Japan is currently undergoing a reorganization of its energy sector with simultaneous developments occurring in nuclear, oil, and solar energy markets. The concurrency of these endeavors in both the public and private sectors reflects a prevailing concern for Japan’s short-term and long-term energy security.

In 2011, Japan underwent sweeping changes in government policy, reflecting a sharp shift in public opinion over nuclear energy. The Center for Strategic and International Studies notes that prior to the Fukushima accident in March 2011, existing energy plans aimed to increase the share of nuclear power from 30% to 50% of Japan’s total energy source. All fifty of Japan’s nuclear power plants have since been systematically taken offline due to government safety concerns and widespread popular outcry.

Policy reversal

Japanese Prime Minister Yoshihoko Noda approved the reopening of two nuclear reactors on 16 June. The move was made in an effort to preempt power shortages in the country’s second-largest city of Osaka, as demand is expected to peak in mid-July and early August, according to officials from Kansai Electric Power Company. Kansai predicts that the discrepancy between demand and supply of electricity will reach around 15% during the summer. The adverse impacts of an energy shortage would range from concerns over public health to the influence it might have over the state’s economic recovery.

Around 500 protesters gathered outside Noda’s home in Tokyo to challenge his turnabout and express their concerns over the safety of the nuclear reactors. Polls taken in May by the Pew Research Center show that 70% of Japanese people support reducing Japanese reliance on nuclear energy.

The governors of the Shiga and Kyoto prefectures as well as the mayor of Osaka city have voiced conditional acceptance of the nuclear restart, stating that the reactors’ usage should end once the fear of energy shortages diminishes. Meetings planned for July will draft a new energy plan for the country, and Noda may well initiate discussions about long-term provisions for phasing out nuclear energy.

Continual reformulation of the market

This summer, Japan looks to shrink the costs of its energy while simultaneously working to preempt blackouts. This is considered an important priority in view of last summer’s $35 billion worth of fossil fuel imports – increased to offset the reduction of nuclear power – which contributed in large part to Japan’s 2011 trade deficit.

In light of Japan’s heavy dependence on imported energy – only 16% is produced domestically – there have been recent moves to find new avenues to purchase energy more cheaply. The existing trade partnership between Russia and Japan may soon be strengthened as talks proceed about the planned expansion of Russian oil sales via the East Siberia-Pacific Ocean pipeline. As the pipeline is expected to reach the East Sea/Sea of Japan this November, demand in the Japanese market of oil purchasing will continue its rebound following a dip after the March 2011 earthquake. Japan is currently the biggest buyer of oil from the nearby Russian port of Kozmino.

Legislation passed on 20 June will enable the Japanese government to provide guarantees for vessels importing crude oil from Iran. The policy is meant to circumvent EU sanctions which block EU insurance companies from insuring Iranian oil. Japanese demand for oil is such that the sanctions, effective 1 July, would prove problematic as 9% of Japan’s oil was sourced from Iran in 2011.

Push towards renewable energy

Cushioning the government’s actions in nuclear and crude oil, Japanese Industry Minister Yukio Edano authorized a program of incentives for the sale of renewable energies on 18 June. Of particular note is solar energy, since the incentives are likely to push Japan into the position of the second-largest producer of solar energy behind Germany. For utility companies, the system of feed-in tariffs will set prices for solar energy at 42 yen per kilowatt hour for the next 20 years. Japanese utility companies will be required to buy this type of electricity at an increased cost of three times the conventional nonrenewable energies currently used. For businesses and consumers, the program will result in higher costs, but also the ability to sell the electricity produced from solar panels to the government. Research group New Energy Finance predicts a threefold increase in solar capacity in 2013, which implies solar infrastructure manufacturers will benefit significantly.

Renewable energy targets are set between 25% and 35% by 2030 and will presumably be met in large part by the rapid enlargement of the solar energy sector. Likewise, Prime Minister Noda has affirmed his commitment to phasing out nuclear power, which infers other types of energy will inevitably become more prevalent. Meeting the targets will necessitate a rapid expansion of the scale of production of these energy sources, as renewable energy accounted for only 1.6% of Japanese energy prior to March 2011. The question remains as to whether the subsidies will spur sufficient development to compensate for the recent and dramatic drop in the production of nuclear energy.

Lessons from Germany

Although Germany was the largest producer of renewable energy amongst G20 nations in 2011, the German government still faces several challenges with its plans for expanding the national energy grid. In particular, many critics question the feasibility of adhering to its projected phase-out deadline of 2022. Like Japan, Germany produces a minority of its energy domestically – 30% in 2011 – and must rely upon imported energy. Their push for increased renewables has been relatively successful in comparison to other European countries and the U.S., as they remain on target for a 70% reduction in CO2 emissions by 2050.

However, stagnant progress on the energy grid front resembles the Japanese about-face on nuclear in that such patterns demonstrate a subordination of stated environmental objectives to the management of the troubled economy. Due to the negative global economic outlook, both Japan and Germany may find it difficult to prioritize expensive forays into the development of renewable energy sources in the immediate future.