Shulman Advisory

COVID-19, Tokyo Olympics 2020, and Energy

On March 24, 2020, Japanese Prime Minister Shinzo Abe and International Olympic Committee President Thomas Bach officially announced the postponement of the Olympic and Paralympic Games Tokyo 2020 to next year. With the postponement pushing the Games into the background, the actual state of the coronavirus outbreak here in Japan has started to dominate the news.

Questions of how the country can best function under a partial lockdown – or perhaps even a full state of emergency – and cope with the overburdening of the medical system likely to accompany it are starting to get the attention they deserve.  Alongside those major questions, the Japanese energy industry is seeing the effect of the virus to an extent as well.

The most obvious of effect, thus far, has been the deferral of consumer payment deadlines by many electricity and gas providers. There were also some noteworthy public statements by utility companies about the measures they’ve put in place in order to assure unimpeded operations in all eventualities.

Against this backdrop, it’s easy to forget how recently other questions of energy system resilience were put front and center here in Japan.

#1: Climate Change and Grid Resilience

As we discussed here earlier this year, extended power outages caused by unusually ferocious typhoons last autumn have drawn attention to the fragility of the electricity grid. As a result, the Ministry of Economy, Trade and Industry (METI) has put draft legislative amendments on the National Diet’s 2020 agenda aimed at increasing the resilience of the electricity supply system.

The draft legislation proposes many important changes, including:

  • Requiring grid operators to create and submit for review by the government their plans for intercompany cooperation and coordination in case of disasters
  • Requiring grid operators to report the status of electricity supply restoration by area and by household
  • Encouraging the deployment of more distributed energy generation which can function independently to serve its locale on an islanded distribution microgrid when transmission is knocked offline

Addressing the climate change behind the increasing frequency and intensity of natural disasters afflicting the world in recent years is far less straightforward.

As the feed-in-tariff system for solar implemented after the Fukushima accident tapers off, the levelized cost of renewables in Japan remains higher than hoped for. That said, it’s headed in the right direction.

New coal plants are still under construction, largely because having a diversity of fuel sources is viewed as a matter of national survival due to Japan’s lack of domestic primary energy sources.

Japan’s official goal is to reach a 22% to 24% share of power generated through renewables by 2030.  We’ll be keeping a close eye on policy and regulatory shifts that affect the goal. We’ll also be publishing our analysis of how Japan’s FiT system has functioned in practice later this year.

#2: Cybersecurity

With virtually everything that has an on/off switch – and many things that don’t – connected to the Internet, it goes without saying that cybersecurity has come to play a central role in keeping modern societies functioning.

The need for enhanced cybersecurity in Japan has drawn a new level of attention in the context of planning for the 2020 Tokyo Olympics and the high likelihood of cyberattacks during the games.

Some Japanese utility companies have gone so far as to partner with Israel Electric Corporation, which reports having fended off an average of 11,000 “suspected cyber events” per second in 2019, to secure their infrastructure during the Olympics.

Although the Olympics have been postponed, the event will be an equally appealing target for cyber attacks when it is finally held. In the meantime, COVID-19 seems to have attracted an increase in cyberattacks against healthcare institutions worldwide.

The massive increase in people working from home also creates new vulnerabilities.  Although yet to be seen, there’s concern that the impact of this could be particularly pronounced in Japan,  where a culture that values long hours at the office has slowed many companies in adjusting their IT infrastructure and their employee training to adapt to the need to be able to work remotely and securely.

#3:  Infectious Disease Outbreaks

Arriving at the current moment, COVID-19 is drawing attention to the dependence of modern society on energy, particularly electricity.   There’s a vibrant discussion underway about both threats and opportunities the pandemic may present for the transition to clean energy worldwide.

It’s also worth carefully considering the threat that the pandemic presents to the continuous supply of electricity and other vital services, and what’s being done to assure continuity of operations, both here in Japan and abroad.

Although virtually all relevant companies and organizations in developed economies seem to have continuity of operations plans in place, some are planning for the eventuality that COVID-19 may tax them beyond what their existing plans are meant to handle.

In this context, it will be interesting to see if a lower requirement for on-site staffing – meaning less vulnerability to epidemics – as compared with many conventional types of power generation will be added to the list of merits of renewables.

Stay Tuned!

If you are interested in learning more about how the COVID-19 crisis is affecting the energy industry both in Japan as well as around the world, make sure to check our new COVID-19 and the Energy Industry page, where we gather the best articles and resources on the topic from around the web.

We also plan to analyze the developing situation and its impact on the industry as more data becomes available, so make sure to subscribe to our newsletter to be the first to know.

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