Japan's new energy plan
27 February 2025
Introduction
On 18 February 2025, the Japanese government approved the 7th Strategic Energy Plan (the "Plan"), setting an updated course for Japan's future energy policy with a primary focus on achieving carbon neutrality by 2050. The Plan continues to emphasise the integration of energy and industrial policies to ensure a stable energy supply, economic growth, and a transition to decarbonisation.
Key Components of the Plan
The Plan is structured around 6 main points, addressing the following aspects of energy policy in Japan:
- Learning from the Fukushima Accident
- Changes in the Energy Landscape since the 6th Strategic Energy Plan
- Core Principle: S+3E
- Policy Direction towards 2040
a. Energy Conservation and Non-Fossil Fuel Conversion
b. Expansion of Decarbonised Power Sources and Grid Development
c. Securing and Supplying Next-Generation Energy
d. Securing and Supplying Fossil Resources
e. Carbon Dioxide Capture, Utilisation and Storage (CCUS) and Carbon Dioxide Removal (CDR)
f. Securing Important Minerals
g. Energy System Reform
h. International Cooperation and Coordination - Innovations for achieving carbon neutrality
- Communication with All Levels of the Nation
Outlook for 2040
One of the notable features of the Plan is the outlook for Japan's power source composition in 2040, which sets ambitious targets for renewable energy. Renewable energy is projected to account for 40-50% of Japan's power generation by 2040, which would surpass thermal power as the largest power source. Specific goals include achieving 23-29% from solar, 4-8% from wind, 8-10% from hydro, 1-2% from geothermal, and 5-6% from biomass energy. This would mark a significant shift from Japan's current power source composition, which consists of 68.6% from thermal power, 22.9% from renewable energy, and 8.5% from nuclear energy.
Notably, the Plan removes the previous commitment to reduce nuclear dependency as much as possible, facilitating a goal to achieve around 20% from nuclear power by 2040 (up from the current 8.5%) with approximately 30 to 40% from thermal power.
Fossil Fuels and LNG
The Plan acknowledges that fossil fuels remain the primary source of Japan's energy supply. It outlines what is deemed to be a realistic transition strategy while ensuring a stable supply through resource diplomacy, domestic and overseas resource development, diversification of supply sources, crisis management, and the maintenance and resilience of the supply chain. Notably, LNG-fired power generation is highlighted as a crucial component of such transition.
Offshore Wind
The Plan continues to underscore the critical role of offshore wind energy in achieving the nation's carbon neutrality goals by 2050. The Plan sets ambitious capacity targets, aiming for 10 GW by 2030 and 30-45 GW by 2040, including floating offshore wind farms.
To support these targets, the Japanese government plans to be actively involved from the initial stages of development, including site surveys and securing grid connections, to streamline the process and reduce risks for developers. A centralised approach is proposed, where the government will conduct preliminary surveys and environmental assessments to expedite project development. The Plan also emphasises the need for robust grid infrastructure to support the integration of offshore wind energy, including the development of inter-regional transmission lines and enhancement of grid capacity.
Support for Hydrogen Society
The Plan strongly supports the construction of the hydrogen supply chain, in line with the Hydrogen Society Promotion Act enacted in May 2024. Hydrogen and its derivatives (including ammonia, synthetic methane, and synthetic fuels) are identified as key to achieving carbon neutrality. The Plan also promotes the introduction of biofuels and aims to enhance the business and financial environments to secure investment in decarbonised power sources. This includes developing and utilising cutting-edge technologies, improving data centre efficiency, and supporting the renewal of advanced equipment in factories.
CCUS
The Plan has underscored the importance of Carbon Capture, Utilisation, and Storage (CCUS) for achieving energy security, economic growth, and decarbonisation. CCUS is deemed essential for decarbonising sectors that are difficult to electrify or convert to hydrogen. The Plan mentions that it will support investment in CCS projects, technology development for cost reduction, and the development of storage sites. Carbon Dioxide Removal (CDR) is also acknowledged as necessary to offset residual emissions, with efforts focused on environmental improvement, market creation, and technology development acceleration.
Challenges and Opportunities
This marks the first time that renewable energy is envisaged to surpass thermal power in Japan's energy plan, reflecting the government's ambition to achieve carbon neutrality by 2050. However, the Plan acknowledges the challenges of renewable energy, such as variability, intermittency, and regional disparity of generation, and the need for grid expansion, storage, and demand response measures to ensure stable and efficient utilisation.
For example, to achieve the Plan's goals, solar power capacity will need to triple over the next 15 years. This necessitates significant expansion of grid infrastructure, development of storage and smart grid technologies, and promotion of distributed and self-consumption models. The Plan also calls for enhancing the competitiveness and innovation of the domestic solar industry, as well as promoting international cooperation and exports.
Accordingly, the Plan is notable in highlighting traditional energies and nuclear energy as being central to achieving the Plan's goals through its ability to achieve a stable supply of energy, self-sufficiency in technology, and cost-effectiveness.
The Plan also acknowledges the critical role of thermal power in meeting immediate electricity demand and supporting the stability of the power grid. Despite its greenhouse gas emissions, thermal power is recognised for its significant role in current supply, balancing output fluctuations from renewable sources, and maintaining grid stability. The Plan refers to maintaining necessary generation capacity while reducing inefficient coal-fired power generation.
Conclusion
The 7th Strategic Energy Plan underscores Japan's commitment to a sustainable and carbon-neutral future by 2050, with a pronounced emphasis on expanding renewable energy sources. Solar power is anticipated to become the predominant renewable energy source by 2040, reflecting the government's ambitious targets. This Plan opens up substantial opportunities for investment in renewable technologies, fostering innovation, and promoting international collaborations.
However, the Plan also recognises the indispensable role of traditional energy sources, including nuclear, LNG and thermal power, in ensuring a stable and reliable energy supply during the transition period. The successful implementation of the Plan will require overcoming significant challenges, such as the development of extensive infrastructure, the establishment of robust regulatory frameworks, and active public engagement. Addressing these challenges will be crucial for Japan to achieve its long-term energy and environmental goals.
