Last week, Japan’s Ministry of Economy, Trade and Industry (METI) released a draft of its upcoming 6th Strategic Energy Plan which included major changes to the FY2030 power generation mix targets.
Under the draft proposal, the share of fossil fuels in the mix will nearly halve, falling from 76% in 2019 to 41%, which will have significant ramifications for coal, LNG and oil demand.
In response to the announcement, Wood Mackenzie principal analyst Lucy Cullen said: “Japan’s announcement is the latest in a series of bold climate statements following the country’s net zero pledge in October 2020.
“The revised draft targets are in line with Japan’s ambitious 2030 emissions reduction target of 46% from 2013 levels, which was upgraded in April 2021, and it follows a week after Japan’s G7 European peers announced their own transformational ‘Fit for 55’ package.
“Included in the draft targets is a significant increase in renewable and nuclear shares of the generation mix and hydrogen/ammonia is mentioned for the first time. Our current outlook for renewables is a 30% share by 2030, so the proposed 36% renewables share is a stretch. It can only be possible with additional government support.
“Perhaps the most critical and uncertain component of the draft is the nuclear target. METI continues to back nuclear and maintains the previous 20-22% target. Safety regulations, on-going opposition and rising costs continue to plague restarts to date and make this an incredibly challenging target to meet. The outlook for restarts remains highly risked in our opinion.
“Over optimism on nuclear targets has potential to undermine the government’s plans to cut fossil fuels share. Under the revised targets, fossil fuels fall from their dominant position in the energy mix today to 41% by FY2030, a significant drop from the 56% share projected in previous government targets. If met, and we remain sceptical, this represents up to about 10 Mt decline in LNG demand, compared to the previous target.
“With greater emphasis on emission reduction reflected in the revised targets, how the government balances between generation costs and emission concerns will determine relative shares of coal and LNG and the role each plays in offsetting a likely missed nuclear target.”
Source: Wood Mackenzie