Publication date: Feb 6, 2025
January 2025 Monthly Newsletter
Friends and Colleagues, January 2025 Monthly Newsletter: The Latest News In The Japanese Power Market
Recently, the European Union’s Copernicus Climate Change Service released a study showing that the global average temperature in 2024 was 1.6 degrees Celsius higher than in the pre-industrial era and that it is highly likely that the 1.5 degrees Celsius target of the Paris Agreement will be regularly exceeded in the 2030s. This reminds us, once again, of the urgent need to realize a low-carbon society as soon as possible.
In this month’s newsletter, we look into the government’s vision for clustering energy-intensive industries near decarbonized power sources. We also highlight the recent release of the national power demand forecast, in which data centers and semiconductor factories play significant roles in increasing the power demand. Finally, the newsletter concludes with METI’s new scheme to promote FIP projects with more generous subsidies.
Japan Aims to Cluster Industrial Centers Near Decarbonized Power Sources
At the end of 2024, Japan’s government held a Green Transformation (GX) Executive Council meeting to draft the “GX2040 Vision,” which outlines a long-term strategy for decarbonization and industrial policy. It includes a policy to cluster power-intensive industrial centers, such as data centers and semiconductor factories, near decarbonized power sources, such as renewable energy and nuclear power.
To encourage companies to invest in regions rich in decarbonized power sources, several promotional measures, including subsidies, tax incentives, and electricity subsidies, will be considered. These will be finalized after 2025, and support measures from local governments will also be considered. There has recently been heavy investment in the energy intensive semiconductor and AI industries in Japan.
Data Centers and Semiconductor Plants Will Increase Power Demand
The Organization for Cross Regional Coordination of Transmission Operators (OCCTO) has released a national demand forecast for the period from FY2025 to FY2034. OCCTO predicts that maximum power demand will increase due to the construction of new data centers (DCs) and semiconductor plants and is expected to exceed 7 million kW in FY2034 (6.16 million kW for DC and 0.99 million kW for semiconductor plants).
The average growth rate nationwide for FY2024-2034 is projected to be a 0.4% increase in peak power demand and a 0.6% increase in total demand. The average rate of change in maximum electricity demand by area is expected to be negative only in the Chubu and Shikoku areas, down 0.2% and 0.8%, respectively. Total electricity demand is only expected to be negative in Shikoku, with an estimated 0.9% fall.
METI to Promote FIP by Increasing Subsidies
The Ministry of Economy, Trade and Industry (METI) plans to provide more generous support for solar and wind power generation businesses certified under the Feed-in-Premium (FIP) program. Under the FIP, renewable energy power producers are required to match their power generation plans with actual power generation results. From FY2025 onward, the Ministry plans to increase the amount of the “balancing cost” grant (from 1 yen per kW to 2 yen per kW), which is allocated to cover the cost of meeting this requirement.
The grant amount for balancing costs, which covers the cost of developing power generation plans and forecasting the amount of electricity generated and weather conditions, will decrease as the year of operation progresses. METI has set a target of increasing the FIP ratio from the current 2% to 25% of all FIT and FIP power sources, and it intends to increase the amount until the fiscal year in which the ratio reaches 25%.
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