Publication date: Dec 23, 2024

As 2024 draws to a close, we’ve taken stock of some of the key developments shaping Japan’s energy market this year. While progress continues, there’s still much work to be done to achieve the nation’s ambitious decarbonization goals.

Read the full article below to uncover the key developments and milestones that shaped Japan’s energy market in 2024. Year in review 2024 (December 2024)

Policy

Government publishes the 7th Strategic Energy Plan draft
Dec 2024

The Ministry of Economy, Trade, and Industry (METI) and the Agency for Natural Resources and Energy (ANRE) unveiled the draft of Japan’s 7th Strategic Energy Plan (SEP), Japan’s comprehensive policy framework that outlines the country’s long-term energy strategy. The 7th SEP’s 2040 energy mix aims to have renewable energy at 40–50%, nuclear power 20%, and low-carbon thermal power 30–40%. Power demand is expected to grow by 20% compared to 2022, reaching 900 billion–1.1 trillion kWh, driven by electrification and decarbonization.

The draft departs from the “renewables-first principle” to avoid over-reliance on specific sources, emphasizing a balanced energy mix and stable thermal power capacity while reducing output from inefficient coal plants. It also removed the phrase “minimizing dependence on nuclear power” for the first time since the 4th Plan, signaling a shift in nuclear policy. It outlines replacing decommissioned reactors with next-generation ones at existing sites. The draft will be finalized after adjustments with the ruling party and public consultation, with Cabinet approval expected in February 2025.

The Ministry of Environment calls for “transformative change” in the 6th Basic Environment Strategy
February, 2024

The 6th Basic Environment Strategy published by the Ministry of Environment (MOE) highlighted the urgent need to tackle the environmental crises. The strategy calls for a “transformative change” towards a circular economy that balances economic growth with sustainability. Key proposals include promoting sustainable production and consumption, expanding clean energy sources, investing in environmental education, and implementing sustainability disclosure requirements.

Japan to set “GX 2040 Vision” to accelerate decarbonization efforts
Ongoing, 2024

The Japanese government initiated discussions to formulate the national strategy, “Green Transformation (GX) 2040 Vision,” targeted for completion within FY2024. The plan will focus on industrial restructuring, location strategy, and strengthening economic security. Key goals include developing a GX supply chain for critical sectors like semiconductors, steel, and energy while advancing digitalization to enhance competitiveness. To address high domestic energy costs and encourage local investment, the strategy promotes large-scale production and consumption of clean energy, reducing transport losses and supporting regional optimization. The plan aims to counter low productivity and wage stagnation while fostering domestic manufacturing.

Prefectural/Renewables

Miyagi Prefecture introduces the Renewable Energy Regional Symbiosis Promotion Tax
April 2024

In April 2024, Miyagi Prefecture introduced the Renewable Energy Regional Symbiosis Promotion Tax on large-scale renewable projects exceeding 0.5 hectares specifically for solar, wind, and biomass installations developed in forested areas. The tax rate is roughly 20% of operating profits and is based on their power output and the applicable Feed-in Tariff (FIT) price. Exemptions are available for facilities located within promotion zones if certified as Regional Decarbonization Promotion Projects. As of now, there has only been one case of exemption for an onshore wind project. Other prefectures, particularly those neighboring in the Tohoku region, have expressed interest in implementing a similar tax.

LTDA

The first Long-Term Decarbonization Auction showed BESS is booming
April, 2024

Japan’s first Long-Term Decarbonization Auction (LTDA) showcased the growing importance of battery energy storage systems (BESS), which secured 1.1GW of the 4GW target, alongside significant allocations for nuclear, pumped hydro, and other technologies. The pay-as-bid auction model provided developers with 20-year incentives, promoting long-term investment and offering revenue stability amidst competitive bidding and fluctuating market conditions. 

The second LTDA auction is expected in January 2025 with several significant changes. The total auction capacity will increase to 5GW, with a 2GW cap for “Safety Investment for Existing Nuclear Power” to encourage upgrades and new nuclear capacity. Energy storage, including pumped hydro and BESS, will have a procurement target of 1.5GW, split evenly between 3-6 hour and 6+ hour durations. LNG thermal power will also see expanded procurement targets, with extended commissioning deadlines to address supply chain concerns. Additionally, the government plans to enhance incentives for less popular categories, such as ammonia and hydrogen co-firing thermal upgrades, through improved remuneration and market price mechanisms. Year in review 2024 (December 2024)

NFCs

Tracking information available for Non-Fossil Certificates
August 2024

The tracking of Non-Fossil Certificates (NFCs) underwent a significant enhancement, with all certificates now including detailed information such as power type, plant name, location, and operational age – data that was previously limited to FIT-certified NFCs. This upgrade aligns with the RE100 initiative, providing greater transparency for businesses committed to achieving 100% renewable energy targets. While this enhanced system enables clearer traceability, price differentiation between NFCs based on attributes like power source or location has not yet become evident. However, as preferences for specific types of power generation, such as solar, wind, or nuclear, become more pronounced, we may see these distinctions influencing pricing in the future. Year in review 2024 (December 2024)

ETS

Japan advances emissions trading system for full-scale launch in FY2026
Ongoing, 2024

The Cabinet Secretariat has continued to work on the design of Japan’s emissions trading system (ETS) for its full-scale launch in FY2026. The ETS, currently in a trial phase with the GX League, involves industries accounting for over 50% of Japan’s greenhouse gas emissions. The plan is to include companies with direct CO2 emissions exceeding an average of 100,000 tons during FY2023–FY2025, affecting an estimated 300–400 firms. Emission allowances, calculated using sector-specific methods, will be assigned annually and traded on a centralized exchange managed by the GX Promotion Organization to establish a fair carbon price.

BESS

BESS enabled for grid charging and early connection under new Rules
Ongoing, 2024

METI is introducing measures that position BESS as a critical component in the transition from FIT to FIP systems, enhancing grid stability and battery efficiency. Key initiatives include expanding grid charging options for batteries connected to FIP power sources and granting pre-FY2024 certified FIP projects access to grid charging. Starting April 2025, an interim measure will allow early grid connections for BESS operators who adopt self-funded equipment to manage charging during peak periods, alleviating grid capacity constraints. Additionally, updates to the priority dispatch rule, set for FY2026–FY2027, will significantly favor FIP projects, reducing curtailment rates for BESS-supported solar and wind under the FIP scheme compared to FIT projects. Year in review 2024 (December 2024)

Offshore Wind

New rules to improve fairness in offshore wind auctions
July, 2024

The third offshore wind auction concluded in July, targeting two promotion zones off Aomori and Yamagata prefectures, with results anticipated as early as December 2024. New rules are expected to be implemented in future auctions to improve fairness, from the current situation where developers must bid at a “zero-premium level” of JPY 3/kWh to remain competitive. METI has proposed a method to reduce point deductions for bids slightly above JPY 3/kWh, allowing developers to secure modest premium income while maintaining financial stability. While earlier commercial operation dates remain a priority, future auctions will offer a more balanced framework for project viability.

CCS & Hydrogen 

Japan passes CCS Business Bill and Hydrogen Society Promotion Bill
May, 2024

On May 17, 2024, Japan’s parliament enacted two key laws to support its net-zero emissions goal by 2050: the Carbon Capture and Storage (CCS) Business Act and the Hydrogen Society Promotion Act. The CCS law establishes a licensing framework for CO₂ storage and transportation, introduces safety regulations, designates storage areas, and holds businesses liable for leaks or accidents. The Hydrogen Act creates a comprehensive system to promote low-carbon hydrogen, including government policy planning, a business plan approval system, subsidies to offset cost gaps with traditional fuels, and regulatory exemptions to encourage innovation. Together, these laws aim to advance decarbonization by supporting clean hydrogen supply chains and CCS technologies as critical components of Japan’s energy transition.

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