Japan’s new Prime Minister Takaichi Sanae, known for her conservative approach, has been making headlines across various topics such as immigration, national security and energy. An ally of President Trump and deeply involved with his first presidency during Shinzo Abe’s tenure as prime minister, last month’s Takaichi-Trump summit revealed her intent.
Takaichi is not driving for an energy revolution with a strong left to right swing as seen in the U.S., Australia and other G7 markets. Tightening up on poor environmental protections from some renewables operators, putting economic sense at the forefront of investment decisions, and doubling down on energy security are just some of her key goals.
Energy and infrastructure is a long-play game, investment decisions and talent needs are shaped by upstream policy decisions. For both employers and employees, understanding risks and opportunities is key. Let’s dive into sectors where growth can be expected, take note of segments at risk, and consider how the industry can align with political goals.
Expansion of strategic sectors
Nuclear: This ranks high among Japan’s strategic priorities. Accelerating reactor restarts while advancing investment in next-generation nuclear technology and infrastructure are seen as key steps toward achieving cleaner, more stable, and secure energy. Such measures also promise to enhance Japan’s energy competitiveness and create new opportunities to export technology and talent globally.
Hydrogen and Ammonia: Japan has been a champion of the clean-burning molecules, though there are still serious cost gaps with the current technology and with scale; expect further growth and investment into these sectors based on the massive longer-term potential for Japan to be a regional leader in technology, supply and infrastructure.
Integrated and distributed renewables: As industrial production in key sectors such as semiconductors increases, as well as expanding critical digital infrastructure, expect to see a parallel rise in co-located, distributed renewable energy and storage systems. Smart renewable + storage systems help Japan’s power grid, improve overall economics and reduce reliance on overseas energy imports.
Next generation batteries and solar technology: Having lost the PV and LiB markets to China, Japan seeks to regain the upper hand through innovation. Key among Takaichi and Trump’s agreements were critical mineral exploration, trade and sharing. This will spur Japanese innovation in next generation battery / storage technologies as well as perovskite solar cells, aligning well with the distributed energy strategy.
Sectors under threat
Wind power: Offshore wind is facing strong headwinds with the exit of Round 1 projects from the Mitsubishi-Chubu Electric consortium. Also, an increase in environmental issues with onshore projects and scarcity of suitable land are slowing the progress of new projects. With Trump’s war on wind hitting hard and driving the exit of JERA Nex BP, Orsted, RWE and Equinor from the U.S. market, and material costs not coming down in the short-term, major questions remain for the sector.
Large scale renewables: Utility-scale solar can be expected to face similar challenges as onshore wind with an increased focus on tightening regulations around environmental impact and forestry development. Recent headlines note hundreds of solar projects with incomplete or incorrect permits, increasing challenges faced by developers.
Conventional thermal power: For Japan to increase industrial might in an age of increasing carbon tracking and pricing, further investments into carbon intensive energy infrastructure would likely be passed over in favor of nuclear and hydrogen technologies. Though existing fleets will continue to exist, energy security issues with Japan’s reliance on overseas imports is another key roadblock to these technologies.
Smarter talent will lead the way
As the topics of decarbonization, grid stability, energy security, technological innovation and economics overlap more closely, there will be less room for further business which only tackles one of those topics at the expense of others.
Renewable energy developers and operators will need to become deft at handling portfolios of smaller, distributed projects and the aggregation business, rather than relying on a decreasing number of large-scale projects. BESS operators will need to broaden their offerings of power products to fit the needs of their offtakers as ‘easy revenue’ in the form of LTDA and high caps on balancing services are cut. Hydrogen and ammonia players will need to take an integrated approach from upstream to downstream in order to co-create with industrial players to close the cost gap and scale deployment of new technologies.
For Japanese and foreign companies alike, those who can invest longer term, create or leverage new technologies and partner strategically with industry have the potential to thrive. Expect to see investment requirements shift, R&D money redistributed, and new partnerships between local and global players forged. Firms who can support Japan’s goals to become a clean energy technology powerhouse again have the biggest opportunity in this market.
There might be further market exits from companies unable or unwilling to adjust – however we see more opportunities across key segments where either technology or markets are more advanced than where Japan currently sits.
Visionary talent at the top, and flexible talent at middle and lower levels, will be the name of the game. For experienced professionals in the energy sector, the unprecedented increasing rate of change across the industry has made it more important than ever to keep yourself educated and updated on the rapidly evolving market.
Andrew Statter is a Partner at Titan GreenTech, an executive recruitment agency focused on the clean energy space.