Japan’s Ambitious Energy Strategy: Energy of the Near Future Part 1

2025-11-26

Emilie Jones | Senior Sustainability Consultant

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Energy demands are increasing at unprecedented rates, geo-political conflicts are enhancing the need for energy security, climate tipping points are being passed faster than expected, and economic shifts coupled with Japanese domestic political upheaval are driving development interests focused on critical infrastructure. For corporations in Japan planning their transitions to low-carbon business models, the availability of clean, reliable energy is critical. To achieve Japan’s energy goals, two main pathways have emerged: the return of nuclear power, and the rise of mega-solar. In the recent elections, the debate around each pathway raged among the public as politics shifted. In this multi-piece insights article series we will examine the science behind each strategy’s rhetoric. We will discuss the benefits, the costs, and the way each option fits into the broader landscape. This first article will cover an overview of the changing energy situation and the public sentiment towards nuclear and mega-solar as solutions. Our following article will deep dive into each technology and analyze which may be most appropriate.

Japan’s Evolving Energy Considerations

Energy provision has always been a point of concern for resource poor Japan. With no readily accessible fossil fuel reserves, Japan has long relied upon imports to meet demand. Once, nuclear energy seemed to provide a long-term alleviation to the problem. Following the 2011 Great East Japan earthquake, however, nuclear power became a taboo topic. Renewable energy in the form of solar and wind was pushed in its stead but, despite efforts, continued low capacity and intermittence concerns has perpetuated Japan’s reliance on foreign fossil fuels.

In this era of generative AI, Japan sees digital investment as a means of economic growth. Multiple large scale data center development projects are underway to capitalize on it. These data centers can consume over 100 MW of energy, with almost half of that directed at cooling. In line, Japan’s data center development plans are driving unprecedented energy demand increases. While data centers request renewable energy supply to ease public concerns over the energy cost of AI, such goals are not always realized. What is clear is the need for more energy supply.

At the same time, increasing extreme temperatures in both winter and summer drive increases in residential energy demand. Efficiency improvements in heating and cooling devices mitigate this to some degree, but also opens the door to the ominous rebound effect in which increased efficiencies result in increased usage. Residential electrification spurred by home insurance incentives to avoid fire risk continues to increase the demand for grid electricity supply over individual fuel purchasing. Industrial electrification in response to work-force changes, Industry 4.0/IoT, and similar efficiency developments also serve to drive grid energy demand.

Surging demand challenges existing supply pathways, which are further constrained by global geopolitical tensions. Russia’s invasion of Ukraine in 2022 revealed Japan and Europe’s heavy reliance upon Russian natural gas. Japan’s dependence despite the conflict continues to generate new risks as the USA and others seek to increase international trade pressures. Meanwhile, conflicts between Israel and its neighbors threatens global crude oil supply.

Solar and other renewable energies present an attractive alternative, as once they are installed they generate entirely domestic energy. Much of the solar supply chain is based in China and most economically viable solar panels are purchased from Chinese suppliers. Recent comments by Japan’s prime minister regarding Japan’s role in a potential conflict between China and Taiwan has highlighted the fragile relations of the two countries. While trade relations remain mostly unaffected (excepting seafood) at this volatile moment, dependence upon Chinese suppliers runs counter to Japan’s goal of energy security development. Even should Japan have no role, any conflict in the waters around Taiwan would create significant risks for Japan’s shipping routes used to import fuel from other sources.

Figure 1: Reliance on the Taiwan Strait for Trade (CSIS)

Japan, an island nation, imports far more than just fuel. Over 70% of Japan’s food relies on similar shipping routes and international trade. The effects of such globalization became apparent after Covid, when Japan’s economy began to experience true, extended inflationary pressures for the first time in nearly 30 years. After such long stagnation, Japan has not developed a culture of salary increases in line with inflation. Despite wage gains unprecedented in recent history, Japanese take home pay is not keeping up with cost of living. Japanese residents feeling the strain of increasing socio-economic division due to rising costs of living, a weak yen but strong stock market, and political graft scandals, all while foreign tourists come in droves, look to politicians for accountability.

Under pressure, politicians present the AI boom as an opportunity. Meanwhile, how to supply energy for it is a point of hot debate. Fossil fuels expose Japan to energy security risks. Renewables, long supported, are not supplying enough capacity. Nuclear has a dark stain from the continued legacy of the Fukushima Daiichi nuclear power plant accident. The governmental solution, outlined in the 7th Strategic Energy Plan, became a flashpoint in political debates for the recent elections.

7^th Energy Plan Overview

In February, the Japanese Agency of Natural Resources and Energy (ANRE) announced Japan’s 7th Strategic Energy Plan. It outlines ambitious development targets for renewable energy development in line with expected demand increases. Driven by data center development, Japan’s rapid energy demand increases are already guaranteed. However, Japan is facing multiple challenges in achieving the energy supply targets needed to meet this demand.

Figure 2: Outlook for Energy Supply and Demand in FY2040 (ANRE)

According to the strategic targets, solar energy supply will need to increase by at least 160 billion kWh by 2040, with high demand projections reaching a need for over 250 billion kWh more solar capacity compared to 2022. In 2022, Japan’s total solar energy supply capacity only reaches 97 billion kWh. At a conservative estimate, the installed capacity will need to double. Given Japan’s previous efforts to develop solar power, remaining opportunities are significantly more constrained. The easy options are gone, and now developers face technical, social, and time constraints to meet demand.

Nuclear energy expansion forms another strategic pillar. By 2040, Japan projects nuclear power to provide 20% of total energy demand. In 2022, Japan’s nuclear power plants only produced 84 billion kWh annually due to development stoppages following the 2011 Fukushima Daiichi nuclear power plant accident. To meet energy goals, the capacity will need to increase by roughly 150 billion kWh by 2040. In 2025, re-operationalization of existing power plants increased the capacity by 32 billion kWh, and about 24 billion are under construction. However, that leaves a 94 billion kWh gap to meet 2040 energy goals. After a long period of non-development, Japan will need to rapidly develop new nuclear capacity. Yet significant headwinds remain.

Adding to the challenges above, the 7th Strategic Energy plan assumes domestic energy consumption will remain relatively stable through efficiency measures. Only industrial and transport energy consumption is projected to rise, with the projections remaining limited. Should Japan exceed these expectations, even the above ambitious goals will not be enough to meet demand.

The Rise of Mega Solar

Japan has provided support for the deployment of solar energy generation since as early as 1994. In the past 20 years, the introduction of the Feed In Tarif (FIT) program greatly increased incentives for solar developments through purchasing incentives. In 2022, the FIT program phased into the Feed In Premium (FIP) program, which applies demand pricing to purchased energy rather than ensuring a fixed price. The latter incentivizes battery capacity development but reduces the incentive for new solar development. Significant effort has already been applied to developing solar energy generation in Japan, resulting in most readily accessible sites being developed. To double the installed capacity and meet 2040 supply targets, previously disregarded sites will need to be developed. These secondary sites are often in rural or poorly accessible areas leading to significant social, environmental, and economic challenges.

One solution for meeting increasing installed capacity demand in remote areas is to access efficiencies of scale through larger projects. Projects that generate over 1 Megawatt of energy (~8.8 million kWh annually) are called Mega Solar projects. Residential and rooftop solar often falls well below this threshold. Solar project land use heavily depends on the localized conditions and on how solar panels are arranged but, as an estimate, a mega solar project requires 10,000 – 20,000 square meters of space.

Centralized energy generation allows for minimal transport infrastructure build up. Rather than many small transmission cables to dispersed sites, a single set of cables can optimize costs both economically and environmentally. The optimization makes large scale battery storage systems (BESS) more cost effective, which overcomes the challenge of intermittent supply all solar energy generation faces. Local generation and battery storage also supports disaster preparedness in an earthquake-rich mountainous, coastal landscape like Japan. Once installed, the cost of energy generation reduces to just that of operations and maintenance while the operator gains revenue from energy sale to the grid.

The advantages of mega solar are significant, but so are the costs. Land availability at such scale is often relegated to rural areas and difficult to access landscapes. Mountainous forests require regular maintenance to prevent fires, yet Japan’s aging and urbanizing population has stripped the local communities of their ability to manage large surrounding forests. Mega solar projects are proposed as a way of managing the forest while generating revenue. Even if forest management practices are optimized, solar energy generation creates a far better ROI. However, such profits come with a decline in ecosystem services. The water is less clean, the ground is less stable, the birds and insects are less numerous. Landslides are more common. In such rural areas, access for maintenance becomes a challenge. Then at the end of their usable lifespan, the energy panels become a waste product which, when handled improperly, can contaminate local soil.

In our next article, we will examine the technical potential of mega-solar, the environmental costs it may bring, the generation potential, and the momentum and barriers implementation faces. We will also discuss the implementation and generation potential of alternative solar energy solutions such as perovskite and agri-solar.

The Return of Nuclear

Nuclear power in Japan is still marked by the 2011 Great East Japan Earthquake and Fukushima Daiichi Nuclear power station’s disaster. Following, new nuclear developments were halted and most nuclear plants began the long decommissioning process. Even though guidelines for re-operationalizing nuclear power plants with increased security measures were released in 2013, existing nuclear power plants only began to receive operational approval in 2020, when most were already nearing their 40-year lifespan. Due to Japanese regulations, nuclear power plants have a maximum lifespan of 40 years, regardless of safety measures. The aging infrastructure would need to shut down. However, in response to increasing energy demands and a need for domestic energy security following Russia’s invasion of Ukraine, the government has allowed aging nuclear power plants to apply for special permission to continue operating after 40 years.

The shift in policy from nuclear decline to reviving aging nuclear operations is largely unpopular but recognized by some as a necessary step in ensuring sufficient, stable energy supply. Nuclear power plants only need to refuel about every 15 years, depending upon the nuclear plant design. The long fuel lifespan and large generation capacity allows for low energy costs compared to fossil fuel alternatives. The carbon emissions profile of nuclear energy is relatively low as well due to the avoidance of burning hydrocarbon fuels. The main environmental concern is plant disfunction and fuel waste handling.

Figure 3. Survey responses when asked if they support operation of existing nuclear fission power plants (Hiroshi Yamagata)

As long as fuel is in a fission plant, it will continue producing energy. There is no temporary stop. This positions nuclear power plants as an ideal energy source for stable base load supply, a sharp contrast to the intermittence of solar with the same centralization benefits mega solar provides. This same property is also the main safety concern for nuclear fission power. When an accident occurs and proper conditions cannot be met, the continually heat producing fuel has the potential to “melt down” and overheat everything around it spilling radiation into the surrounding environs. This is what happened at the infamous Chernobyll site. Since then, significant safety enhancements have been made to nuclear fission power plant design. Following the Fukushima Daiichi nuclear accident, Japan imposed even stricter measures and during the 14 years since nuclear fission technology has advanced significantly. To meet these safety regulations, Japan’s energy generators invested heavily in fortifying the existing Pressurized Water Reactor plants built in the 1990s. The required investment and long non-operational period during design and refurbishment sunk significant capital into the existing assets, incentivizing the use of legacy assets. Even with these assets back in play, though, there remains a large energy gap between current production potential and 2040 supply goals. Currently, two plants whose development started before the Fukushima Daiichi accident are now under construction.

Figure 4. Respondents’ reasons for their opinion on building out new nuclear capacity (Hiroshi Yamagata), Colors indicate respondents’ opinions on building new nuclear capacity.

Significantly more capacity will need to be built to meet the 94 billion kWh deficit in 2040. Public sentiments for new development, however, remain very low. Outside of local proximity concerns, the Japanese public is also highly conscious of the unresolved issues of how to handle nuclear waste. A new type of nuclear plant, Small Modular Reactor (SMR), and other technological advancements may reduce the issue of nuclear waste handling, but to employ these technologies deeply ingrained local reticence and funding constraints will need to be overcome. In our next article in this series we will investigate the emerging science, that which is being applied in other countries, and the likelihood of Japan meeting its nuclear energy generation goals at large.

Conclusion

Japan’s clean energy ambitions are admirable, but observers hold serious concerns over whether they can be realized. In media and common discourse, the question is often: “Which energy source is best”. But with skyrocketing demand, constrained by economic, political, and community concerns, the question should really be: “Can any clean energy source meet its targets?”. If not, what energy source will compensate for the demand load? And if so, how?

These questions are critical for any corporation in the clean energy ecosystem and all those who plan to rely upon it for their low-carbon transition. Codo Advisory is here to support planning and realizing your company’s specific transition strategy. You can learn more about our services here.

In our next Insights we will take a technical look at the challenges and opportunities solar and nuclear energy face in Japan to achieve the Government’s strategic plan.

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