Battery Storage In Japan – Policy Deep Dive

Policy Deep Dive is the latest policy update brought to you by Langley Esquire. Click on the image above to see the actual video.

In this edition of Policy Deep Dive, we talk about storage batteries. It’s well known that the importance of batteries in general is undeniable, especially with the advent of electric vehicles in recent years. However, storage batteries in general are also expanding into areas that were unimaginable just even a decade ago. This expansion isn’t limited to electric vehicles; it’s becoming strategic for countries’ energy supply worldwide. 

Throughout this session, we will explain the Japanese government’s policies regarding storage batteries and explore the future possibilities in Japan’s market in this field.

August 2022: METI releases strategy for Battery Storage

In August 2022, METI unveiled the “Storage Battery Industry Strategy,” charting an exciting vision for the future of batteries. This strategy highlights three game-changing roles for batteries:
1. Driving Carbon Neutrality: Japan aims to achieve carbon neutrality by 2050, with electrification at the forefront. Think electric cars, buzzing with the latest battery tech, paving the way to a greener future.
2. Powering Renewable Energy: Renewable energy is vital but unpredictable. Large-capacity batteries are the heroes stabilizing this energy, making wind and solar power reliable and mainstream.
3. Backing Up Critical Infrastructure: From 5G communication hubs to data centers, batteries are the backbone, ensuring seamless operation and propelling Japan’s digital transformation.

Battery storage isn’t just about power—it’s about resilience. In a country prone to natural disasters and heavily reliant on imported fuel, robust battery systems are essential. While lithium-ion batteries remain the star of the show for their high energy density and electric vehicle compatibility, Japan is also investing in cutting-edge battery research to stay ahead of the curve.The “Storage Battery Industry Strategy” is not just a policy; it’s a bold step towards a sustainable, technologically advanced, and resilient Japan.

How Renewable Energy is Currently Being Managed in Japan

Returning to the second point, batteries are vital not just for electrification but also for stabilizing the power system to ensure a steady supply of green electricity. Among renewable energy options, solar panels have seen the most significant growth in Japan due to their cost-effectiveness compared to wind, hydro, or geothermal power. Consequently, the use of solar panels has been increasing annually within Japan’s renewable energy sector.

Solar panels generate electricity only during daylight hours. Their output drops to zero at night, rises with the sun, and falls back to zero after sunset. The values shown can vary depending on the weather and time of year.

From our hydrogen presentation, you may recall that 20% of Japan’s energy currently comes from renewable sources, with a goal to increase this to 36-38% according to the latest Basic Energy Plan by the Agency for Natural Resources and Energy. Given the widespread use of solar panels in Japan, they will undoubtedly play a key role in achieving this target.

The Problem? Excessive Generation of Energy

The critical challenge with solar power is stabilizing its energy supply. 

During the day, excess solar power can overwhelm the electricity grid, causing congestion and increasing blackout risks. Large-capacity batteries are essential for storing excess power generated during the day and releasing it when needed, ensuring a consistent and reliable power supply.

In recent years, the issue of excess solar power has become significant. Last year, Kyodo News reported that major power companies temporarily suspended power generation 194 times for renewable energy operators in the first half of fiscal year 2023, 3.1 times more than the previous year. This problem affects individual solar power producers and can lead to large-scale blackouts and financial losses.

The power generation pattern of solar panels and the grid’s limited capacity to absorb this energy highlight the need for improved battery storage solutions and better grid management to accommodate increasing solar power without compromising stability.

The Solution? Battery Storage!

In response to this ongoing problem, battery storage has emerged as a promising solution. Instead of wasting excess electricity, the system stores it in batteries. This allows excess solar energy generated during the day to be used at night, effectively balancing supply and demand throughout the day.

Power plants generate electricity, and during surplus production, the excess power is stored in batteries. This stored power is then discharged during high-demand periods. This method offers significant benefits. Currently, nighttime power generation relies on gas or coal-fired plants, which have higher carbon dioxide emissions. By storing solar power generated during the day and using it at night, a cleaner alternative source of electricity is provided, reducing the carbon footprint.

Additionally, the energy storage system can store excess electricity when supply exceeds demand and release it when needed, generating profit from the price difference between charging and discharging the batteries. This makes battery storage both environmentally and financially sustainable.

Implementing battery storage enhances the stability and efficiency of the power grid while supporting the broader goal of a sustainable and carbon-neutral energy system. By maximizing renewable energy use and mitigating its instabilities, we can ensure a more reliable and environmentally friendly power supply for the future.

Why is Japan Interested in Battery Storage Now?

We’ve discussed how battery storage is gaining attention for its role in stabilizing the power from Japan’s widespread solar panels. But why the focus on battery storage now, given Japan’s long history with solar panels and other green energy sources?

The answer lies in recent changes. With the surge in solar power, excess electricity has become a real issue, especially as solar generation often exceeds demand. Plus, with industries like AI, data centers, and semiconductor factories expanding, Japan faces a growing need for reliable, 24/7 green electricity.

Large-scale batteries are key to this challenge. They store solar power for use at night and ensure a steady green energy supply, crucial for Japan’s sustainability goals and the Green Transformation (GX) initiative.

In short, battery storage is now crucial due to the boom in solar power and the increasing demand for green energy from emerging industries. This highlights the need for effective storage solutions to maximize renewable energy and support Japan’s sustainable future.

Global Growth of Battery Storage Market

To understand Japan’s interest in battery storage, it’s essential to look at the global battery market’s growth potential, especially in exports.

The storage battery market is booming worldwide. Projections show a 2.5-fold increase in automotive batteries from 2019 to 2030. This ia a staggering 16-fold increase from 2030 to 2050. Similarly, stationary batteries are set to grow tenfold from 2030 to 2050. The automotive battery market is already expanding rapidly due to the rise of electric vehicles (EVs). Currently, the stationary storage market is about one-tenth the size of the automotive market, highlighting its massive growth potential as we move toward 2050.

The Stakes Are High: Race Against Rising Competition

However, formulating an industrial policy to figure out what works best for batteries is no simple task for the Japanese government.

Japanese companies initially secured the early market with technological advantages, but as the market expanded, Chinese and Korean manufacturers increased their share. Meanwhile, Japanese manufacturers saw a decrease in their market share.

From 2015 to 2020, Japan’s share in the automotive lithium-ion battery market plummeted from over 50% to just 21%, and in stationary lithium-ion batteries, it dropped from 27% to a mere 5.4%. This rapid decline is striking, especially given Japan’s near-monopoly in 2000 and the fact that domestic production actually increased during this period.

This fall from dominance mirrors Japan’s past experience with the semiconductor industry, where it once led but now lags. As Japan’s semiconductor sector has shrunk, the government is now focused on attracting foreign investment to secure its domestic supply.

To avoid repeating this pattern with batteries, Japan must reverse its decline by reclaiming and enhancing its competitive edge. This involves fostering domestic innovation, boosting investment, and exploring international collaborations to lead the global battery market. The key challenge is to turn the tide and secure a leading position in this evolving industry for long-term sustainability and competitiveness.

The Government’s Targets for Battery Storage

Now that we’ve covered the benefits of battery storage and Japan’s growing interest, let’s dive into the Japanese government’s detailed policies on this promising technology.

The “Storage Battery Industry Strategy” document from METI sets out three key targets:

 

1. 1. Boost Domestic Manufacturing: Japan aims to ramp up its domestic production of automotive storage batteries to 100 GWh by 2030, with a long-term goal of reaching 150 GWh annually. This move highlights the potential for foreign companies to invest in Japan.

1. 1. Secure Global Presence: Japan plans to enhance its global footprint by ensuring access to rare metals essential for batteries and influencing international standards through standardization efforts.

1. 1. Capture Next-Generation Markets: Japan is targeting the next-generation battery market, including solid-state batteries, with full-scale implementation expected around 2030. This involves promoting joint R&D initiatives with Japanese companies.

Additionally, the “Sector-Specific Investment Strategy (Draft)” presented at the 10th GX Implementation Meeting on December 15, 2023, outlines significant investments: 7 trillion yen for battery manufacturing and 3 trillion yen for battery storage deployment over the next decade. This comprehensive strategy underscores Japan’s commitment to leading the battery technology sector.

Steps taken so far: Amendment to the Electricity Business Act (2022)

Since METI released its Battery Industry Strategy, the government has implemented regulatory changes to make storage batteries more user-friendly and predictable.

Notably, METI quickly amended the Electricity Business Act, which governs power plants and facilities. Previously, large-scale energy storage systems were mainly auxiliary units at power plants and substations, with unclear status when connected independently to the grid.

The 2022 amendment reclassified power generation from storage batteries as equivalent to conventional power generation, granting them the right to connect to the grid. This change comes with safety regulations to ensure secure operation.

This shift broadens the scope of policies and corporate strategies related to energy storage, elevating its importance. METI will continue to update regulations to remove obstacles and foster a thriving battery storage industry in Japan.

How the Government Plans to Eliminate (Financial) Barriers for Storage Batteries: Subsidies

The major policy directions in Japan’s fiscal year budget are:

 

• • 4 billion yen for accelerating renewable energy adoption, focusing on grid-scale storage batteries and optimizing distribution networks. This funding supports businesses installing large-scale battery systems.

• • 4.6 billion yen for developing and demonstrating next-generation technologies that use decentralized energy resources like storage batteries, applicable for both large grids and distributed uses.

• • 10.5 billion yen for promoting solar power self-consumption, enabling businesses and households to generate and use their own solar energy. This supports the “prosumerism” concept, enhancing the role of decentralized energy resources.

 

Conclusion

To wrap up, here are the key points on why storage batteries are crucial for Japan:

 

1. 1. Carbon Neutrality and Green Transformation: Storage batteries are vital for achieving carbon neutrality and facilitating Japan’s green transformation. They are essential for reaching the carbon neutrality targets set for 2030 and 2050.

1. 1. Industrial Demand for Green Energy: Japan’s competitiveness in cutting-edge technologies, like semiconductor factories and AI-focused data centers, depends on a reliable green energy source. Without sufficient green energy, the growth of these industries would be limited.

1. 1. Energy Security: Storage batteries are key to stabilizing Japan’s energy system. Given Japan’s limited natural resources and dependence on imports, combined with its vulnerability to natural disasters, investing in reliable and sustainable energy solutions is critical.

In summary, Japan’s focus on storage batteries highlights their importance in achieving sustainable energy, maintaining technological edge, and enhancing energy security.