- One questionable assumption in REI 2030 is that solar and wind are already the cheapest power options. This assertion is certainly not correct for Japan, where even sympathetic analysts in PV Magazine note that the cost of solar remains “among the highest in the world” (Hall, 2020). As for Japan’s offshore wind, it is so pricey that the Japan Wind Power Association’s ambitious scenario is cutting it to JPY 8/kWh by the early 2030s, compared to the JPY 5-6/kWh that prevails in Europe at present (Obayashi, 2020). The REI 2030, however, base their offshore wind cost projections on much more optimistic assumptions – from Bloomberg New Energy Finance – that Japan’s offshore wind will cost just over JPY 5/kWh by 2030. In short, the Japanese wind power experts (who presumably know their business) and the REI 2030 price projections for 2030 offshore wind differ by 60%. That gap suggests the REI 2030 is opting to use the most favourable assessments to support its arguments, which in fact risks undermining them.
A second problem on costs is that most calculations of solar, wind and other VRE generation costs overlook the larger system costs. These costs are defined as “the total costs above plant-level costs to supply electricity at a given load and given level of security of supply” (World Energy Council, 2020). The elements of these costs include the transmission, frequency regulation, storage, and other facilities required for connecting VRE to the main power grid and backing them up when they cannot generate power. These costs vary by scale of VRE, the project locale, the amount of VRE already on the grid, and other factors. As the World Energy Council paper on “Renewable Energy System Integration in Asia” puts it, there is no free lunch. They point out that rising system costs are reflected in rising power prices. They therefore argue for clarity on the costs of integration, leading to a better-informed public debate on who should pay (World Energy Council, 2020). But the REI 2030 also does not address system costs, such as investments in transmission and storage required to connect offshore wind to the grid. Surely it is misleading to insist that the cost of solar panels and wind turbines is falling without paying attention to whether the transmission, storage and other system costs are declining as well.
- A second questionable assumption is omission of concerns about critical material supplies and prices, even though REI 2030 is aimed at Japan’s power system, a country that lacks domestic resource endowments.2 Critical materials include copper, lithium, cobalt, nickel, rare earths, and a long list of other metals needed for clean energy. Solar and wind do not burn fuel, in contrast to fossil fuel generation, but they do require massive upfront investments in often exotic materials in order to generate energy. Recent International Energy Agency (IEA, 2020a) and other reports on these critical materials warn that ambitious policies on renewables and electric mobility imply cobalt, lithium, nickel and other critical material demand that exceeds current supply. The IEA and other analyses discuss supply constraints, geostrategic risks, human rights concerns, environmental damage (from harvesting and processing critical materials), and related issues. The IEA’s concerns parallel those of the Japanese,3 the European Union,4 and a rapidly growing number of other actors. Indeed, the August 31 Financial Times reports that the EU is sounding the alarm over critical raw materials, as “[s]hortages of elements used to make batteries and renewable energy equipment could also threaten the bloc’s target of becoming climate neutral by 2050” (Peel and Sanderson, 2020).
Moreover, Japan’s Strategic Energy Plan includes strategies to expand and diversify access to these materials, which the REI certainly read. So one would have thought that REI 2030 would offer suggestions on maximizing the efficient use of supply-constrained materials while transforming the power system. This is because many of these critical materials are used at far greater density, per unit of energy consumption or production, in green technologies as compared to conventional power systems, internal combustion automobiles, inefficient air conditioners, and the like. And supplies of these materials have myriad other competing sources of demand, including smart phones, data centres, refrigeration and cooling, health care, and other rapidly expanding areas.
The World Bank Group has also been deeply concerned about the supply-demand balance of critical raw materials for several years. Updating earlier work, on May 11, 2020 it released “Minerals for Climate Action: The Mineral Intensity of the Clean Energy Transition” (World Bank Group, 2020). The report examined scenarios of likely demand for cobalt, copper and other materials, their potential GHG impact, and risks for shortages. One important backdrop to the report was the multiple effects of the Covid-19 pandemic, whose economic fallout led to a drop in prices for materials and reduced investment in new supply. The World Bank Group warns about constrained capacity to satisfy the need for critical materials in light of this context and accelerating moves towards a material-intensive green recovery. Against this backdrop of uncertainty, it would seem imperative that the REI 2030 call for the most materially-efficient deployment of these metals. Resource-poor Japan’s renewable advocates should be among the leaders of the global debate in this respect, particularly considering the human rights abuses, environmental destruction, and other costs of critical materials.
- A third implicit assumption of REI 2030 is that NIMBY and other opposition will not intervene. Yet solar and wind projects already face significant opposition in Japan, due to concerns about environmental damage, disaster resilience, health effects, dominance by big business, and other issues (Choushuu Shimbun, 2020). Community opposition has in fact led to a doubling of local government ordinances, from 30 in 2017 to 60 in 2019 (Nikkei Shimbun, 2020). And this opposition seems unlikely to go away. Indeed, there is significant opposition to new wind, transmission and other assets in Germany, one of the models for REI 2030. This opposition in Germany has led to difficulties in meeting goals, in addition to a very expensive plan to build transmission underground (Chu, 2020, IEA, 2020b).
The likelihood of increased local opposition certainly does not make a significant role for VRE impossible or inadvisable. But it does suggest that REI 2030 gives too much emphasis to solar and wind at the expense of other renewables such as geothermal, hydro, and biomass. These renewables play a large role in many countries, and have the advantage of being 24/7 sources of high-quality power. It pays to recall that REI 2030 aims at removing both nuclear and coal from the power mix by 2030. The massive and rapid power-shift advocated by REI 2030 would allow for little local consultation in planning what must necessarily be very large generation, transmission, storage and other projects.
- Curiously, REI 2030 use Spain (21% nuclear), UK (21% nuclear), and German (12% nuclear) as examples of how to grow VRE. But they fail to note how those countries’ increase in wind and solar has been and continues to be facilitated by nuclear and other 24/7 baseload power and massive international power trading networks. In other words, the REI 2030 skips over the question of whether Japan can do without these assets, even as it builds its argument on the basis of them.
- We have also seen that REI 2030 implies a massive increase in LNG use. This is a questionable choice for decarbonization. Natural gas is not only a comparatively costly fossil fuel in Japan (cf. the US). Its greenhouse-gas footprint depends on leakages in the production process as well as transmission through pipelines, conversion into LNG, shipment by LNG tanker, reconversion of LNG into natural gas, and then transmission to power-generation plant for combustion. Recent research suggests that these leakages may be higher than thought, leading to questions about the future of gas (Stern, 2019). REI 2030’s plans imply huge new investments in the infrastructure to ship, transmit, and burn LNG, in order to drive extant and decarbonizing nuclear assets out of the power mix. This aim does not seem consistent with climate goals.
- A related problem is that the REI 2030 also simply assumes that LNG costs and supply will not be significantly impacted over the next decade. This is a gamble, and should be addressed as such. Certainly Covid-19 flattened LNG demand and thus prices, and may do so again in a second wave of infection and lockdowns. But LNG has become a focus of energy demand growth globally, and particularly within Asia (Iwamoto, 2019; Timera Energy, 2020). Over the next few years, that demand could lead to higher prices, especially because of stalled projects and growing opposition to new development, particularly in the US (Cocklin, 2020).