Japan is among the biggest economies in GDP, and also a fourth largest consumer of electricity, after the U.S., China, and India in 2017. Yet it is also heavily reliant on fossil fuels, which made up almost 85% of energy production in 2017. Although this is largely the direct result of suspension of nuclear plants after the Fukushima disaster following the earthquake in 2011, progress in the Japanese renewable industry is lagging behind compared to other developed countries.
EKOenergy strives to expand the availability of EKOenergy labelled electricity in different parts of the world, and the Japanese market is no exception. The EKOenergy ecolabel guarantees the electricity is properly tracked and comes from power plants with minimum impact on local biodiversity. Information on the renewable options available to consumers is vital to realise our mission for the development of ecolabelled renewable energy market in Japan.
Although Japan has been committed to carbon emission reduction for a long time, existing energy certificates and carbon credit systems are complicated and fragmented at best. For Japanese companies who seek to shift their energy acquisition to renewables, the complexity is posing extra difficulty on top of the cost associated with renewables in Japan.
The certificates were established for use in Japanese market in mind, but the importance of international reporting is increasing, especially for companies with investors interested in environmental commitment. In Japan, there are three ways which the environmental value of renewable energy can be traded: Green Energy certificates, J-Credit and Non-Fossil Value certificate(NFV).
Global Acceptance of Certificates
Energy Attribute Certificates (such as Guarantee of Origin in the EU and I-RECs outside established markets) are used to track and document the generation of renewable electricity. These certificates prove the greenness of renewable energy and can be traded separately. They can be purchased by companies and entities to allow tracking environmental benefits from the place of production to the place of consumption, given that mostly the electricity from different sources gets mixed up in the grid. Tracking systems eliminate double-counting of environmental value at the source (through generation) and at the consumption of the values (used for carbon reporting schemes).
Global initiatives supporting a transition to 100% renewable energy, such as the RE100, as well as the global initiative for carbon disclosure CDP, accepts all three certificate systems, but accepts NFV certificates with tracking information from the government. The national tracking scheme for NFV certificates is planned, but has not yet been implemented as of February 2019. In the following section, each of the three certificate systems are briefly explained.
Non-Fossil Value Certificate (NFV) – FIT electricity and its environmental value
The newest of the three certificate systems is the Non-Fossil Value certificate (Hikaseki shōmeisho), which started in 2018, and utilizes the zero-emission environmental values of Feed-In Tariff (FIT) electricity. In future, the scheme is planned to include nuclear power, as it is zero-emission power.
Since 2009, Japan supported the installation of renewables through a Feed-In Tariff system, where the state guarantees to buy renewable energy at a fixed price for 10 years. The electricity is sent into the national grid, and its cost for the high purchase price is surcharged onto every consumer in the country. The environmental values of FIT electricity could be claimed by the users, but since the cost for sustaining the FIT scheme is surcharged to all consumers, its emission status is calculated so that the emission coefficient takes the national surcharge scheme into account .
NFVs were created for retail electricity sellers, which emerged after market liberalization in 2016, so that they can procure environmental value for their electricity acquired from FIT, as well as to reduce the burden for consumers to sustain the FIT scheme. The certificates are sold on a newly created, non-fossil market called the Japan Electric Power Exchange(JEPX), which is an energy exchange market for electricity companies to purchase electricity. The size is expected to be over 50 billion kWh between April and December 2017, making it the biggest certificate system in Japan.
The certificate has two types, normal and “renewable”, the latter possessing renewable attributes on top of its carbon reduction value. Because it is currently only issued to FIT electricity, all of them are “renewable” certificates. In 2019, when the purchase price guarantee for first generation of FIT plants expires, the environmental value of non-FIT electricity is to be introduced into the market, and NFV from nuclear power is planned to be included.
J-Credit – Project based carbon credit
J-Credit is a credit that is issued to projects for reducing carbon emission, energy consumption and increasing carbon absorption based on its CO2 reduction value. It is jointly maintained by the Ministry of Agriculture, Forestry and Fishery, the Ministry of Environment and the Ministry of Economy, Trade and Industry. Through the transaction, buyers can claim their commitment towards zero-emission, and producers can gather capital needed for the project. This system includes both renewable energy production and forest maintenance for increasing absorption. The FIT certified plants are excluded from this system as well. For the RE production, the credit is calculated by the comparison between projected energy consumption and reduced energy consumption after the project. The size was estimated to be worth 1.2 billion kWh in 2017.
Green Energy Certificate – early energy certificate
The Green Energy Certificate (Green denryoku shōmeisho) has been issued by private companies since 2001. It can be used for national reporting on Greenhouse gas reduction through national accreditation scheme by independent auditor, and is accepted by CDP as well. Its size is fairly limited, about 311 million kWh. Because of the limited size, and fairly high price, it offers limited opportunities for companies seeking transition into renewables.
The current issue with the certificates in Japan is its complexity, and limited size of certificates with tracking information, which is vital for use in international initiatives like CDP and RE100. Starting in late-2018, METI working group is planning to experiment with tracking system for NFCs with the batch traded in February 2019. The bidding of tracking information is has been conducted, and allocation will be happening in March 2019.
With the recent market liberalization, Japan’s energy market is transforming itself gradually. The introduction of a national tracking system in the near future would be a welcome change in one of the major electricity consuming states in the world.
EKOenergy welcomes the introduction of tracking systems in Japan. The EKOenergy label can work with certificates from all three tracking schemes, and we will strive to promote the shift to renewables in Japan. With the recent additions to RE100 companies from Japan, such as AEON, Fujitsu and Marui to name a few, the trend is definitely shifting towards 100% renewable energy across the world. To learn more about EKOenergy’s work in the global arena, see our 5-year report.
Written by Wataru Yamazaki
Posted on 04 March 2019