The Fukushima accident in 2011 jolted Japan's energy sector and public opinion so strongly that the country is now grappling with a host of uncertainties. But it has also expedited energy transition, for which Total, active in Japan for 60 years, can supply an array of solutions, from natural gas to solar and energy efficiency. CNBC shines a spotlight on a country in the midst of a sweeping change.
A unique energy situation
The specifics of energy in Japan are unlike those anywhere else on the planet. Densely populated, with nearly 127 million inhabitants1, and highly industrialized, it's the world's third-largest economic power behind China and the United States. This, despite being 26 times smaller; the country has a land area of less than 378,000 square kilometers.
Another unique feature, in this case geological, is Japan's position atop an active volcano zone, the Pacific Ring of Fire, where several tectonic plates collide. As a result, it has virtually no fossil fuels and lives with the ever-present dangers that active volcanoes pose to production facilities and residential buildings.
Primary energy2 consumption per capita is comparable to Europe's, or 3.383 tons of oil equivalent4. So Japan has to import massively to meet its needs: in 2014, this was 94 percent of its energy supply. In 2016, it was the world's top importer of natural gas, third-ranked importer of coal and fourth-largest importer of oil. That makes it one of the least energy-independent industrialized economies. To top it all off, Japan is an island nation. If its power grid fails, it can't quickly turn to its neighbors to bail it out, as Europe can. So Japan has to maintain a larger generation capacity than would be needed if it were attached to the rest of Asia.
As a result, the country is the world's third-biggest power producer, again behind China and the United States. Per capita power consumption exceeds 7,800 kilowatt hours (kWh) a year, compared to roughly 7,000 kWh in Germany and France, 13,000 kWh in the United States and almost 4,000 kWh in China. In 2016, Japan generated this power using 82 percent conventional thermal (gas, coal, fuel oil), 8 percent hydro, 4 percent biomass and waste, and 2 percent nuclear sources. The remainder came from wind, geothermal and solar energy5.
Following the Fukushima nuclear power plant explosion in the wake of an earthquake and subsequent tsunami in March 2011, Japan halted all its nuclear power generation. That's where the 2 comes from. The disaster also severely discredited nuclear power technology among the public, with the Japanese understandably expressing strong reservations and exacting demands when it comes to restarting nuclear power plants. This revived the debate on the transition to more renewable energies.
Japan has been seeking new energies and technological innovations for more than 50 years, and is one of the most advanced countries in terms of renewable energy and hydrogen research and development (R&D). A signatory of the COP21 Paris Agreement in 2015, it is the world's sixth-largest greenhouse gas emitter and has pledged to reduce its emissions by 26 percent between 2013 and 2030. To do that, it wants to boost renewables' share of its energy mix to 24 percent, up from 13 percent before the Fukushima accident.
Spotlight on the 27 MW Nanao solar power plant in Japan
Longtime partner Total
These transition conditions make Total a partner of choice for Japan. Active in the country since 1957, the French company offers a wide array of products and services that dovetail with Tokyo's current and target energy mix.
Daniel Lauré, country chair6 for Japan, said: "Total's move to Japan was motivated by its desire to import Middle Eastern crude oil; the company opened an office at the time to sign its first agreements and start a trading business." The oil trading desk has since disappeared, replaced by liquefied natural gas (LNG) imports.
The activity is still growing, Lauré said, "and faces the challenge of creating a real LNG market… By acquiring Engie's gas assets, Total became the second-largest supplier in the global market and a key player for Japan. Our varied sources of supply will deliver the flexibility and reliability Japan needs."
In addition to its gas activities in the country, Total has moved into solar power in the last five years. "Alongside our affiliates SAFT and SunPower, we have already installed more than a gigawatt of production capacity. Total's role is to make it easier to get projects rolling," Lauré said.
There are two projects. The first, Nanao in southwestern Japan, came onstream in March 2017 with a capacity of 27 megawatt peaks (MWp). The second, 25 MWp Miyako, has been under construction in the northeast since May of the same year. "That's still tiny given Japan's size," Lauré said. "Japan has set ambitious renewable energy goals7, including many solar projects to make up around 7 percent of the energy mix, or 64 GWp, in 2030."
However, such ambition comes with a price tag because Japan has a relatively low solar resource. Thus, as in other countries, public subsidies help support solar activities. "An unsustainable situation in the long run. Budget constraints being what they are, solar won't really take off until it's profitable without subsidies," Lauré said.
For that to happen, costs will have to fall. "The Ministry of Economy, Trade and Industry's (METI) goal is ambitious but achievable. At the end of 2017, 49 gigawatt peaks (GWp) of solar capacity had been installed. And in a country that is 70 percent mountainous, there is also potential beyond solar farms, with big building rooftops," Lauré said. "Japan expects industrial operators such as Total to be reliable and dependable. We keep on expanding our energy efficiency expertize and capturing even more synergies with SunPower and SAFT, which continue to develop solutions suitable for markets such as Japan's."
• For more on the subject: The power of solar
All the same, Fukushima disrupted Japan's energy sector. On top of public distrust of nuclear, backed by many protests and legal challenges, government officials are concerned about meeting international commitments. "The foreign affairs minister publicly questioned Japan's energy policy and reminded people that the country needs to meet its COP21 commitments," Lauré said.
For its part, METI published forecasts "about nuclear that some people consider optimistic. We're waiting to see how the 2030 targets will be compatible with 2050's." This widespread uncertainty has already prompted some nuclear operators to throw in the towel. But Japan may still bring 20 to 30 nuclear reactors back into service; that compares with 54 before Fukushima.
"If 20 aren't back up and running in three to five years, the plants' owners won't be able to wait indefinitely," Lauré said, "and the Japanese will have to alter their habits permanently. But it won't be enough to use less air conditioning and stop wearing ties to the office in the summer!" More seriously, Japan strives to optimize energy efficiency wherever possible. "The drop in consumption here is real," Lauré added. "The country went from 8,000 terawatt hours (TWh) consumed in 2012 to 7,500 TWh in 2015." Although it's only fair to point out that Japan's population is shrinking and the recession and deflation that have dogged the country for 20 years are somewhatto do with that.
So the Japanese market is hesitant. "When we talk to power producers, we see real uncertainty about the conditions for restarting the country's nuclear power plants. They need LNG, but don't know for how long, and no one wants to commit long term," Lauré said. So there's a sort of wait-and-see attitude in as much as the government can't, by itself, force power plants to start back up.
There's no wait and see from Total, however, which considers itself a valuable partner for Japan. "We reach out to all energy stakeholders to show and convince them that we can foster the emergence of a genuine, reliable, flexible LNG market, as well as competitive solar solutions. We believe it and we're pushing for it," Lauré said. "We're playing a long game."
1 However, demographic forecasts project the Japanese population will decline to 85 million by 2050.
2 Energy found in nature that has not undergone any conversion process.
3 Source: International Energy Agency, Key World Energy Statistics 2017.
4 Ton of oil equivalent (toe) is a unit of energy measuring the amount of energy released as heat by burning one ton of crude oil, applied to other forms of energy.
5 Source: IEA.
6 The Country Chair is a function created in March 2018 at Total. In each country that has one, the Country Chair is the sole official spokesperson and gateway for all Total activities and operations.
7 Have renewables account for 22 to 24% of the energy mix.