Green Japan: "Net Zero" is Transforming Society and Business

November 2023


In a mountain-ringed bay off the coast of Hokkaido, Japan, fourteen giant wind turbines are rising from the water. The spinning of their 80-meter-long blades—driven by the same winds that bring this northern island its famously fluffy snow—will generate enough electricity to power 83,000 homes when the project is completed in December.

The 112-megawatt Green Power Ishikari wind farm is one of a profusion of renewable-energy projects that are moving forward across Japan, as the country embarks on an industrial and social transformation intended to reduce its net greenhouse gas emissions to zero by 2050.

The projects span a range of clean-energy fields, from wind to solar, geothermal, biomass, and hydrogen. And they are changing Japan's economy as well as its energy mix, by creating jobs, spurring innovation and investment, and opening the door to global business partnerships.

"Japan has made ambitious commitments to decarbonize its economy, and that is creating opportunities," says Roland Thompson, founder and CEO of Austvent, an impact investing firm, who has been involved in a wide range of clean-energy projects in Japan.

Ishikari Bay New Port Offshore Windfarm, Hokkaido

The Ishikari wind farm's owner, Green Power Investment exemplifies those opportunities. Founded in 2004, it attracted Pattern Energy, an American renewable energy company, as a major shareholder, and currently operates or is building nine wind and solar projects around Japan, with more in the pipeline. In May, the Green Power was purchased by a Japanese consortium comprising NTT Anode Energy and JERA, a joint venture between the utilities TEPCO Fuel & Power and Chubu Electric Power.

Japan has long depended on imported fossil fuels for the majority of its energy, and constraints arising from the country's topography and climate have posed a challenge to the development of renewable sources. But the shift to renewable energy and other decarbonized power sources is accelerating, boosted by a broad-based GX Promotion Strategy that was unveiled this year.

New laws closely related to the strategy—the GX Promotion Act and GX Decarbonized Power Supply Act—contain a range of measures to promote renewable energy. For example, the development of the power grid, which is crucial for renewable energy has been speeded up.

In addition, the GX Promotion Strategy includes the establishment of a Japanese version of the Centralized Model, in which the government and local governments are more involved in order to accelerate the formation of offshore wind power project, and surveys are conducted quickly and efficiently.

Financial incentives are also on the table. Over the next decade, 150 trillion yen in combined public and private sector will be directed toward the GX field, including the development of renewable energy technologies. A GX League, comprising more than 560 companies, has started trials of a voluntary emissions trading system, which will be launched at full scale in FY2026, and a GX surcharge (surcharge on fossil fuel supply) will be introduced in FY2028.

Underpinning these efforts are Japan's world-class scientific and R&D capabilities. Among the technologies that show promise are next-generation photovoltaics such as perovskite solar cells—an innovation that originated in Japan—, and the use of hydrogen and ammonia for power generation.

Perovskite solar cells, which are thin-film devices and designed for places where traditional solar cells are difficult to install, such as building walls and load-bearing roofs, are under development, and Japan's Sekisui Chemical plans to commercialize the technology by 2025.

Hydrogen and its close relative ammonia (a compound of hydrogen and nitrogen) are also expected to play an important role in the world's energy transition, because they do not emit carbon dioxide when burned and can be produced using a wide range of primary energy sources. Ammonia, in particular, is insulated from global supply chain disruptions, which make it useful in countries with a high penetration of renewable energy as well as those—notably in the Global South —where thermal power plants are likely to remain in use for some time.

Takasago Hydrogen Park, Mitsubishi Heavy Industries, Ltd.

This year Mitsubishi Heavy Industries began full-scale operations at the Takasago Hydrogen Park in Takasago City, Hyogo Prefecture. The park is the world's first integrated validation facility for technologies related to hydrogen production, storage, and use in power generation. MHI has also established the Nagasaki Carbon Neutral Park, a development base for energy decarbonization technologies including hydrogen, biomass, and ammonia.

In Hokkaido, Green Power Investment is considering adding a hydrogen production plant to its wind farm, which would increase the farm's useful output by in effect turning surplus wind energy into hydrogen for later consumption.

Thompson, the Austvent CEO, says government agencies such as JETRO, the Japan External Trade Organization, can help foreign enterprises navigate licensing and permits, introduce business contacts, and advise on strategy and marketing.

"There are language and business practice challenges in Japan, but they are manageable," he says. "It's a stable country and a big market, and it has world-class technology to drive its energy transformation."

With a national push to decarbonize the economy underway and government programs available to support foreign entrepreneurs and investors in the green sector, opportunities abound for global companies.

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