Housing Japan’s Bryan Kipping discusses with Silverbirch Associates Founder and CEO, Patricia Bader-Johnston, Japan’s ambitious plans to achieve a 46% reduction in greenhouse gas emissions by 2030 and to become carbon-zero by 2050. Facing several impediments to attainment, such as financing, lobbying, and supporting infrastructure, Patricia assesses Japan’s current position and ways forward in the following excerpt of a much broader conversation.
Japan’s Energy Transition
Japan is in a unique position to show great leadership. It is not a producer of fossil fuels, and as a buyer of fossil fuels, Japan is subject to price fluctuations.
The country has been hindered by a nuclear fixation for decades. This, in turn, has slowed the development in other renewable areas; nuclear energy cannot solve every problem. Moreover, for Japan to meet its current energy ambitions, it would need to turn on twenty-seven of its nuclear reactors.
As an alternative, there has been a lot of activity in hydrogen and ammonia as decarbonising solutions. Notably among these are ammonia for it’s storage capabilities and hydrogen as a solution to transition away from coal. Japanese trading companies have been acquiring the necessary partnerships and moving towards a hydrogen future. There is also an unprecedented opportunity for other forms of renewable energy to gain traction in Japan.
Solar Energy’s Role in the Transition
One report suggests Japan ranks third globally in terms of solar production. Solar installation does however have limitations. Solar panels occupy what would otherwise be an idyllic landscape; this is a shared sentiment about having too much solar, competing with agricultural land.
So why isn’t there more rooftop solar in Japan? Over the years, there have been issues with the due diligence on over 50 solar projects. In an assessment in one part of Japan, after reviewing ~128 public building rooftops, only ~28 of them were structurally sound enough to support such solar projects. There is also the issue that Japanese buildings are not designed to last. Privately held buildings also face an insurance gap, where one may not be able to get roof insurance. Additionally, if the owner changes, they may also opt to have the panels removed.
Another challenge is the funding of these projects. Banks look at bankability and due diligence factors that preclude modern technologies. No matter how established the technology, scientifically proven or thoroughly tested it is in other countries, unless it has a 20-year track record in Japan, it is not considered insurable. The financial system appears to preclude the adoption of renewable technology.
Japan must also consider competitive factors, with Japanese manufacturers taking priority. Even if there is a cheaper or more efficient foreign competitor, these built-in barriers make it difficult to finance these projects; renewable companies tend to be younger. Moreover, the banking industry does not really have a concept of project finance for renewables in Japan.
All these barriers prevent superior solar technologies from entering the Japanese market.
46% reduction in greenhouse gas emissions by 2030 and carbon-zero by 2050 is an ambitious target. Is it likely to happen?
Yes. About 17 nuclear reactors are operational again. Decommissioning a nuclear plant is a lengthy and costly endeavour. What would be the replacement? Hydrogen? A vast majority of the hydrogen acquired or developed in Japan is called grey hydrogen. It still requires fossil fuels to make the catalyst. The use of grey hydrogen is not much greener than using fossil fuels itself.
SDG (Sustainable Development Goals) Commitment
Treating a much more robust financial and investment discussion around climate mitigation in terms of commitment, what started as just the publishing of social reports has now morphed into integrated reporting. Currently, 95% of Japanese Keidanren (Japan Business Federation) members are issuing integrated reports, gaining more traction in the past ten years, from a time when there were none. Next year, of the 95% of companies issuing integrated reports (that factor in the climate risk and the mitigation), there is a possibility of those Keidanren members joining the TCFD (Task Force on Climate-related Financial Disclosures) metrics, which would be a step beyond the GRI (Global Reporting Initiative) metrics they are currently using.
Japan remains sensitive to reputation backlash; it wants to be seen as a global leader. As a result, there is pressure amongst Japanese trading companies to shift to hydrogen. Foreign partnerships are gaining momentum, and fossil fuel partnerships overseas are shoring up. Moreover, Japan announced at COP-26 its commitment to end deforestation and PKS (palm kernel shell), which is the fourth-largest cause of deforestation.
The trading companies are at the heart of the transition to blue and, hopefully, green hydrogen.
Carbon Capture and Storage
Japan could play a bigger role in carbon capture and storage because they have marine resources and algae methodologies. However, the problem is that Japan is not nurturing enough innovators in the renewable energy sector in the same way that they are nurturing digital entrepreneurs, where almost all the venture capital is going.
There is a need to support modern technologies that make it possible for smaller, more agile companies to get into the small energy community’s carbon capture. These contribute not only to community development but the creation of jobs and help with aging society issues in the world. The point is the policymakers in Japan are largely missing the point, and that is one area that needs to be explored and discussed more.
Check out the full interview YouTube video!
