Sustainability and Energy
Attractive Markets

The overall market size of wind energy generation in Japan is growing. The cumulative power generation capacity from wind energy was 5,213,000 kW at the end of 2023, with 2,626 installed units. The new installed capacity during 2023 (487,000 kW) is approximately 2.4 times greater than that in 2022 (200,000 kW), representing steady increase (Figure 6).

In particular, the Japanese government has emphasized the importance of offshore wind energy generation in its “Basic Policy for Green Transformation” and “The 6th Strategic Energy Plan” and is actively promoting these initiatives.

As result of these factors, offshore wind energy generation has been steadily increasing (Figure 7). Similar to onshore wind energy, the majority of high-potential areas for offshore wind energy are in the northern part of Japan (Hokkaido and Tohoku region)¹⁷, with continuous development of these areas expected in the future. At the end of December 2023, there were 57 offshore wind energy generation plants at 10 sites, out of which six were full-scale offshore wind energy and four were semi-offshore wind energy (offshore wind energy accessible from coastal areas)¹⁸. The majority of newly introduced plants in Japan are by foreign manufacturers, including Vestas (Denmark) and Siemens (Germany)¹⁹, and it is expected that wind turbines will increase in size, resulting in a significant increase in cumulative energy output.

The government has set a goal of offshore wind power projects of 10 million kW by 2030 and 30 to 45 million kW by 2040. Additionally, in 2020, under its first offshore wind energy industry vision, the government announced a policy of designating zones of around 1 million KW per year for a period of 10 years²⁰. In this manner, the government has designated renewable energy promotion zones to form offshore wind energy generation projects and has issued a public call for offshore wind farm operators to participate. In the same year, the first round of public calls for operators in three promising zones was held²¹. In 2023, a second call for applications was made in four new potential zones, and a joint consortium comprising of RWE Offshore Wind Japan Murakami-Tainai K.K. (with German offshore wind manufacturer RWE as the parent company), Mitsui & Co., Ltd., and Osaka Gas Co., Ltd., was selected as an implantable offshore wind energy producer in Niigata Prefecture²². As a result of the above-mentioned, government support for private companies has led to increased cooperation between European and Japanese companies and growing momentum for collaboration, with more companies entering the Japanese market. (Figure 8).

In addition, the 6th Strategic Energy Plan mentions the development of direct current (DC) transmission system to transmit electricity from high-potential areas such as Hokkaido, Tohoku, and Kyushu regions to large consumption areas as a policy to promote offshore wind energy²⁴. Japanese offshore wind market is expected to continue to expand in future due to initiatives by public and private sectors, such as the opening of specific regions to offshore wind energy, active collaboration and participation of private companies, and development of transmission systems.

The biomass energy generation market in Japan is in the growth phase. Prior to the introduction of FIT in 2012, the cumulative amount of biomass energy generation was 2.3 million kW; however, as of June 2021, the cumulative amount of biomass energy generation, including the amount certified under the FIT, was 10.36 million kW, and this figure is on an increasing trend²⁵. Furthermore, although biomass accounted for only 3.7% of the overall energy source composition in 2022, its share has been increasing every year and is expected to continue to grow (Figure 9).

As for the prospects of introducing biomass energy generation in 2030, a large share is expected to come from wood-based sources, with 6.26 GW coming from wood-based sources and 0.21–0.24 GW from methane-fermentation gas-based sources²⁷. Biomass is attracting attention as a regionally distributed energy source with significant ripple effects on improving disaster resilience, economy, and employment. On the other hand, biomass is an energy source that requires fuel, and fuel costs account for the majority of energy generation costs. For this reason, the Japanese government has introduced a policy to promote the implementation of FIT and FIP for biomass from the perspective of cost recovery and to promote initiatives to stimulate market trading. Some examples are the selection of suitable tree species as fuel wood by relevant authorities, demonstration testing of forestry methods suitable for the region, and development of quality standards for wood biomass fuels, aiming at increasing the supply of domestic wood biomass fuels²⁸. The Japanese biomass energy market is at a growing stage compared to other energy markets, and with expansion over the long term, it is expected that foreign companies will enter this market, which will accelerate the market’s growth. (Figure 10).

Solar energy accounted for 9.2% of energy source composition in 2022, the highest share among all renewable energies, and the amount of electricity generated was 92.6 billion kWh in the same year, representing a continuously increasing trend (Figure 11).

The potential in terms of volume of solar energy generation facilities is assumed to be 455,205 MW for “building systems (government offices, public facilities, housing, etc.)” and 1,009,836 MW for “land systems (disposal sites, agricultural land, degraded agricultural land, water, etc.)”. In addition, it is estimated that the Kanto region, Aichi, Osaka, and other urban areas have the highest potential for building systems, while Hokkaido, with its large land area, is considered to be the highest potential area for land systems³¹. The number of solar energy projects, particularly in residential applications below 10 kW, has been increasing in recent years in response to surging fuel and electricity prices³².

In the 6th Strategic Energy Plan, future policies on solar energy include the use of energy management systems (HEMS/BEMS) in homes and buildings, practical application of next-generation solar cells such as perovskite solar cells that can be installed on walls, and the development of basic technologies to improve performance of next-generation solar cells through collaboration between industry, academia, and government³³.

Meanwhile, reducing the cost of energy generation is a challenge, and foreign companies with cost advantage are expected to continue dominating the Japanese solar energy generation market (Figure 12).

Japan is a pioneer in acquiring knowledge of hydrogen and ammonia energy generation and in the development of infrastructure in marine transport technology. It is working to establish and expand the commercial supply chain with the aim of establishing its presence in the global market. In particular, efforts are being made to strengthen industrial competitiveness by identifying nine fields in five categories, including hydrogen supply, fuel cells, and use of hydrogen compounds, as priority areas where the market is large and Japanese companies are considered to have a technological advantage³⁵.

From the 2017 Basic Hydrogen Strategy to the 2020 Green Growth Strategy and the 6th Strategic Energy Plan in 2021, the position of hydrogen is becoming increasingly important in Japan. The target for the introduction of hydrogen in the Green Growth Strategy is up to 3 million metric tons by 2030 and around 20 million metric tons by 2050³⁶. In addition, the Basic Hydrogen Strategy revised in 2023 added a new target of 12 million metric tons of hydrogen (including ammonia) for 2040³⁷.

Development trend in hydrogen includes initiatives in power-to-gas technology, which absorbs fluctuations in the energy output of natural variable power sources such as solar energy and converts it into hydrogen for storage. A demonstration project for hydrogen production using a 10,000-kW alkaline water electrolyser, one of the world’s largest, is also underway³⁸.

Regarding hydrogen mobility, fuel cell buses and fuel cell forklift trucks were launched in market in 2016. In addition, technological development of large fuel cell trucks began in 2020, and several automobile and transportation companies began demonstration operations in the Kanto and Chukyo regions in FY-2022, and mass production is scheduled to begin after FY-2025. Moreover, the advanced development of hydrogen stations started in 2013, and 181 hydrogen stations (including those under construction) were opened by the end of May 2023³⁹.

In hydrogen energy generation, the development of technology to control the high combustion rate of hydrogen is progressing, and in 2018, the world’s first 100% hydrogen-fuelled gas turbine energy generation (1 MW) to supply heat and power to a city block was achieved⁴⁰. In this manner, a wide range of research and demonstration projects have been carried out (Figure 13).

Japan has the second-highest number of hydrogen-related patents after the European Union (EU), accounting for 24% of the total number of hydrogen-related International Patent Family (IPF) inventions published as of 2023⁴².

Future technological developments are expected to effectively utilize fossil fuels in clean form by producing hydrogen and ammonia from surplus renewable energy sources such as electricity and by combining them with CCUS (Carbon Capture, Utilization, and Storage) technology⁴³. Hydrogen-related businesses are still in the technology development and demonstration stage worldwide, and more foreign companies are expected to enter the market in the future. (Figure 14). The Japanese government is planning to promote legislation, including the establishment of a hydrogen-related safety regulation system, along with support for the development of supply infrastructure such as tanks and pipelines and large-scale investment aid using blended finance⁴⁴, making the market more active in the future.

In the "Basic Policy for the Realization of Green Transformation," the storage battery industry was identified as one of 16 priority areas for promoting green transformation investment, and the direction of green transformation and measures to promote investment were summarized⁴⁶. The demand for storage batteries is expected to grow for both in-station and in-vehicle applications. The Storage Battery Industry Strategy, formulated in August 2022, sets the targets of establishing a domestic manufacturing base of 150 GWh/year by 2030, securing a global manufacturing capacity of 600 GWh/year, and the full-scale commercialization of all-solid-state batteries. Liquid-based lithium-ion batteries are currently the mainstream; however, considering safety, operating range, and recharging time, the development of all-solid-state lithium-ion batteries is expected to lead as the next generation storage batteries⁴⁷.

As of April 2023, Japan's current storage battery production capacity is around 20 GWh⁴⁸. Earlier, the Japanese companies held the top global share in the lithium-ion market; however, in recent years, they have faced a decline in market share due to the expansion of Chinese and South Korean manufacturers⁴⁹. In order to overcome the situation, the Japanese government is promoting investment support measures related to storage batteries. In the future, the government plans to invest approximately 3 billion USD* (450 billion JPY) from the public and private sectors to support the target of securing a domestic manufacturing base of 150 GWh/year.

In addition, the "partnership in critical minerals" (October 2022) with Australia and the "agreement on strengthening the supply chain for critical minerals" (March 2023) with the United States have been signed so far. In the future, the government will continue to promote global cooperation and initiatives to secure stable supplies of the resources needed for storage batteries, such as by strengthening cooperation in the supply chain with Canada⁵⁰.

In the 6th Strategic Energy Plan, target price has been set for FY-2030 to increase storage batteries for commercial and industrial use as well as for grids. The target price at which the investment can be recovered through revenue generated from energy storage system is around 466 USD* (70,000 JPY) per kWh for household energy storage systems and 399 USD* (60,000 JPY) per kWh for commercial and industrial energy storage systems⁵¹.

In addition, regarding lithium-ion batteries, some examples of foreign companies entering the market for R&D and collaboration with Japanese companies are observed (Figure 15).