Since the Japanese earthquake and tsunami in 2011, the country has understandably seen an explosion of interest in renewable energy. A plethora of wind and solar projects were announced, especially in the early days after the Fukushima nuclear plants were shut down. Goldman Sachs said recently that it will invest as much as $487 million in Japanese fuel cell, solar, wind and biomass efforts. The Japanese government, meanwhile, has set renewable targets of between 25% and 35% of total power generation by 2030, by which time some $700 billion would be invested in new, renewable energy.

Despite those developments, the Japanese government still backs nuclear power as a key energy provider. Prime Minister Shinzo Abe, breaking from the previous Liberal Democratic Party (LDP) government that had committed to phasing out of nuclear power by 2030, said in early 2013 that the country would begin restarting its plants as soon as new safety guidelines are in place. It’s likely to be a slow process: In the summer of 2013, Japan had just two of its 50 reactors operational, and may have only four providing power by 2015, according to Japan’s Institute of Energy Economics.

What’s more, serious new challenges affected the plant in the spring and summer of 2013, which could impact Japanese views on nuclear power going forward. Radiation readings on the ground at the crisis-ridden Fukushima Daiichi nuclear plant by September had spiked to levels that would be deadly within hours to an unprotected person, according to news reports. Tokyo Electric Power Company (TEPCO), Japan’s largest utility, which runs the Fukushima plant, has also been increasingly under fire to stem serious leaks of contaminated water into the Pacific Ocean. The Japanese government has pledged to spend some $500 million to correct the problems at the plant, but the recent setbacks could derail Prime Minister Abe’s efforts to restart some of Japan’s 48 atomic plants now in mothballs.

Japan, the only country to experience nuclear bomb attacks (on Hiroshima and Nagasaki in 1945), remains deeply conflicted about nuclear power. As the The New York Times reported, “The question of when, and whether, to restart the plants has dogged the country for two years, as politicians and ordinary Japanese try to balance their fears of a moribund economy when oil and gas costs have already hurt the balance of trade and worries over another environmental crisis, especially if the industry is not well regulated.”

Akihisa Shiozaki, an attorney who helped organize the first independent investigation of the Fukushima nuclear disaster, said that giving up the plants is not an easy decision, but the consensus for it is increasing. “Japan is a country that is not rich in natural resources on its own,” he said at the May 2013 Wharton Global Forum in Tokyo, in a session organized by the school’s Initiative for Global Environmental Leadership (IGEL). “So you would always have to secure an alternative energy source before you phase out something.”

Shiozaki added, “I think there is definitely a greater interest in renewable energy now. And nuclear energy will be facing higher security standards and therefore higher costs. There also will be efforts to import energy, like shale gas, from the U.S., and others.”

Japan, the only country to experience nuclear bomb attacks (on Hiroshima and Nagasaki in 1945), remains deeply conflicted about nuclear power.

Erwann Michel-Kerjan, managing director of the Risk Management and Decision Processes Center at Wharton, agrees with Shiozaki about the critical issues ahead. “The challenge in Japan is that the energy choices are rather limited,” he said. “It’s a small country without large natural resources, and it’s technically hard for them to abandon nuclear power — which has been a multi-decade national investment. Japan can substitute renewable for some nuclear, and that’s what they’re looking at now. But the country’s capital investment in nuclear power is considerable.”

Hard Choices for Japan

The reaction to the Fukushima Daiichi disaster has varied from nation to nation. In the U.S., the government has called for greater safety precautions, but made no serious political effort to reverse American commitment to nuclear power.

In Germany, however, the effect on policy was dramatic. As Lincoln Davies wrote in a 2011 article for the Brigham Young University Law Review titled, “Beyond Fukushima: Disasters, Nuclear Energy and Energy Law,” the disaster happened soon after German Chancellor Angela Merkel had forged a deal to keep the country’s 17 plants open for an additional 12 years.

“How much can change in a day,” Davies wrote. “In Fukushima’s wake, anti-nuclear sentiment in Germany surged to all-time highs, and Chancellor Merkel swiftly caved to the pressure. Not weeks or months but mere days after the tsunami struck Japan, Merkel announced that the government would order the shutdown of Germany’s seven nuclear plants built before 1980.” A later announcement added the 10 newer plants as well, meaning that Germany would have no nuclear power after 2022.

But Germany had always been a reluctant partner with nuclear power, and the Japanese — after some initial hesitation — had fully embraced it. Indeed, before 2011, Japan was on a course to double its nuclear commitment. As Nature reported, the country was laying the groundwork for nine additional plants in the next decade and 14 by 2030, complementing the 54 it already had. By 2030, nuclear power was intended to provide half of Japan’s energy needs (double its pre-Fukushima contribution).

Even after Fukushima, the nuclear momentum in Japan remains formidable. Renewable energy is not yet the path not taken, but it could become that. David Suzuki, the leading Canadian environmentalist, told Bloomberg News that the nuclear meltdown was “a huge opportunity” to build a national wind and solar network, but the opening is “being squandered in the drive to get the reactors up and running again.” Suzuki, a member of the Japan Renewable Energy Foundation, decried the tight bonds between the government and the private energy sector, which he said has made Japan’s Parliament reluctant to consider alternatives.

Before the earthquake and tsunami, carbon-free energy — mostly hydroelectric — accounted for just 11% of Japanese power generation. That percentage is growing, but slowly. In general, with the nuclear plants out of action, the biggest beneficiary in the short term has been fossil fuels, use of which was up 21% in 2012. Much of the growth comes from imported natural gas, a rising force to produce electricity in Japan.

Strong Renewable Incentives, But with Barriers

At the same time the Japanese government is supporting the re-start of its nuclear industry, it’s also very visibly financially supporting renewable energy. Shiozaki says the largest initiative so far has been the introduction of a feed-in tariff for renewables. Introduced a few months after the meltdown, the tariff “provides the assurance that the government will purchase for a fixed price any energy that is produced from renewable energy sources…. Companies can enjoy a large subsidy as a result of the fixed price.”

The feed-in tariff covers purchases over 10 to 20 years, depending on the type and amount of energy produced. Among the renewable forms covered are wind, solar, geothermal, biomass and hydropower. Solar producers, for instance, will receive, over 20 years, a very generous 37.8 yen, or 38 cents, per kilowatt hour generated.

But despite clean energy subsidies that are as much as three times more lucrative than those offered by renewable leaders Sweden and Germany, development has been slow. Although the feed-in tariffs made Japan the largest solar market (by annual installations) in 2013, the high cost of photovoltaic (PV) panels and wind turbines there remains a deterrent, reports Bloomberg. According to the International Energy Agency, installed solar PV prices in Japan are more than double those in Germany as of 2011. Some of the reasons for the price differences include higher land and labor costs and tougher regulations. In addition, the Japanese market tends to demand more advanced PV technologies given space limitations.

Japanese officials are also mindful of the intermittent nature of wind and solar — a big barrier to making either a primary source of electric power. Uninterrupted renewable power (except from geothermal, biomass and hydro-electric sources) often requires a backup form of energy storage, including large battery banks.

Bernard David, a partner in Energy Management International, and a senior fellow at Wharton’s IGEL, points out that intermittency is the biggest obstacle to a renewable-based energy economy. And it’s a challenge everywhere in the world, not just Japan. “We truly need great battery storage in order to use either wind or solar for baseload energy demands,” he said. “Also, depending on where you are in the world, you need to have high-voltage transmission lines from utility-scale projects to move the electricity to places where it will most probably be used.”

“Japan has had to import nearly all of its energy and that led to their becoming careful stewards of resources, and to a position of leadership on energy efficiency.” — Eric W. Orts

There are developing solutions to that problem. Mark Schiller, vice president for business development at Proton Onsite, a Connecticut-based company that manufactures energy-storage solutions based on PEM electrolysis hydrogen generators, says his firm is developing a hydrogen storage solution that can store energy on a megawatt-scale, with the ability to start and stop very quickly. Fast response is a key attribute for power plant energy-storage solutions.

Japan’s Asahi Shinbun newspaper reports that bureaucratic hurdles are another impediment to the country’s development of wind power, despite an abundant supply (especially along the extensive coastline). Holding installation back, the newspaper reports, “is a requirement that they [the developers] first carry out a lengthy and complex environmental impact assessment.”

One company, Green Power Investment Corporation, is planning a wind project on Japan’s main Honshu Island, but remains unsure how long it will take to complete the lengthy environmental assessment. Green Power also announced a 55-turbine project in a windswept district of Tokyo, but despite popular support, that 120-megawatt effort (the largest in Japan) has stalled as it attempts to meet the requirements of “dozens” of environmental studies.

Japan: A Nation of Efficiency Experts

Almost by necessity, Japan has become a very efficient user of energy. “Japan has had to import nearly all of its energy and that led to their becoming careful stewards of resources, and to a position of leadership on energy efficiency,” says Eric W. Orts, director of IGEL and a professor of legal studies and business ethics at Wharton, (as well as leader of the Wharton Global Alumni Forum Tokyo panel on “Lessons Learned from 3/11”). “They are very good at that, and continue to improve. And that’s led to greater opportunities for decentralizing energy resources.”

An example of the latter is the Japanese government’s successful subsidy of home fuel cells, thousands of which (aided by their compact size) now provide distributed electric power in homes throughout the country. In the first three years of a subsidy program launched in 2005, more than 2,000 one-kilowatt fuel cells were installed. One factor that makes the program work is lower per-capita electricity consumption in Japanese households (especially when compared to profligate American homes).

Japan has been an enthusiastic supporter of zero-emission hydrogen, which drew $240 million in research funding in 2012, according to the Hydrogen and Fuel Cell Promotion Office at Japan’s Ministry of Economy, Trade and Industry. The country is also a leading supporter of fuel-cell vehicles, and both Honda and Toyota plan to commercially launch hydrogen-based cars around 2015. By that year, Japan Times reported, 13 companies will have banded together to establish 100 hydrogen fueling stations, mainly in large cities.

Under the National Energy Strategy adopted in 2006, the goal is to improve Japan’s overall energy efficiency by 30% in 2030. The country has started toward that goal, one project at a time. Here are some key announcements:

  • Honda said this year it would build a 10-megawatt solar installation at a property that also includes a test track in the city of Tochigi prefecture city of Sakura. The company said it would be in a position to sell electricity by 2015.
  • Mitsubishi and C-Tech Corporation are currently building a very large 77-megawatt solar complex in Tahara City.
  • Japanese trader Mitsui announced plans in 2011 to build solar plants able to supply 30,000 households in the region most affected by the earthquake and tsunami.
  • Habitat for Humanity has also installed solar panels in storm-damaged regions of Japan as part of its Solar Home Recovery Project. Thirteen families are to benefit from the first phase of the program, with three-kilowatt systems. According to Hisato Harako, whose Higashinihon Sorana is installing the solar arrays, “The need for renewable energy is now higher than before the disaster. I hope this project will help bring about a positive change for the future of disaster-hit areas.”
  • Soon after the earthquake, a mega-solar project involving 38,000 panels was opened on an industrial waste site in the Tokyo suburb of Kawasaki City.
  • Japan has 2.3-gigawatts of installed wind power, with regulations requiring any tower over approximately 100 feet to have earthquake proof technology. Some 80% of the Japanese wind power infrastructure survived the natural disaster, including the Kamisu offshore farm, located only 180 miles from the epicenter. In early 2013, a 143-turbine, one-gigawatt offshore wind farm was announced for a location just nine miles from Fukishima. If completed by 2020 as planned, it would be the world’s largest.

Challenges and Opportunities

The projects are encouraging, but are not yet sufficient to wean Japan from its dependency on nuclear power. Hiroaki Fujii, executive deputy president and director of SB Energy Corporation in Tokyo, said at the Wharton forum, “we have been highly dependent on nuclear power, and I have no intention of denying its importance now, but renewable energy is also something that the Japanese people are now thinking about…. If we had distributed power, and a disaster of this magnitude reoccurs, we would have that system in place to respond. The government needs new policies to further promote renewable energy, and they should be positioned to encourage private investment.”

Wharton management professor Marshall W. Meyer, who specializes in Asia, said in an interview at the Tokyo Forum that Japanese leaders need to play a major role in encouraging renewable investment if it is to succeed. “The government is going to have to guarantee the investments — not just jump-start it, but stay in,” he said. “Because if that doesn’t happen, the investors will end up going to China or somewhere else.” Meyer pointed out that Chinese over-capacity in solar panel production has affected markets elsewhere, including the U.S. (where it was a factor in the celebrated Solyndra collapse) and Europe.

“Nuclear power is inherently enormously complicated, and that by itself is the strongest argument for getting our energy from somewhere else. As we saw in Japan, the consequences of mistakes with nuclear power are very great.” — Robert Giegengack

But in one sense, the Fukushima meltdown inadvertently led to a possible opening for locating renewables in a country where land is at a premium. Interviewed after the IGEL panel session, Satoshi Kitahama, representative director of the Kizuna Foundation, said that post-tsunami, land unsuitable for resettlement — or any other kind of development — could become sites for solar and wind installations. “Suddenly there is a large amount of land along the coast in a no-build zone,” he said. “It has abundant sunlight, and is in the largest populated prefecture after Hokido. The region is connected to the main electric lines, and thus to a large part of Japan.”

It’s more than a concept. “[The foundation is] working with locals to give them some value back to their land,” Kitahama said. “If it is shoreline land, we can put panels on it — and there will be no need to go near them. The owners can get paid a royalty or an equity stake in the business, which would give them the means to move on and get their lives started again.”

A Strong Start

In some ways, Japan is well-positioned for a renewable renaissance. Masayuki Kamimoto, vice chairman of the North Japan Research Institute for Sustainable Energy at Hirosaki University, reports that the disaster area “is well known for abundant renewable energy resources, such as wind, biomass and geothermal heat. Aomori Prefecture in the northern end of this area, for instance, has more renewable energy potential than its energy demand.” He cautioned that to effectively distribute renewable resources across different regions of the country will “require reinforcement of the national power grid.”

Effectively, if Japan is to at least supplement its nuclear-dominated energy supply, it needs a robust renewable network, connected to a smart grid that can move the power where needed. That would be a worthy goal, notes Robert Giegengack, professor of earth and environmental science at the University of Pennsylvania. “Nuclear power is inherently enormously complicated, and that by itself is the strongest argument for getting our energy from somewhere else. As we saw in Japan, the consequences of mistakes with nuclear power are very great.”

Bernard David, an entrepreneur and senior fellow at IGEL, endorses feed-in tariffs — already in place in Japan — and other incentives that need to be “in place long-term, and with certainty” — to transcend what might otherwise be a risky investment in renewable energy.

By setting national goals, passing lucrative incentives, announcing large-scale projects and exploring innovative ideas — such as unmanned green energy parks in irradiated zones — the country is making a start. But Japan is unlikely to say, as the Germans have, “Atomkraft? Nein, danke.”