Japan can achieve its pledge to triple renewable power capacity by 2030, but only if it addresses structural and institutional barriers rather than technological or economic limitations, according to a new report released by the Institute for Energy Economics and Financial Analysis (IEEFA).
The report, authored by Michiyo Miyamoto, Energy Finance Specialist for Japan at IEEFA, points to transmission constraints, regulatory hurdles, market inflexibility, and limited action from major utilities as the principal obstacles to renewable growth.
Currently, Japan’s ten largest electric utilities control nearly 75% of installed power capacity but own less than 0.3% of renewable assets (excluding hydropower), continuing to prioritize fossil fuel and nuclear resources. In 2024, 52 renewable energy developers exited the market — including eight bankruptcies with liabilities exceeding JPY 10 million — doubling the previous year’s figure.
“The challenges are not technological but systemic,” Miyamoto noted. “Political and corporate reluctance, weak policy enforcement, grid congestion, and geographic mismatches between renewable supply and demand continue to hold Japan back.”
Regional Models Offer Scalable Solutions
Despite national setbacks, progress at the regional level demonstrates viable pathways forward. Prefectures including Fukushima, Akita, Saga, and Hokkaido have introduced local renewable energy targets, invested in transmission, mobilized regional finance, and engaged communities.
In Akita, offshore wind development advanced through early engagement with local fisheries cooperatives, ensuring community support and paving the way for designation as a national promotion zone. Similar approaches have been replicated in Aomori and Hokkaido, creating a framework for faster offshore wind deployment.
Weak Enforcement and Policy Shortfalls
The report highlights underutilization of the Non-Fossil Certificate (NFC) system, which requires utilities to meet a 44% non-fossil fuel obligation. Most NFCs purchased, however, are linked to nuclear rather than renewables, with enforcement remaining limited.
Meanwhile, the transition from the 2012 Feed-in Tariff (FIT) to the 2022 Feed-in Premium (FIP) has created new challenges for smaller developers. Unlike the fixed FIT model, the FIP ties revenue to volatile wholesale market prices, increasing financial risks. Grid curtailment due to insufficient capacity has further undermined project bankability.
Transmission and the Urban-Rural Divide
Japan lacks a comprehensive framework for transmission development, creating a mismatch between resource-rich rural regions and high-demand metropolitan centers. Long-distance transmission projects face high costs, complex permitting, and financing constraints for operators.
In Kyushu, renewable developers face steep grid access costs and delays, with thermal power plants prioritized in dispatch rules, exempting them from curtailment at output levels below 30–50%.
Unlocking Future Growth
To overcome these barriers, IEEFA recommends:
Establishing a clear target to triple renewable capacity via auctions and procurement mandates.
Expanding corporate and community PPAs with regulatory and financial support.
Introducing credit guarantees and risk-sharing mechanisms to help smaller buyers access renewable electricity.
Reforming grid access rules and modernizing market design.
“Over 220 RE100 companies in Japan cannot meet renewable obligations due to insufficient clean energy supply,” Miyamoto said. “Policy tools like public credit guarantees and incentives for public institutions to purchase renewable electricity would accelerate market entry.”
The report also stresses the importance of expanding renewable energy auctions, which have already demonstrated viability in offshore wind. Legal reforms enabling development in Japan’s Exclusive Economic Zone (EEZ) are opening new deployment areas, while participation from international developers is driving competition and bringing advanced technology and expertise.
“If Japan addresses grid and supply chain constraints, it could emerge as Asia’s leading offshore wind hub,” Miyamoto concluded.
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