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Energy Highlights: Listening to Key Persons
Japan's Current Energy Mix and Issues for Achieving Carbon Neutrality (Chapter 3)

In this series of articles, under the theme of achieving carbon neutrality, we invite experts who are working on energy issues in various fields to engage in a discussion with Tatsuya Yamada―Division General Manager of Hitachi's Energy Business Division, which is working on policy proposals relating to electric power and energy―and introduce trends in each industry. Through these discussions, we consider carbon neutrality from various angles, such as the formulation of a process and vision for achieving carbon neutrality, initiatives aimed at achieving it, and environmental development.

In the chapter 1 and 2, we discussed the challenges of energy supply and demand in Japan and overseas, and the energy mix needed to achieve carbon neutrality. In the chapter 3 and final chapter, they touch on policy issues, discussing what kind of energy systems should be built in order to achieve the best energy mix that Japan should aim for, and how we should proceed with restarting nuclear power plants.

Achieving the best energy mix for the system as a whole

Yamada: Listening to what you have said so far, I feel that each type of energy comes with its own characteristics and challenges, and that it is very important to mix them well, considering the best mix ratio, and optimize the system as a whole, including the power grid. But that is also the hardest part.

Ishikawa: Yes, that's right. People often say that, if we go to 100% renewable energy, then we don't need fossil fuels, or we don't need nuclear power. But that's not realistic. The same goes for those who say that with nuclear power we don't need fossil fuels anymore.

When I first joined the Ministry of International Trade and Industry (now the Ministry of Economy, Trade and Industry), I was actually assigned to the Coal Department. So, I was well aware of the advantages of coal. But on the other hand, I didn't think that coal would be enough to cover Japan's energy needs. For one thing, cars don't run on coal. (Laughs) I think we need to make a calm and collected decision on this, and search for the best energy mix.

Yamada: In the case of solar power, too, there is a prospect of increasing it in the future, but it is very difficult to make adjustments, because we don't want to produce too much, and the amount of power generated is unstable to begin with.

Ishikawa: In the future, I think it would be better to store and use solar power locally, rather than putting it on the grid. In industry parlance, it's called "ironing out the wrinkles" (shiwatori)―but it's not easy to make adjustments for the unstable amounts of power generated by solar and wind power. If it is difficult to funnel solar power from tens of thousands of households onto the grid. It would be more efficient to store all of that electricity in batteries.

Yamada: In order to achieve such a thing as an energy system, the power of political policy is essential. The problem now is that, while the ratio of renewable energy is increasing due to the market mechanism, more and more of it is flowing onto the grid. Naturally, the amount fluctuates greatly because it is renewable energy, but the more the ratio of these power sources increases, the more difficult it will be to control. In other words, from the perspective of stable supply and security of electric power, it is not enough to simply be cheap at that time. Hitachi also has the technology to control this electricity well and contribute to a stable supply, but there are currently no rules, so there is nothing that we can do about it.

Ishikawa: I think it would be a good idea to create a (policy) system and delegate full authority to the transmission divisions of the ten major electric power companies that own the grid. It works best to leave it to people who properly understand the situation on the ground. In addition, policy-making committees should include the companies that are developing these technologies and companies that are operating electric power facilities. It will be more efficient and less likely to cause accidents if the people who create and operate these technologies on the ground take a leading role in determining the rules. I think it is very problematic that is not the case at present.

Stabilize power generation business by improving the business environment

Yamada: In that sense, I think it is now more necessary than ever to improve the environment for the power generation business. In other words, even if rules are established for the restart and expansion of nuclear power plants, the technology is in place, and public sentiment follows, I am concerned about whether it will be possible to properly recoup investments as a business. I think that the viewpoint of improving the business environment for stable management of power generation businesses in the liberalized market has not been discussed much so far.

For example, in the future, if we start with cheap power supplies and gradually put incorporate them into the grid at that time, it may become difficult to operate nuclear power plants even if the restart proceeds. Nuclear power is a kind of power supply that is suitable for stable operation at a constant output, but power generation cannot be stopped simply because it is not necessary at that time. I believe that it is essential to have a system that utilizes market mechanisms while also making good use of nuclear power for stable supply.

Power generation capacity of nuclear power plants in operation
Source: Created based on the Sixth Basic Energy Plan, materials from the Agency for Natural Resources and Energy (ANRE), estimated capacity is assumed to be 70% of nuclear power plant capacity utilization rates

Ishikawa: I think it is necessary to properly decide―by law―how to improve the business environment, including how to handle nuclear power generation. It is also very important to stand on economic principles. Japan has to rely on nuclear energy because it is a fossil fuel importer. If the US and China can produce natural gas and coal in their territories and territorial waters, there is no need to rush ahead with nuclear energy in terms of price. In Japan's case, nuclear energy can be considered relatively cheaper in terms of security and procurement costs. So, in actual fact, in the Kansai Electric Power and Kyushu Electric Power areas, where nuclear plants have already been restarted and are operating at full capacity, electricity rates are already lower than in other areas.

Yamada: There are many misunderstandings about economic efficiency.

Ishikawa: It is true that there are high hopes for solar and wind power, but as I have said many times, these are unstable power sources that fluctuate, and it is difficult to use them as the main source of power. If you really want to increase renewable energy, you have to be serious enough to put all the electricity obtained from renewable energy sources into storage batteries. Otherwise, I don't think that things will progress.

Yamada: Currently, pumped-storage hydroelectric power has the highest energy storage capacity. It can cover about the power output of one nuclear reactor.

Ishikawa: As an aside, it was actually pumped-storage hydroelectric power generation that saved us in the electricity supply and demand crunch on March 22, 2022. Due to the earthquake off the coast of Fukushima Prefecture on March 16, the operation of thermal power plants in the Tohoku and Tokyo areas was temporarily suspended, and there were concerns about power outages due to the drop in temperature. But (power companies) were able to overcome the situation using pumped-storage hydroelectric power generation. You only realize that spare capacity is important when you don't have any.

Yamada: Also, in order to utilize renewable energy, it is essential to invest in the development of wide-area power grids, which I mentioned at the beginning of this discussion. A scenario has been drawn up in which an investment of 6?7 trillion yen is required to expand the grid, but you think that this is not enough, right?

Ishikawa: It depends on the price of materials, but as you can see from examples such as the Olympics and Expo 2025, I think it will be a certain percentage more than that estimate. Government budgets always have a tendency to be underestimated. (Laughs.) Well, there is an aspect that by keeping estimates low, we can make our policies more flexible. In any case, I believe that it is essential to approach energy policy in a balanced manner, including security and spare capacity, while standing firmly on sound economic principles.

Long-term outlook for wide-area grid development (base scenario)
Source: Created based on Organization for Cross-regional Coordination of Transmission Operators,
Japan (OCCTO) long-term policy for wide-area grid system (master plan for wide-area grid)

The balance between nuclear, thermal, and renewable energy is important

Yamada: In terms of solving energy problems and achieving carbon neutrality, I felt (from our discussion) that it is not enough to simply apply technologies, but that it is also important for us to stand on economic principles and play a major role in policymaking.

Ishikawa: Well, carbon neutrality is a slogan for promoting both technological innovation and economic growth. Simply reducing CO2 emissions is not enough to achieve that dream. And if we going to achieve carbon neutrality while standing on economic principles, there are nuclear power plants that are ready to be restarted at any time, so there is no reason not to restart them.

I don't think it's enough to throw it all at the NRA, and it won't work unless the national government and municipalities where these nuclear power plants are located take the lead in getting them restarted. Ultimately, the Prime Minister's decision will be crucial. In fact, it was then Prime Minister Yoshihiko Noda who restarted Reactors 3 and 4 at Oi Nuclear Power Plant in Fukui Prefecture in 2012.

Another complaint I would like to make is that there is a difference between "regulation" and "control." Regulatory bodies are supposed to be the ones that get things moving. Control, on the other hand, is to show that something should not be done, as illustrated by various control laws. That's why I think it's strange that regulations are acting as a hindrance, and that things that should be getting restarted are not.

Yamada: Even if you have good technologies, there are many cases in Japan where you will fall behind in business due to regulations.

Ishikawa: Well, that's because Japan is precedent-oriented, so we don't try to be the first to do anything. In the case of France, they do it because no one else does it. (Laughs) This is a phrase I heard directly from a French person when I was an official. I would like Japan to learn from France.

Also, Japan tends to be biased toward idealism, but I think we should put cost theory at the forefront. I hope that the Japanese public will support politics that make judgements based on that without ridiculing them. On the other hand, it is the role of politicians to explain the need for nuclear power and persuade the public to go along with it. Japan can only develop through a balanced use of nuclear power, renewable energy, and thermal power generation. I would like as many people as possible to learn that having all three of these working together will make normal life possible.

Yamada: Today, we had a discussion that went right to the heart of energy policy. Thank you for spending time with us today.

Kazuo Ishikawa
Policy analyst
1965: Born in Fukuoka
1984-1989: Department of Resource Development Engineering, Faculty of Engineering,
The University of Tokyo
1989-2008: Ministry of International Trade and Industry
(Ministry of Economy, Trade and Industry / METI)
(In charge of electric power and gas market liberalization, renewable energy, environmental assessments, rationalization of domestic coal mining, industrial safety, industrial finance and SME finance, installment sales and credit, reform of the national civil service system, etc.)
(Since his retirement, he has served as a member of the Cabinet Office Council for Regulatory Reform and Council for Administrative Reform work groups, a senior researcher at the Tokyo Foundation for Policy Research, a visiting professor at the National Graduate Institute for Policy Studies, a specially appointed professor at Tokyo Women's Medical University, and a visiting professor at Senshu University.)
2011: CEO, Institute for Industrial Growth and Social Security Policy (IIGSSP)
(Since then, he has served as an officer and advisor to many companies and organizations.)
September 2020-September 2022: Temporary Expert Advisor, Minister's Secretariat, Ministry of Economy, Trade and Industry
April 2021-: Regional Promotion Advisor, Suttsu and Kamoenai, Hokkaido
April 2022-: Presenter, Canary (Kazuo Ishikawa's Canary of Crisis), BS TV Tokyo
● Currently, he also appears on many other TV, radio, and online programs as a commentator and quiz show respondent.
● His business ventures include brain education for infants, elementary school students, and seniors, and various venture capital investments.
● He is also author of books such as The Right Way to Stop Nuclear Power Plants (PHP Shinsho), etc.

Tatsuya Yamada
Division General Manager, Energy Business Planning & Management Division,
Energy Business Division, Hitachi, Ltd.
Vice President, Institute of Electrical Engineers of Japan, and Regular Member,
The Japan Society of Public Utility Economics.
Tatsuya 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.

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