Map out a clear strategy to attract big investments

Huge amounts of funds are required for capital investment and research and development to realize a decarbonized society. It is important to draw up a strategy that will motivate companies to invest, leading to the growth of the Japanese economy.

The government has unveiled the interim report of its Clean Energy Strategy. Prime Minister Fumio Kishida directed his government to formulate the plan, which presents policies to achieve the goal of net-zero greenhouse gas emissions in 2050. The government intends to finalize the strategy by the end of this year.

In the interim report, the government presented an estimate of the amount of public and private sector investments required to promote decarbonization, which is predicted to cost a total of ¥150 trillion over the next decade or so until the mid-2030s. As of 2030, ¥17 trillion per year will be required, which is at least about three times the present amount.

The investment targets are wide-ranging. Among sectors in which expectations are high, ¥2 trillion will be invested in solar power generation and other renewable energy facilities, ¥300 billion in supply networks for hydrogen and ammonia, which do not emit greenhouse gases when burned, and ¥600 billion in the construction of storage battery plants.

However, the interim report only lays out estimated figures and challenges. Specific measures to encourage companies to invest must be clearly stated.

For example, hydrogen can be used for thermal power generation, but its production costs are much higher than those of existing fuels such as natural gas. There are many cases in which investors are hesitant to invest because of doubts about profitability, according to the report.

The interim report states that the government will consider a system that focuses on boosting initial investments. An effective framework that makes it easier for companies to make investment decisions is essential.

The United States, European Union nations and China are among a growing number of countries around the world that have announced massive fiscal spending on decarbonization. To ensure Japan does not fall behind other countries in technology development and related businesses, the government must provide proactive support.

The interim report also clearly states that nuclear power generation should be “utilized to the maximum extent possible.” However, it is unclear at what pace nuclear reactors will be restarted.

Of the 27 nuclear reactors for which applications have been submitted to resume operations following the 2011 Great East Japan Earthquake, only 10 have been restarted. According to the government’s Strategic Energy Plan, nuclear power generation will account for 20% to 22% of total power generation in fiscal 2030, but it will be difficult to achieve this goal unless all 27 reactors are in operation.

Restarting nuclear reactors that do not emit carbon dioxide would be a viable option that would allow the government to make use of existing facilities. It is hoped that the government will present a clear path to promote the restart of nuclear reactors while responsibly ensuring their safety.

With fuel prices soaring amid the crisis in Ukraine, momentum is growing in Europe and elsewhere for the development of new nuclear plants. Nuclear power generation is also important in terms of energy security. The Japanese government should not shy away from discussions on the construction of new reactors.

(From The Yomiuri Shimbun, May 18, 2022)