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IEEJ: August 2006 Ken Koyama
Japan’s New National Energy Strategy
August 30, 2006 Tokyo, Japan
Ken Koyama, PhDSenior Research Fellow, Energy Strategy Unit
Institute of Energy Economics, Japan
IEEJ: August 2006
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Ken Koyama
Introduction：An overview of
Japan’ New National Energy Strategy
Energy policy/strategy re-examined with the emphasis put on enhancement of energy securityA report on National Energy Strategy published on May 2006
Promotion of energy source diversificationOil dependence in primary energy mix to be lowered at 40% in 2030Oil dependence in transportation fuel to be lowered at 80% in 2030
Promotion of nuclear power developmentIts share in power mix to be 30-40% in 2030
Promotion of energy conservationEnergy intensity to be improved by 30% by 2030
Promotion of upstream investmentOverseas upstream equity oil imports to be increased to account for 40% of total oil imports
IEEJ: August 2006
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Presentation Topic
1. Background of New National Energy StrategyEnergy security, an important agenda for JapanJapan’s energy policy after the 1970sGrowing concern for energy security
2. Content of New National Energy StrategyGoal of the StrategyApproach of the StrategyIssues to be considered
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Energy security is critical for Japan
Definition of “Energy Security”:To secure sufficient energy supply at reasonable prices for the achievement, pursuit and maintenance of maximizing economic/social welfares and sustainable development of national economy and citizens
Japan (and every country) requires to achieve energy security as an essential/critical policy goal
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Perceived Risks for Energy Security
Contingent risksPolitical and military risks in main energy supply areaAccidents in energy supply chainConsumers’ panic behavior
Structural risksSupplier’s embargo with political objectivesMarket power of major suppliersSupply/demand squeeze due to insufficient investment, rapid growth of demand, etc.Resource constraints and chronic energy shortageSide effects of market liberalization and environmental restrictions
Japan has developed energy policy to enhance energy security in the past 30 years
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Trend of JapanTrend of Japan’’s energy intensitys energy intensityEnergy conservation and changes in economic structure Energy conservation and changes in economic structure
resulted in lowered energy intensityresulted in lowered energy intensity
0
2
4
6
8
10
12
14
16
1965 68 71 74 77 80 83 86 89 92 95 98 01 04
（Kcal/yen）
Japan's energy intensity（primary energysupply/GDP） has lowered by about 30 %from the 1970s
（Source）EDMC/IEEJ Statistics
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Trend of Japan’s primary energy supplyOil’s share declining, but still dominating energy mix
（Source）EDMC/IEEJ Statistics
0
100,000
200,000
300,000
400,000
500,000
600,000
1965 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03
0
10
20
30
40
50
60
70
80
90Hydro & othersNuclearGasOilCoalOil dependency
（10 Billion Kcal） （％）
（21.4％）
（48.8％）
（13.9％）
（10.8％）
（5.0％）
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Trend of Japan’s oil importsShare of Middle East crude oil rising (89.5% in FY 2004)
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
1965 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99
2000 01 02 03 04
0
10
20
30
40
50
60
70
80
90
100
Crude oil imports
Oil product imports
Middle East dependence
（1,000 Kl) （年)
（Source）EDMC/IEEJ Statistics
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Trend of Japan’s oil stockpileJapan’s stockpile (National & private) covers about 170
days’ consumption
（Source）EDMC/IEEJ Statistics
0
2,000
4,000
6,000
8,000
10,000
12,000
1965 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 030
20
40
60
80
100
120
140
160
180
Private stock
National stock
Day cover
（10,000 Kl) （day cover)
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New situation for global energy security
Recent oil price run-upEmerging large-scale importers (China, India, followed by Indonesia, etc.)Impact of September 11Instability in the Middle EastGrowing attention to “Geopolitical aspects” of energy
Active discussion with regard to strategy to enhance energy security in Japan
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Rising WTI futures priceWTI futures reached 77$ mark in July 2006
10
20
30
40
50
60
70
80（USD/bbl）
1998 1999 2000 2001 2002 2003 2004 2005 2006
（Source）NYMEX data
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Recent supply interruption/instability
Instability in major oil producersIraq: war, terrorism, security problemsIran: nuclear issuesNigeria: domestic conflictsVenezuela: general strikes, political issues Russia, Saudi Arabia, etc.:
Natural disasters and accidentsHurricanesAccidents in up/downstream supply chain
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Emerging risks/threats to global energy security
Rapidly growing oil demand/imports in developing countries and concerns for structural tightening of global supply-demandCompetition for access to energy resourcesGrowing geopolitical risksEmerging concerns for energy supply constraints
Investment risks in resource developmentImportance of stability of energy transportation and sea lane securityImpacts of market liberalization and environmental constraints
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World oil supply-demand outlook（IEA）Oil demand expected to grow due to strong growth in Asia. Supply growth in Middle East OPEC is required to meet growing demand
Oil demand outlook
4,760 5,050 5,320 5,510
620870
1,1201,310
1,590
1,850
2,230
2,590
440490
560 620
520430
330260
990830
660540
0
2000
4000
6000
8000
10000
12000
14000
2004 2010 2020 2030
Other developing countries
Other Asaia
India
China
Transition economies
OECD
（10,000 B/D）
Oil supply outlook
2,020 1,920 1,610 1,350
1,140 1,450 1,560 1,640
1,5201,770 1,760 1,630
2,280
2,6603,530
4,400960
1,030
1,210
1,320
0
2000
4000
6000
8000
10000
12000
14000
2004 2010 2020 2030
Other OPEC
Middle East OPEC
Non conventional
Other Non OPEC
Transition economies
OECD
（10,000B/D）
（Source）IEA「World Energy Outlook 2005」
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Energy security “re-visited” in Japan
Japan’s policy initiatives after 1970s resulted in substantial achievement in diversification, stockpile, etc.
But high oil dependence, import dependence, Middle East dependence remain unchangedEmerging risks/threats to global energy security
Energy security policy is still a very important agenda for Japan
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Ken Koyama
Objective of the Strategy
Establishment of energy security measures that our people can trust and rely on
Establishment of the foundation for sustainable development through a comprehensive solution ofapproach for energy
issues and environmental issues all together
Commitment to assist Asian and world nations in addressing energy problems
Establishment of energy security measures that our people can trust and rely on
Establishment of the foundation for sustainable development through a comprehensive solution of approach for energy
issues and environmental issues all together
Commitment to assist Asian and world nations in addressing energy problems
(Source) METI “New National Energy Strategy”
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Important points in implementing the Strategy
Medium- or long-term visions toward the specific direction, with specific numerical targets as a milestoneBreakthrough by the world’s most advanced technologies Strategic collaboration between the government and private organizations and government-wide efforts to strengthen the scheme of carrying out the Strategy
(Source) METI “New National Energy Strategy”
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Ken Koyama
Establishment of numerical target
Target of energy conservation→ At least another 30% improvement of efficiency will be attained
by 2030. Target of reducing oil dependence→ The ratio will be reduced to be lower than 40% by 2030.
Target of reducing oil dependence in the transport sector→ The percentage will be reduced to around 80% by 2030.
Target on nuclear power generation→ The ratio of nuclear power to all power production will be
maintained or increased at the level of 30 to 40% or more up to 2030 or later.
Target of overseas natural resources development → The ratio of Japanese developed oil in total oil import will be
increased to around 40% by 2030.(Source) METI “New National Energy Strategy”
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Specific programs for the strategy
Realizing the state-of-the art energy supply-demand structureEnergy conservation Frontrunner PlanTransport Energy for the Next Generation PlanNew Energy Innovation PlanNuclear Power Nation Plan
Comprehensive Strengthening of Resource Diplomacy and, Energy and Environment Cooperation
Comprehensive Strategy for Securing Resources Asia Energy and Environment Cooperation Strategy
Enhancement of emergency response measures
Common ChallengesEnergy Technology Strategy
(Source) METI “New National Energy Strategy”
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Energy conservation frontrunner plan
100
159
７０
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
1973 2003 2030
Fina
l ene
rgy
cons
umpt
ion
inde
x p
er G
DP
unit
quan
tity
Approx. 37% improvement
Approx. 30% improvement
100
159
７０
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
100
159
７０
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
1973 2003 2030
Fina
l ene
rgy
cons
umpt
ion
inde
x p
er G
DP
unit
quan
tity
Approx. 37% improvement
Approx. 30% improvement
Build-up strategy for energy conservation technologyPrepare top-runner type standard (benchmarking approach) for various sectorsEstablishment of market evaluation mechanism for energy conservation investment (energy conservation IR)Create an “energy conservation park/city” as a model case
(Source) METI “New National Energy Strategy”
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97% 98%
80%
0%
20%
40%
60%
80%
100%
120%
1973 2000 2030
97% 98%
80%
0%
20%
40%
60%
80%
100%
120%
1973 2000 2030
Transport energy for the next generation plan
Improvement of fuel efficiencyFuel efficiency standardOctane improvement
Fuel diversificationInfrastructure for biomass fuel and others“Diesel shift”
Promotion of “new transportation fuel”Technology R&D to improve economics of new fuel
Promotion of electric vehicles and fuel cell vehiclesR&D for development and diffusion of electric/fuel cell vehicles
(Source) METI “New National Energy Strategy”
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Ken Koyama
New energy innovation plan
Cost reduction of solar power generation to the same level as thermal power generation.Promote the efforts of local-production for local-consumption through biomass energy and wind-powered electricity to improve the self-sufficiency ratio of the energy supply in the region.Promotion of hybrid vehicles and introduction of electric vehicles and fuel cell vehicles
(Source) METI “New National Energy Strategy”
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【我が国原子力発電比率と目標値】
0% 0% 3%
14%27% 29%
0% 0%2%
14%
22%26%
29% 26%5%
4%
10%
25%
19%31%
73%
53%
29%
10%
52%42%
17% 16% 12% 11%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1960 1965 1973 1979 1990 2004 2030
Renewable, new energy
Petroleum
Coal
LNG
Nuclear power
30
40%
～
【我が国原子力発電比率と目標値】
0% 0% 3%
14%27% 29%
0% 0%2%
14%
22%26%
29% 26%5%
4%
10%
25%
19%31%
73%
53%
29%
10%
52%42%
17% 16% 12% 11%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1960 1965 1973 1979 1990 2004 2030
Renewable, new energy
Petroleum
Coal
LNG
Nuclear power
30
40%
～
Nuclear power nation plan
Construct new nuclear power plant under liberalized marketEstablishment of fuel cycle based on existing light water reactorsEarly introduction of Fast Breeder Reactor cycleContribution to global efforts for NPTTechnology R&D and human resource developmentPromotion of international business development of Japan’s nuclear power industryPromotion of efforts for radioactive waste managementStrengthen measures for safety managementImprove/strengthen relation between government and local authority/citizens (Trust buildup)
(Source) METI “New National Energy Strategy”
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Ken Koyama
Comprehensive strategy for securing resources
0
5
10
15
20
25
30
35
40
73 77 81 85 89 93 97 01
oil volume ratio on exploration and development by Japanese companies (%)
2030
40%
Strengthen strategic and comprehensive approachStrengthen comprehensive tie-up with resource rich countriesStrengthen financial assistance to overseas upstream activitiesPromote diversificationBuildup a basic plan for securing resources and combined efforts by government/related entitiesPromote transparency and stability of the marketStrengthen assistance to development of Uranium resources and bio-ethanol
Promotion of strategic resource development technologyStrengthen natural gas procurement strategyDevelopment of clean utilization of fossil fuelsStrengthen strategy for mineral resource development
(Source) METI “New National Energy Strategy”
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Ken Koyama
Asia energy and environment cooperation strategy
Promotion of Energy Conservation based on the Asia Energy Conservation Program New Energy Cooperation in Asia Dissemination of clean use, production and safety technologies of coal in Asia Building the stockpiling system in Asia Promotion of regional cooperation on nuclear power in Asia
(Source) METI “New National Energy Strategy”
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Ken Koyama
Enhancement of emergency response measures
Strengthen/upgrading oil stockpile system (including examination of oil product stockpiling)Emergency response measures for natural gasStrengthen crisis management system/capability
(Source) METI “New National Energy Strategy”
IEEJ: August 2006
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Ken Koyama
Establishment of energy technology strategy
Establish an energy technology strategy as a roadmap for long-term vision Strengthen R&D for energy technology
In order to promote cooperation between the public and private sectors, technical challenges to be solved by 2030 will be summarized in the energy technology strategy, and this approach should take into account the technologies needed from a strategic viewpoint by envisaging the situation in 2100 or 2050. And looking back from then.
(Source) METI “New National Energy Strategy”
IEEJ: August 2006
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Ken Koyama
Toward realization of the “New National Energy Strategy”
Promoting the creation of powerful enterprises Efficient and effective use of policy tool such as budget and taxes Implementing public hearings and public relations on energy and energy educationDetailed and concrete action plans and their implementation will be required to realize the goal of the strategy
(Source) METI “New National Energy Strategy”
Contact: [email protected]
