Japan projects 53 mil-74 mil mt gas supply need for FY 2040-41 in Strategic Energy Plan

The Japanese cabinet approved a series of key policies Feb. 18, including the Strategic Energy Plan, under which the country projects it will need 53 million-74 million mt of natural gas in its primary energy supply for the fiscal year 2040-41 (April-March).

The cabinet's approval of the 7th Strategic Energy Plan, Japan's principal energy policy, follows a public comment process on the draft policy from Dec. 27, 2024, to Jan. 26, 2025.

Japan's FY 2040-41 energy supply and demand outlook in the Strategic Energy Plan is based on the country's new greenhouse gas emissions reduction targets of 60% by FY 2035-36 and 73% by FY 2040-41, both from FY 2013-14 levels, to achieve net-zero emissions by 2050.

The FY 2040-41 energy supply and demand outlook is based on multiple scenarios, which align with Japan's target of a 73% reduction in GHG emissions by FY 2040-41 from FY 2013-14. It expects the country's final energy consumption volume to be about 260 million-270 million kiloliters in the fiscal year to March 2041, compared with 300 million kiloliters in FY 2023-24.

Japan's primary natural gas energy supply is anticipated to be 53 million-61 million mt in FY 2040-41 under the 73% GHG cut-aligned scenario. However, the FY 2040-41 primary energy supply of natural gas is expected to be about 74 million mt under the 61% GHG cut scenario.

The 74 million mt of natural gas in the primary energy supply for FY 2040-41 underscores Japan's need for a long-term and stable LNG supply, as it exceeds the country's total LNG imports of 65.89 million mt in 2024. However, this could also send mixed signals to the industry, as Japan's proposed share of thermal power in its power generation mix will plunge to 30%-40% in FY 2040-41 from 68.6% in FY 2023-24.

Generation mix

The approved thermal power share in the FY 2040-41 power generation mix comes as Japan aims to maximize the introduction of renewable energy as its main power source and seek a balance in its power generation mix for a stable energy supply and decarbonization.

Japan expects its electricity generation volume will expand to 1.1 trillion-1.2 trillion kWh, from around 985.4 billion kWh in FY 2023-24, driven by anticipated growth in power demand from digital transformation (DX) and green transformation (GX).

The FY 2040-41 power generation mix comprises renewables at about 40%-50%, thermal power at around 30%-40% and nuclear power at about 20%, compared with renewables at 22.9%, thermal power at 68.6% and nuclear power at 8.5% in FY 2023-24.

The renewables share in the FY 2040-41 power generation mix includes a target introduction of 20 GW of perovskite solar cells -- a technology that is not yet commercialized -- by 2040.

The renewables in the FY 2040-41 power generation mix are comprised of 23%-29% solar power, 4%-8% wind power, 8%-10% hydro power, 1%-2% geothermal power and 5%-6% biomass, compared with 9.8% solar power, 1.1% wind power, 7.6% hydro power, 0.3% geothermal power and 4.1% biomass in FY 2023-24.

The FY 2040-41 share of thermal power, however, does not include a breakdown of each power generation source, such as coal, LNG and oil, nor does it present an explicit share of hydrogen and ammonia in the proposed power generation mix, unlike the 6th Strategic Energy Plan for the FY 2030-31 power generation mix.

Implications

Despite a drop in the FY 2040-41 thermal power generation share, Japanese power utilities generally perceive that the 7th Strategic Energy Plan places thermal power in an important role to balance intermittency from growing renewables output, according to company officials.

A Kyushu Electric spokesperson said the Strategic Energy Plan noted that "fully replacing thermal power with renewable energy and batteries is difficult" and also stated that efforts will be made to reduce generation output (kilowatt-hour) primarily from inefficient coal-fired power, with a commitment to "maintain and secure the generation capacity (kilowatt) necessary for stable supply across thermal power."

Similarly, a Kansai Electric spokesperson said the Strategic Energy Plan reflects "a balanced composition that does not depend on specific power sources or fuels," adding that the proportion of thermal power has been set considering the expected expansion of decarbonized energy sources such as renewable energy, in addition to the maximized use of nuclear power.

Hosaka interview

In a Jan. 29 interview with Platts, part of S&P Global Commodity Insights, Shin Hosaka, the former head of Japan's Agency for Natural Resources and Energy, said the country will seriously need to consider practical solutions to fill the balance of 50% other than renewables in the FY 2040-41 power generation mix.

"What I think is that this Strategic Energy Plan suggests something else -- the renewable energy figures are what they are with perovskite operating at full capacity, right?" said Hosaka, who was in charge of formulating the 6th Strategic Energy Plan in 2021 as the ANRE commissioner at the Ministry of Economy, Trade and Industry.

"Looking at the integration costs, it appears that once renewable energy exceeds 50%, the costs rise significantly, and the option of going beyond 50% renewable energy faces territorial and geographical limitations," Hosaka said.

"Of course, if we push offshore wind power to its limits, it might be possible, but when we think about the whole situation, we must ask what will cover the remaining 50%," he added.

"When it comes to covering the remaining portion, it seems we have no choice but to find practical solutions," he said, pointing out that there are "certain limits" to expanding the share of nuclear power beyond 20% following the Fukushima nuclear disaster.

"This leads us to consider how we will handle gas," Hosaka said, adding that "discussions on how to manage gas will inevitably continue."