Geothermal Power Development in Japan: Barriers and Remedies

Geothermal Power Development in Japan: Barriers and Remedies

Farhad Taghizadeh-Hesary, PhD, from Tokai University, Japan, and Vice President of The International Society for Energy Transition Studies (ISETS), discusses the challenges and potential solutions for geothermal energy development in Japan.

Impact of Fukushima Nuclear Disaster

The Fukushima nuclear disaster led to the shutdown of nuclear power in Japan, significantly altering the country's energy mix.

Shift in Japanese Energy Mix

Following the Fukushima disaster, Japan's energy mix underwent considerable changes:

• Renewable Energy Increase: The share of renewable energy increased from 9% before the crisis to 12% in 2014.
• Government Outlook for 2030: Aims for 23% total renewable energy, distributed as follows:
  • Hydro: 9%
  • Geothermal and other renewables: 7%
  • Solar: 7%
• Fossil Fuel Dependence:
  • LNG: 27%
  • Coal: 26%
  • Oil: 3%
• Nuclear Decline: Nuclear energy's contribution decreased significantly.

Crude Oil Consumption

A graph illustrates crude oil consumption by sector in Japan from 1982-2013, showing the impact of the Fukushima disaster in March 2011. The disaster heightened the sensitivity of Japanese economic sectors to oil price fluctuations. Sectors include transportation, residential, energy power, non-energy, industrial, and commercial.

Achieving Energy Security in Asia

The lecture references the book "Achieving Energy Security in Asia: Diversification, Integration and Policy Implications" (2019) by Farhad Taghizadeh-Hesary, Naoyuki Yoshino, Young Ho Chang, and Aladdin D. Rillo.

Geothermal Capacity

Japan is utilizing only approximately 2% of its geothermal capacity.

Estimated Geothermal Resources (MW)

• United States: 30,000
• Indonesia: 27,791
• Japan: 23,470

Installed Capacity of Geothermal Power Generation (MW)

• United States: 3,596
• Philippines: 1,929
• Indonesia: 1,590
• New Zealand: 971
• Italy: 916
• Mexico: 907
• Iceland: 665
• Turkey: 775
• Kenya: 676
• Japan: 544

Geothermal Energy Lag

Despite having the third largest reserves of geothermal resources, geothermal energy deployment lags in Japan.

• Energy Self-Sufficiency: Following the Fukushima nuclear disaster and subsequent nuclear shutdown, Japan's energy self-sufficiency dropped from 20.2% to 6.4% in 2014.
• Decreasing Geothermal Power Generation: Power generation from geothermal sources has been steadily decreasing over the years.

The study aims to examine the reasons behind this lack of development, provide a quantitative analysis of underpinning factors, and offer policy recommendations for increasing geothermal energy's share, not only in Japan but also in other countries with potential geothermal reserves.

Geothermal Power Plants in Japan

The lecture provides a map and list of geothermal power plants in Japan, noting that no additional geothermal power stations have been constructed since the Hachijojima Station in 1999. As of March 2017, plants in operation (over 1,000kW) include:

• Hatchobaru
• Yamagawa
• Onikobe
• Yanaizu Nishiyama
• Otake
• Waita
• Ogiri
• Medipolis Ibusuki
• Suginoi

Geothermal Power Generation (1966-2017)

A graph illustrates geothermal power generation in Japan from 1966 to 2017, showing fluctuations over the years.

Supportive Policies for Renewable Energy

Policies to promote the Renewable Energy (RE) sector include:

• Feed-in-Tariff (FIT): FIT policies are present in many countries (EU, USA, Japan), and, along with tax advantages, are considered efficient.
• Renewable Portfolio Standards (RPS): While RPS had a direct impact on RE, the scheme was not ambitious enough to be a success.
• R&D and Capital Cost Reduction: R&D and policies that reduce capital costs are also found to be appropriate supportive schemes.
• Novel Financing Regimes: Community-based funding or utilizing carbon taxes to increase the rate of return of RE projects are also important.

Barriers to Geothermal Energy Deployment

Studies identify the following barriers to geothermal energy deployment:

• Social Barriers:
  • Lack of awareness or acceptance
  • Lack of clear policies and political will
• Environmental and Technical Barriers:
  • Concerns over safety and sustainability of resources
  • Absence of qualified staff
• Economic and Financial Barriers:
  • High capital costs
  • Lack of sufficient market

Challenges and Barriers

The lecture outlines a detailed breakdown of challenges and barriers:

Technical Barriers

• Low electric efficiency
• High degree of specialization needed
• Low rate of success for survey drillings
• Capacity factor around 60%

Social Barriers

• Lack of public awareness
• High opposition from local onsen owners fearing resource depletion
• Decision-making at the local level influenced by onsen owners

Legal and Environmental Barriers

• 80% of geothermal resources located in national park areas
• Long and costly Environmental Impact Assessment, mandatory since 1999

Economic and Financial Barriers

• Risky and high upfront investment
• Higher installation costs in Japan due to low drilling success rates, assessment costs, and limited connectivity to the power grid
• Long lead time because of long consensus-seeking and multiple extra assessments

Supportive Policies

• Sunshine Plan: After 1973, geothermal energy was targeted by a vast R&D program (the 'Sunshine Plan') to increase energy self-sufficiency, allocating ¥220 billion to R&D across 23 national research projects. NEDO was created in 1980 to handle R&D.
• Policy Shifts: Stabilization of oil prices and discontent with the Sunshine Plan's expense led to the discontinuation of R&D subsidies in 2002. From 2003 to 2012, only the Renewable Portfolio Scheme (RPS) was in force.
• Current Measures: Since 2012, the Feed-in-Tariff (FIT) replaced RPS, and JOGMEC was put in charge of geothermal development, providing subsidies for surface surveys and drillings, offering 50% equity capital, and providing liability guarantees.

Public Expenditures for Geothermal Energy

A graph illustrates public expenditures for geothermal energy, including loan guarantee schemes, R&D, survey drillings and educational programs, subsidies, environmental impact assessments, and private investment.

Variables for Quantitative Analysis

The lecture identifies key variables for a quantitative analysis of geothermal energy development:

Unit Root Tests

Results from Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests are presented, showing t-statistics for levels and first differences of key variables (** denotes significance at the 5% level).

Vector Error Correction Model (VECM)

The Vector Error Correction Model (VECM) is defined as: DVt = A(L)DV{t-1} + \Pi V{t-1} + \varepsilont where V = (Y, FIT, SUBS, RD, P_O, I, GDP, CAP). D represents first differences, L is the lag operator, and \varepsilon is an error term. \Pi can be written as \Pi = \alpha \beta', where \alpha and \beta are p \times r matrices, and p is the number of variables in V. \beta is a vector of the cointegrating relationship, and \alpha is a loading matrix defining the adjustment speed of the variables in V to the long-run equilibrium. The rank of \Pi is denoted by r, the AIC standard suggested nine lags.

The long-run relationship is given by:

Y = 1321.31FIT - 0.16SUBS + 0.16RD + 0.06P_{oil} - 14.18i + 52.62GDP - 1602CAP
((\text{99.34)^}) ((\text{0.01)^}) ((\text{0.03)^}) ((\text{0.003)^}) ((\text{29.45)}) ((\text{14.99)^}) ((\text{160.94)^})

Note: * denotes statistical significance at the 5% level.

Short-Run Dynamics

Table showing short-run dynamics including error correction terms (ECT1, ECT2) and lagged variables with t-statistics and R-squared values.

Impulse Response Function

Graphs displaying the accumulated response of Y (geothermal power generation) to Cholesky One S.D. (d.f. adjusted) Innovations in FIT, SUBS, RD, PO, I, GDP, and CAP.

Variance Decomposition

Table showing variance decomposition of geothermal power generation (Y) explained by FIT, SUBS, RD, PO, I, and GDP over a 20-year period. The Cholesky ordering is Y FIT SUBS RD PO I GDP CAP.

Conclusion

1. Barriers hindering the development of geothermal energy can be divided into four types: technical, legal, social, and economic.
2. Environmental hazards and uncertainty linked with geothermal power increased social opposition and forced the government to strengthen regulations, leading to high development costs and long lead times.
3. Supportive policies, such as R&D and subsidies, were introduced but discontinued due to their expensive nature. After 2011, government expenditures reached unprecedented levels but are expected to be discontinued as well.
4. Quantitative analysis indicates that R&D and FiT are the most efficient policies for promoting geothermal energy development, while subsidies are less effective. Social opposition remains an important barrier.