Publication date: Dec 4, 2024 Predictions for Japan’s 7th Strategic Energy Plan: Balancing Ambitions for Decarbonization Amid Rising Demand

The Strategic Energy Plan (SEP) is a medium to long-term strategy established by the Japanese government led primarily by the Ministry of Economy, Trade and Industry (METI), to outline the fundamental direction of its energy policy. It addresses key challenges and sets goals related to energy supply and use within Japan while proposing measures to achieve these objectives. The SEP is formulated based on the Basic Act on Energy Policy, enacted in 2002. The document is an essential reference among the various stakeholders and not only illustrates the Japanese government’s visions but also has a significant impact in creating clear direction in each energy sub-sector.

The plan aims to achieve the three main pillars of energy policy, namely, 1) energy security, 2) economic efficiency, and 3) environmental sustainability. In addition, ensuring safety has also become an important focus since the 2011 Great East Japan Earthquake. The SEP covers a range of themes related to the energy sector, including energy mix targets, sector-specific evaluation and plans (e.g., renewable energy, nuclear power, etc.), decarbonization agenda, energy efficiency, and international energy cooperation, among others.

The SEP has been revised every few years since its first publication in 2003, and the latest 6th Strategic Energy Plan was published in October 2021. The 6th SEP was distinct from the previous plans as it was published after the Japanese Government announced its ambition to reach carbon neutrality (CN) by 2050, and a new interim target to reduce GHG emissions by 46% in 2030, compared to 2013 levels. The 6th SEP anticipated an increased risk of insufficient supply capacity in the near future as the capacity factor for thermal power plants falls, equipment ages, and services become suspended or discontinued due to declining profitability. The 6th SEP included policy directions towards 2030 to ensure optimal siting for new renewable developments with an emphasis on harmonizing projects with local communities, expanding existing solar photovoltaic and onshore wind capacity, and achieving a ratio of renewable energy in the energy mix of 36-38% in 2030. 

What lies ahead? 

The forthcoming 7th Strategic Energy Plan is expected to outline a revised path for the country’s energy mix in 2030, reflecting the need to reconcile its ambitious decarbonization goals with emerging challenges and opportunities. Rising energy demand from data centers, cloud services, and semiconductor manufacturing has prompted the government to revise its earlier projections of declining energy consumption, leading to a potential upward adjustment in total demand forecasts. In response, the 7th SEP is likely to establish more pragmatic milestones, extending its interim targets beyond 2030. This approach underscores Japan’s cautious yet committed strategy to balancing energy security with its ambitions for decarbonization.

Renewables, where the current target is 36-38% of the energy mix by 2030, will likely remain a central focus. Japan aims to significantly reduce its reliance on fossil fuels by 2040 with ambitious goals to make renewables the backbone of its energy system, complemented by nuclear power and other presently novel carbon-neutral technologies. However, due to the variable nature of renewable energy, it is necessary to have clear strategies for investment in energy storage solutions and grid infrastructure enhancements to enable renewables to fulfill this critical role in Japan’s energy landscape. It is also likely that we will see new interim renewable energy targets set for 2035 and 2040, establishing milestones towards Japan’s goal of CN by 2050. These targets are expected to feature a continued expansion of renewables, including advanced solar and hydrogen technologies, and the commencement of new offshore wind projects alongside enhanced grid infrastructure and storage solutions to support their integration. 

Nuclear power, which has been projected at 20-22% of the energy mix by 2030, may stay at a similar level in the new plan, though this would require securing license extensions for the existing plants and multiple nuclear reactor restarts ahead of 2030 (to note, the share of nuclear power generation as of FY2023 was 8.5%). However, even with these extensions, nuclear capacity is projected to decline significantly after 2042, and without any new builds, its share in the energy mix will fall. Therefore, we may see dialogue for the building of new nuclear plants in future iterations of the SEP. The narrative surrounding nuclear power may also shift depending on public sentiment, regulatory frameworks, and advances in technology within the nuclear sector as well as others. New technology, including small modular reactors (SMRs), carbon capture and storage (CCS), and hydrogen, hold promise as long-term solutions but are unlikely to substantially impact the energy mix by 2030 due to their early stage of development.

As mentioned, fossil fuels are expected to decline in Japan’s energy mix as the country advances toward its decarbonization goals while reducing reliance on imported energy sources. However, they are likely to remain a significant component and contribute to over half of the total energy supply. This continued reliance stems from the need for coal and LNG to bridge gaps caused by the slower-than-anticipated deployment of renewable energy, the intermittency of those renewables, and the slow restart of nuclear power.

The 7th SEP represents a critical juncture for Japan as it seeks to balance its ambitious decarbonization targets with the practical realities of energy demand and infrastructure needs. Predictions for Japan’s 7th Strategic Energy Plan: Balancing Ambitions for Decarbonization Amid Rising Demand