Japan's RE targets too ambitious, analysts say

Gas will remain king for now.

Japan’s plan to increase its renewable energy capacity is likely to fail due to an exceedingly competitive bidding process as well as negative economic and demographic projections, a new report warned.

BMI Research noted that whilst Japan’s newly approved energy targets for 2030 envisions significantly expanded roles for solar, wind and biomass generation, the government’s goal of increasing RE’s share to 14% of total generation capacity is likely to be missed.

“Our Power team believes that this target is likely to be missed, as an increasingly more competitive bidding process for larger-scale solar projects, coupled with downbeat macroeconomic and demographic projections, subdue investment appetite and the pace of capacity additions post-2020,” the report said.

BMI Research is bullish on LNG’s long-term prospects, supported by a domestic power projects pipeline that remains overwhelmingly in favour of gas.

“In spite of Tokyo’s long-term desire to steer the national energy mix towards nuclear and renewable energy sources, gas-fired power generation capacity accounts for 40.0% of the planned and proposed capacity additions out to 2024, according to our Key Projects Database. In contrast, greenfield nuclear capacity additions, along with re-starts of existing reactors, continue to remain at risk, due to myriad legal and regulatory challenges and local opposition. The renewables pipeline remains comparatively modest, although poses the biggest downside risk to gas’ long-term share in the energy mix,” the report noted.