BY NICOLAS VIERGE
Corporate energy procurement strategies are often built on a simple, implicit assumption: that tomorrow’s market conditions will broadly resemble today’s. Chief among these assumptions is that energy – like most commodities – will remain readily available, provided buyers are willing to pay the prevailing price.
In Japan, this premise is becoming increasingly uncertain.
Power demand is expected to rise significantly, driven by the expansion of data centers and semiconductor manufacturing. The grid oversight body, OCCTO, projects electricity demand could reach as much as 1,100 TWh by FY2040 – an increase of roughly 25% from current levels. In parallel, METI targets a similar level of generation, at about 1,150 TWh by FY2040.
However, the assumptions underpinning METI’s outlook, as laid out in the nation’s 7th Basic Energy Plan, face mounting physical and structural constraints. Several of the power sectors that are forecasted to grow substantially are struggling with costs, regulations, diminishing returns and grid integration issues.
The one electricity source that was quietly expected to pick up the slack should others fail to deliver – gas-fired power generation – now faces greater scrutiny over fuel delivery disruptions due to the Iran war and extreme weather events in Australia.
As a fallback to the fallback plan, the government is easing restrictions on the use of older, less efficient coal-fired stations. Many are already half a century old. To assume that these will be around to backstop supply shortages in 2040 is naive. So would be the idea that the current electricity supply cornucopia will continue into the next decade.