local governments.

 

The RPS Law, which was finalised from April 2003, demands an increase in production of energy from new energy sources such as biomass, wind generation, solar generation, geothermal generation and medium and small sized hydro generation. It can be expected then that there will be significant interest from Japan in renewable energy sources for the medium to long term.

Opportunities

Australia has a stable political and economic situation and low associated business risk. Its geographical advantages such as abundant raw materials, vast land areas, abundant sunlight and good wind direction are also essential to create a successful clean energy business. 

There are two main areas Japanese companies will focus on for overseas expansion – the demonstration phase and overseas sales promotion phase. Some Japanese companies will be active in both areas and develop not only manufacturing but also sell electricity, operation and maintenance services.

The potential of the Japanese general trading houses to invest in Australian clean energy projects deserves some mention. Generally, they do not possess their own technologies. Rather, they proactively coordinate the participation of several companies with complementary technologies to enter overseas markets. Japanese trading houses also have plenty of funds to invest, thereby making them key players.

Carbon Capture and Storage (CCS)

Japanese companies possess a competitive advantage in CO2 separation technologies. Mitsubishi Heavy Industry’s chemical absorption method is the best commercial technology in the world.  Australia has serious aspirations to be a world leader in the development and deployment of CCS technologies as part of its efforts to provide global climate change solutions.

Japanese companies possess a competitive advantage in CO2 separation technologies. Mitsubishi Heavy Industry’s chemical absorption method is the best commercial technology in the world.  Australia has serious aspirations to be a world leader in the development and deployment of CCS technologies as part of its efforts to provide global climate change solutions.

Photovoltaic (PV) power

Japanese companies are global leaders for PV technology in terms of both market share and technology efficiency. The Japanese Government plans to expand PV power generation 40-fold by 2030 and again bolster the nation’s competitiveness in this field through concrete assistance measures including feed-in tariffs and PV subsidies for households. Japan’s PV technology and experience with large-scale generation plants is a natural fit to Australia’s Solar Flagship Program.

Japanese companies are global leaders for PV technology in terms of both market share and technology efficiency. The Japanese Government plans to expand PV power generation 40-fold by 2030 and again bolster the nation’s competitiveness in this field through concrete assistance measures including feed-in tariffs and PV subsidies for households. Japan’s PV technology and experience with large-scale generation plants is a natural fit to Australia’s Solar Flagship Program. 

Fuel cells

Stationary fuel cells are gaining attention as the technology reaches deployment stage. Fuel cells for vehicles, on the other hand, require additional time to commercialise. The quality of Japanese fixed fuel cells technologies is world-class for both polymer electrolyte fuel cells and solid oxide fuel cells. The market for stationary fuel cells is very small at present, but is expected to grow as the cost of the technology decreases. 

NAS batteries

NGK Insulators Ltd is the only company in the world with the technology to mass produce sodium-sulfur (NAS) batteries. The main purpose of large batteries is to level the electricity load between day and night. At present, Australia does not experience large fluctuations in the electricity grid load because of the flexibility coal-fired power affords. Thus, at present NAS batteries are given a lower priority but this is expected to change in the future. 

Solar thermal

Solar thermal power generation has been put to practical use in the US, however Japanese technology is still in the research phase. Solar thermal generation requires expansive land with long daylight hours – characteristics that can readily be found in Australia but not Japan. Japan should consider demonstration trials of its remarkable beam-down type condensing method in the favourable conditions of Australia.

Solar thermal power generation has been put to practical use in the US, however Japanese technology is still in the research phase. Solar thermal generation requires expansive land with long daylight hours – characteristics that can readily be found in Australia but not Japan. Japan should consider demonstration trials of its remarkable beam-down type condensing method in the favourable conditions of Australia.

Wind power

Introduction of wind power technologies into the Japanese domestic market has been hampered by the nation’s changeable wind gusts and typhoons. As a consequence, Japan’s technologies still lag behind European firms.  However, Japan dominates in the production of small-scale wind generation equipment of 10kW or less. Leading Japanese residential housing construction companies such as Sekisui House and Daiwa House are partnering with manufacturers to include small-scale wind turbines as part of their sustainable green designs. Scope exists for such products to be introduced to the Australian market.

Bioethanol

Second-generation bioethanol technology utilises bacteria and micro-organisms to convert cellulose from waste material into ethanol. Japanese technology, like that of the US, is superior to other countries. It is expected that Japanese bioethanol companies will focus on overseas expansion in the coming years as the Japanese domestic market is limited by geographical characteristics and difficulty to secure large amounts of cheap raw materials. This technology holds tremendous potential for Australia.

Lithium-ion (LIB) batteries

LIB batteries are regarded as the best batteries for use in cellular phones and laptops. In the future, LIB will also be utilised in vehicles. The technical capability of Japanese makers is highly regarded, with a 60 per cent share of the global market. As the cost of LIB decreases, Japanese companies are expected to focus on overseas expansion for stationary batteries. As LIB production requires large amounts of rare metals, Australia offers many advantages as a location for LIB manufacturing.

LIB batteries are regarded as the best batteries for use in cellular phones and laptops. In the future, LIB will also be utilised in vehicles. The technical capability of Japanese makers is highly regarded, with a 60 per cent share of the global market. As the cost of LIB decreases, Japanese companies are expected to focus on overseas expansion for stationary batteries. As LIB production requires large amounts of rare metals, Australia offers many advantages as a location for LIB manufacturing.

Geothermal

Japan currently has 535MW of geothermal power installed, however high development cost has curbed the growth of new geothermal capacity. Japan has conducted geothermal R&D for a considerable time and utilises both binary and steam methods. However, there are few companies with the hot dry rock technology that is required to utilise Australia’s geothermal resources, so there may only be niche opportunities in this sector.

Japan currently has 535MW of geothermal power installed, however high development cost has curbed the growth of new geothermal capacity. Japan has conducted geothermal R&D for a considerable time and utilises both binary and steam methods. However, there are few companies with the hot dry rock technology that is required to utilise Australia’s geothermal resources, so there may only be niche opportunities in this sector.

Biomass

Biomass is seen as a more stable source of new energy as it is less affected by natural weather conditions, but the cost of power generation is still higher than that of existing sources like coal. Sources of biomass in Japan are spread over a wide area, which leads to costs associated with collection, distribution and storage, so depending on the geographical area, there may be opportunities for biomass supply from Australia to enable Japanese power producers to meet the targets of the RPS.

Competitive environment

Many companies in Japan plan to accelerate expansion into overseas markets because opportunities in the Japanese clean energy market have become limited. 

The Japanese market is constrained by an ageing population and limited land space available for new energy projects. These domestic limitations as well as the rapid uptake of clean energy technologies in other markets are incentive for Japanese companies to look beyond their own borders in order to maintain profitability.

Globserver is viewed as one of the prime candidates for Japanese corporate expansion into overseas business. The USA, EU, China and India are more promising than Australia in terms of market size. However there are a significant number of well-established competitors in the USA and EU. Similarly, China and India have a tendency to protect their domestic industries, thus it is harder to make inroads into these countries. In this sense, Australia holds an important position in the minds of Japanese corporations looking offshore.  As a developed country with fewer competitors than other markets, Australia is perceived as attractive. 

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