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Energy Highlights: Listening to Key Persons
Initiatives for the Achievement of Carbon Neutrality (Chapter 1)

Diverse initiatives are currently underway to establish a carbon neutral society. However, a mountain of problems that require innovation lie in the way of achieving carbon neutrality. In this new series, Listening to Key Persons, Tatsuya Yamada, a Hitachi, Ltd. official in charge of policy proposals and new business development, asks experts and people in the field about problems that must be resolved for the establishment of a carbon neutral society. Yamada looks deep into how these key people view the existing problems and what actions they are taking to solve them.

In this Vol.1, Yamada asked University of Tokyo Vice President Hiroshi Ohashi, who has been involved in the planning of various policies related to energy issues, including the Japanese government's clean energy strategy, to discuss the materiality of the issues faced by society through industry-academia cooperation and the need to use digital technologies.

Activities of H-UTokyo Lab. Contributing to Policy Planning

Yamada:H-UTokyo Lab, Hitachi and University of Tokyo Joint Research, was established six years ago in 2016 based on the enthusiasm of the late Hiroaki Nakanishi, a former Executive Chairman of Hitachi, Ltd., and Makoto Gonokami, the former President of the University of Tokyo. H-UTokyo Lab. has achieved many things since then, including Version 4 of the Proposal “Toward Realizing Energy Systems to Support Society 5.0” released in March 2022, which it had worked on as a part of its activities. In the course of these interviews, I had several discussions with Professor Ohashi as well.

A discussion at a forum sponsored by H-UTokyo Lab.
(left: late former Hitachi Chairman Hiroaki Nakanishi, second from right: University of Tokyo Vice President Hiroshi Ohashi)

Ohashi:It's hard to believe that six years have passed already. The complete liberalization of electric power retailing began in 2016. We can say H-Tokyo Lab. started in a symbolic period of power system reforms.

Yamada:As you said, since its launch, H-Tokyo Lab. has worked to develop a vision for the power industry as the retail power market is deregulated and the structure of the industry changes against the backdrop of the population decrease, asking what kinds of technologies should be developed and how investment to strengthen the power infrastructure should be encouraged. Subsequently, H-Tokyo Lab. found the need to look not only at electricity but also at energy as a whole, including heat and gas, through the studies it advanced. Based on its awareness of that, the lab has expanded its field of vision beyond the reform of energy system suppliers to reform on the demand side, involving companies, ordinary households and communities.

H-UTokyo Lab.

In these conditions, the Japanese government declared in 2020 that it would reduce national greenhouse gas emissions to zero and achieve the carbon neutrality of the country by 2050. The declaration has made initiatives involving all stakeholders necessary. More new problems have emerged, including steep rises in energy prices and the tightening of the power supply-demand balance due to the recent situation in Ukraine. Those problems have created a pressing need to create a vision for the future of energy systems, that considers energy security and economic efficiency in particular.

Ohashi:The use of renewable energy began to increase with the launch of the feed-in tariff (FIT) system in 2012. In this environment, H-UTokyo Lab. initially discussed matters including incentives to promote investment in the power grid. We can say these initiatives have born fruit, such as the plan for the High Voltage Direct Current*1 transmission system to transmit power generated in the Hokkaido and Tohoku regions to the Tokyo metropolitan area, a consuming region, and the Revenue Cap*2 system conceived as a reform of transmission charges. In other words, policies have reflected the discussions at H-UTokyo Lab. Our society has started to implementing results of H-UTokyo Lab.

NordLink Wilster Converter Station (Germany)

Yamada:I feel that H-UTokyo Lab. has achieved significant results in its approaches to technology and the promotion of investment and policy planning.

Ohashi:I agree. However, the lab has not yet solved many problems in the area of investing and the economy. The number of suspended or decommissioned power generation facilities actually increased, tightening the supply-demand balance as a result of efforts to curb investment in power generation facilities following the deregulation of the power market. Fuel prices are also soaring due to reduced upstream investment in petrochemical resources in line with the global trend toward decarbonization and reduced reliance on Russia due to the Ukrainian situation. How we overcome this phase is an urgent issue. Naturally, increasing power conservation and other countermeasures are necessary both on the supply side and the demand side. H-UTokyo Lab. is establishing multiple working groups and repeatedly discussing and addressing these diverse issues.

In this way, the lab has worked on issues that are a half step ahead of the times. I feel the lab has linked itself to policy planning and grown into a presence viewed as superior in various circles because it has discussed these issues based on reality.

Yamada:Professor Ohashi, what is your personal evaluation of the initiatives taken by H-UTokyo Lab. from your position in academia?

Ohashi:I think Hitachi is connecting with University of Tokyo researchers in various fields, and, in a sense, playing a role in offering them a place to foster multi-disciplinary knowledge through cross-disciplinary cooperation and collaboration between the humanities and the sciences. Further, Hitachi is providing them with diverse research resources including an array of data through its extensive off-campus networks.

I also want to praise H-UTokyo Lab. for examining power systems in Japan from a broad public viewpoint, instead of the perspective of one company. I think that is why we can take part in the lab as researchers in a neutral position, and the people around us have considered our activities there to be trustworthy.

*1
High-voltage direct-current transmission system
HVDC (High Voltage Direct Current) is a system to deliver electricity using a high voltage direct current This system enables large-volume, long-distance power transmission with minimal loss. The system is also suited for connecting systems using different frequencies. The system is attracting attention as a solution supporting the conversion to renewable energy as a main power source and the establishment of a decarbonized society by means including the connection to large renewable energy systems and long-distance power transmission to high-demand regions.
*2
Revenue Cap system
This is a new transmission charge system that is planned to be introduced in April 2023. Its goals are to increase the cost efficiency of general power distribution business operators and promote the investment that is necessary to strengthen the power grid. The system enables general power distribution business operators to flexibly set transmission charges within a revenue cap for a fixed period the Japanese government establishes for them following the examination of the business plans and the like that they submit. In other words, it is a system for incentivizing business operators by permitting them to post the results of their cost reductions as profit. The system can be called an initiative that contributes to the transition to renewable energy as a main power source.

Huge Jumps Needed to Achieve Carbon Neutrality

Yamada:Japan has adopted carbon neutrality in 2050 as its slogan. What do you think the current conditions are in the country?

Ohashi:Carbon neutrality is the idea of balancing greenhouse gas emissions with greenhouse gas absorptions in 2050. We must take several steps to achieving this.

Nationally determined contribution (NDC) is one of them. It means reducing greenhouse gas emissions by 46% from their fiscal 2013 level by 2030. We must be ready to jump forward considerably, including innovation to achieve this target. First, we must discontinue inefficient coal-fired power generation that emits large amounts of CO2. We must expand investment in decarbonized power sources that emit no CO2 at the point of power generation and supply while guiding thermal power plants that have taken no measures to reduce CO2 emissions toward the exit. We have been asked to set a course for ultimately shifting to decarbonized power sources while securing diverse power sources, including renewable energy, by taking steps including the mixed firing of ammonia and hydrogen using liquefied natural gas (LNG). For this, we must examine the pace of initiatives and the best route based on various factors, including economic efficiency, the speed of innovation and international systems such as the Carbon Border Adjustment Mechanism (CBAM).

Of course, uncertainties exist as well. Global resource procurement changes, market trends and exchange rated fluctuate in response to the latest situation in Ukraine, impacting Japan heavily because imports are about 88% of the primary energy the country consumes. Procuring oil and coal from Russia has become difficult already. Taking these points into consideration, we must generate more electric power using domestically produced fuels in the future, instead of relying on overseas energy. I think we must keep the practical use of nuclear power in mind as one solution for these problems. For that purpose, we are asked to advance programs including emergency evacuation plans by securing the understanding and cooperation of host communities after firmly guaranteeing the safety of nuclear power.

Figure: 【Comparisons of primary energy self-sufficiency ratios among major nations (2019)】
Source:10 questions for understanding the current energy situation in Japan's Energy (2021 Edition) published by the Ministry of Economy, Trade and Industry (METI)
(Source: Estimates for 2019 from IEA “World Energy Balances 2020”, except for data for Japan, which are confirmed values of FY 2019, derived from “Comprehensive energy statistics of Japan”, Agency for Natural Resources and Energy. *The ranks in the table are those of the 36 OECD member countries.)

Yamada:As Professor Ohashi said, efforts to achieve carbon neutrality in 2050 do not immediately advance from the present situation in a straight line. Major reforms in areas including the structure of industry, production processes and consumer confidence are necessary for the achievement of carbon neutrality. All of us must discuss what we should do to realize the transition to carbon neutrality, viewing these efforts as our own. Those of us on the corporate side must think ahead and advance technological development in a way that suits the transition process as well, backcasting with 2050 as our starting point.

The scenario approach is one method that H-UTokyo Lab. has adopted for doing these things. In the approach, two or more scenarios are established by considering unpredictable changes and technologies are developed with those changes in mind when matters are considered over the long term. In other words, multiple scenarios are established and the technologies required to respond to them them are prepared, instead of focusing on just one technology or terminating its development based on an assessment of current conditions.

Ohashi:Achieving carbon neutrality in 2050 is probably impossible by just accumulating the technologies around us. H-UTokyo Lab. adopted backcasting and scenario analysis so that all of its members could share an out-of-the-box perspective free from existing frameworks.

Putting imagination to work to picture the Present based on the Future

Yamada:In Version 4 of the proposal, H-UTokyo Lab. presented two scenarios ― the first one in which diverse forms of energy including nuclear power are used and the second one in which only renewable energy is used ― as the conditions under which carbon neutrality is achieved. In fact, the lab studied several other scenarios in the course of preparing the proposal. The situation in Ukraine changed greatly in the subsequent period, too. I think H-UTokyo Lab. must revise its scenarios in the future, taking these changes in the conditions into consideration.

Ohashi:I think that scenarios can play a role in the development of people's awareness that carbon neutrality is not an extension of the present conditions but that its achievement requires repeated jumps. In other words, the value of scenarios is their ability to change people's perceptions. We can say that the government announced drastic reduction figures like 46% precisely because its mind-set has changed.

Yamada:I agree. I also feel that people's perceptions, including people in the government, are changing. Achieving a reduction rate of 46% in 2030 by simply accumulating figures from here will be difficult. I think setting firm targets and thinking about the things that we should do by backcasting from the targets is extremely important for achieving the difficult goal of carbon neutrality.

Ohashi:What's more, Japan must think about achieving carbon neutrality in the context of its relationship with the world, instead of achieving the condition exclusively. Japan must first build a framework for the achievement of carbon neutrality in Asia as a whole by cooperating with its Asian neighbors. Contributing to value chain development by providing cutting-edge decarbonization technologies in the course of these efforts can be considered an important role for Japan, too.

The achievement of carbon neutrality may be painful for citizens. This is another point we must consider. Power rates are already rising. The could continue to increase, depending on the future energy mix. How we ensure the stable energy supply is an important issue, too, as we increase the amount of renewable energy that we use.

The risk of heatstroke will rise this summer if air-conditioning is not used properly during abnormal weather that frequently occurs in unpredictable ways. Moreover, home care has advanced. There are many people recuperating at home using medical devices. Those conditions have made power failures a human life issue. We cannot tolerate things like power failures due to a power shortage due to the suspension of all thermal power plants. Handing the global environment over to future generations is extremely important. However, we must advance matters, balancing the burdens imposed on the present generation. Continuing a trend from this spring, the balance of power supply and demand is predicted to be tight this summer and this winter. We cannot allow this tightrope situation to continue indefinitely.

What kind of world awaits us on our way to carbon neutrality? How many burdens must citizens endure in this process? What kind of world will we seek to reach at the end of the process? We must use our imaginations to visualize the way that our future should be. I think that not only presenting mere scenarios, but also strengthening initiatives to change people's perceptions and ways of thinking based on a clear vision are important.

H-UTokyo Lab.
The University of Tokyo and Hitachi, Ltd. established H-UTokyo Lab. in 2016 by creating a new industry-academia collaborative creation scheme for the goal of realizing the “Super Smart Society” (Society 5.0) proposed by the Japanese government.
The Laboratory is advancing research and development projects through a new way of creating and transmitting a vision and solving problems that represents a drastic change from the conventional approach of industry-academia cooperation for solving problems.
Further, information on the joint projects as well as their achievements will be actively shared with society through various channels including open forums.

Hiroshi Ohashi
Vice President, The University of Tokyo, Professor, the Graduate School of Public Policy, the University of Tokyo and Professor, the Graduate School of Economics, the University of Tokyo.
Ohashi graduated from the Faculty of Economics, the University of Tokyo. He also graduated from Northwestern University in the United States in 2000 (earned a Ph. D. in economics).
Ohashi assumed his present positions in 2022 after serving as an assistant professor at the Sauder School of Business, The University of British Columbia in Canada and an associate professor at the Graduate School of Economics, the University of Tokyo. Ohashi specializes in industrial organization theories and competition policies.
He has served as a member of various committees, including the Advisory Committee for Natural Resources and Energy and the Electricity and Gas Market Surveillance Commission.
He has received include the Miyazawa Kenichi Prize (Fair Trade Institute) and the Enjoji Jiro Prize (Japan Center for Economic Research).

Tatsuya Yamada
Division General Manager, Energy Business Administration Division and Business Planning & Strategy Division, Hitachi, Ltd.
Yamada joined Hokuriku Electric Power Company in 1987, and was seconded to The Institute of Energy Economics, Japan in 1998 before joining Hitachi, Ltd in 2002.
He has engaged in tasks involved in the planning of strategies for energy-related businesses, and became Director of the Management Planning Office, the Strategy Planning Division in 2014, Senior Manager of the Business Planning Division, the Energy Solution Business Unit in 2016, General Manager of the Business Planning Division, the New Age Energy Business Co-create Division in 2019, and assumed his present positions in 2020.