TheCleanEnergySectorinJapan AnAnalysisonInvestmentand IndustrialCooperationOpportunities forEUSMEs Author:StijnLambrecht MinervaResearchFellow February2014 TheCleanEnergySectorinJapan TableofContents ExecutiveSummary.......................................................................................................................ii ListofAbbreviations.....................................................................................................................iv ListofTablesandGraphs...............................................................................................................v Acknowledgment.........................................................................................................................vi 1 Introduction..........................................................................................................................1 2 EUJapanCooperationonCleanEnergy...............................................................................4 2.1OverviewofEUJapanCleanEnergyCooperation..............................................................4 2.2CleanEnergyCooperationintheForthcominGFTA/EPAandSPA.......................................8 2.3HowtoMoveCooperationForwardbetweenJapanandtheEU?.....................................9 3 InvestmentandCooperationConditionsforEUCleanEnergyCompaniesinJapan..........12 3.1CompetitivenessoftheEUCleanEnergySector..............................................................12 3.2CleanEnergyinJapan.......................................................................................................13 3.3AttractivenessoftheJapaneseCleanEnergyMarket.......................................................19 3.4MarketAccessIssuesforEuropeanCompaniesandSMEsinJapan.................................21 3.5FundingandCooperationOpportunitiesfromJapan.......................................................24 3.6FundingandCooperationOpportunitiesfromEurope.....................................................30 3.7CleanEnergySectorProcurementProcessesinJapan.....................................................31 3.8ExperiencesofEuropeanSMEsontheJapaneseCleanEnergyMarket...........................33 4 OpportunitiesontheJapaneseCleanEnergyMarketforEuropeanSMEs........................37 4.1Overview...........................................................................................................................37 4.2WindPower.......................................................................................................................38 4.3Bioenergy:WoodyBiomassandBiogas...........................................................................46 4.4OtherOpportunities..........................................................................................................56 5 ConclusionandRecommendations....................................................................................61 6 Annexes..............................................................................................................................66 6.1CostofEnergyinJapanin2011........................................................................................66 6.2EnvironmentalAssessmentProcedure.............................................................................67 6.3ListofEuropeanCleanEnergySMEsinJapan...................................................................68 i TheCleanEnergySectorinJapan ExecutiveSummary WhiletheEUandJapanareattheforefrontofthedeploymentofcleantechnoloGies, there is still an unexplored potential in terms of experience sharing, technoloGical cooperation, and mutual investment in this area. The similarities in geoGraphical, environmental, political, and economic structures make Japan an ideal market for green technoloGies in which European companies can succeed. For Japan, there is a clear benefit to learn from the EU experience in technoloGies and solutions to accommodatelarGequantitiesofcleanenergysourcesintoitsenergymarket. TheJapanesemarketonlystartedtomoveaftertheFukushimadisasterin2011and there is a chance for foreiGn players to be part of the game. However, Japan is in a luxurious position as it is able to choose from the best approaches worldwide. Therefore, it is essential to present these solutions in Japan and show the Japanese playersinthismarketthatEuropeishereandenGaged. ThisreportoutlinesthecurrentstatusofEUJapancooperationoncleanenerGyand howbusinesscouldfitintotheseactivities.CooperationtakesplacethroughtheEU JapanEnerGyDialogue,ScienceandTechnoloGyAgreementandseminarsorGanisedby stakeholdersinJapan.However,acomprehensivefocusoncleanenerGyismissingand could be accommodated by the forthcominG Free Trade Agreement (FTA)/Economic PartnershipAgreement(EPA)andStrategicPartnershipAgreement(SPA). This report further reports on the conditions for clean energy in Japan for EU companies. The main obstacles, funding and cooperation opportunities are subsequentlysetout.Whileseveralissuesunderpinthegrowthofcleanenergy,they are not being seen as insurmountable. Japanese policymakers are aware of the necessity to remove the obstacles withholding growth in order for Japan to attain a highershareofrenewableenerGyintheenerGymixandincreaseenergyefficiency.It wasalsofoundthatthebusinessconditionsinthissectorarenotremarkablydifferent fromothersectorsinJapan. TodrawaclearpictureofthestatusofEUSmallandMediumsizedEnterprises(SMEs) onthismarket,SMEsactiveonthecleanenergymarketinJapanwereidentifiedanda selectionoftheminterviewedinordertolistentotheirexperiencesanddemands.61 companieswerefoundofwhich31haverepresentationsandninehavealocalofficein Japan.SuccessfactorsforSMEsontheJapanesemarketincludehiringofalocalexpert whohasatrackrecordinthespecificfieldthecompanyisgettinGinto.Inaddition,a ii TheCleanEnergySectorinJapan priorconnectiontoJapaneseclientsandinternationalexperiencewerealsofoundto becorrelatinGfactors.Thesecompanieswouldliketoreceivemoremarketinformation, tradefairparticipationoftheEUthatcouldfacilitatetheirparticipation,activitiesto showcase their company on the Japanese market and information for access to Japanesefunds. OpportunitiesforSMEscanbefoundinmostsectorsofthecleanenerGymarketfrom all types of renewable energy to smarts grids and energy efficiency related technoloGies.Throughinterviewsandliteraturereview,windandbioenergyhavebeen identifiedashavingthemostpotentialforEuropeancompanies. Finally,anumberofconclusionsandrecommendationsforpolicymakersaregiventhat could encourage investment and technoloGical cooperation in this field. The main actionstheEUcantaketopromoteEuropeancompaniesinJapanare: OrGanisingactivitiesfocusedonaspecifictechnoloGyorservice. IncludecleanenergyintheupcomingEUJapanFTA/EPA. IncludecleanenergyintheupcomingEUJapanSPA. Tradefairparticipation. EUbusinessmissionsforSMEswithinaspecifictheme. ExpandtheinformationserviceforEUcompaniesinterestedinJapan. iii TheCleanEnergySectorinJapan ListofAbbreviations BEV BatteryElectricVehicles CAPEX Capitalexpenditures CHP CombinedHeatandPower EPA EconomicPartnershipAgreement EPCO ElectricPowerCompany ETP ExecutiveTraininGProgramme EV ElectricVehicles FIT FeedinTariff FTA FreeTradeAgreement GW Gigawatt IEC InternationalElectrotechnicalCommission IPP IndependentPowerProducer JETRO JapanExternalTradeOrGanisation JV JointVenture JWPA JapaneseWindPowerAssociation kL kiloliter kW Kilowatt METI MinistryofEconomy,TradeandIndustry,Japan MW Megawatt NEDO NewEnergyandIndustrialTechnoloGyDevelopmentOrGanization OCCTO OrGanisationforCrossreGionalCoordinationofTransmissionOperators ORC OrGanicRankineCycle PHEV PluginHybridelectricVehicles PJ Petajoule PV Photovoltaic R&D Researchanddevelopment RPS RenewablePortfolioStandard SME SmallandMediumsizedEnterprise SPA StrategicPartnershipAgreement SPC SpecialPurposeCompanies SWH SolarWaterHeating TEPCO TokyoElectricPowerCompany TPP TransPacificPartnership TTIP TransatlanticTradeandInvestmentPartnership TW Terawatt iv TheCleanEnergySectorinJapan ListofTablesandGraphs Table1 ConcertJapanEfficientEnergyStorageandDistributionProjects 6 Table2 EuropeanlevelinitiativesonCleanEnergyinJapan 7 Table3 ExportValuefromtheEUMemberStates(1000EURO)forChapter 13 84(excluding8401),HS850231andHS854140 Table4 GeneralchallengesintheJapanesecleanenerGymarketfor 22 Europeancompanies Table5 PolicyandtechnicalissueslimitingEuropeancompaniestoenter 23 theJapaneserenewableenergymarket Table6 CleanEnerGyheadingsintheMETIEnergyResourcesSpecial 25 Accountbudget2014 Table7 ActivitiesofEuropeanCountriesonCleanEnerGyin2013 31 Table8 EuropeanSMEsontheJapaneseCleanEnerGyMarket 33 Table9 RenewableenergyintroductioninJapansincetheintroductionof 37 theFIT Table10 ReGulatoryhurdlesintheWindsector 42 Table11 BiomassTarGetsfor2020inJapan 48 Table12 Prefectureswithbiomasspromotionplans 50 Graph1 EnergyUsagebySectorinJapan19732012 16 v TheCleanEnergySectorinJapan Acknowledgment TheauthorwishestothankDr.SilviuJora,GeneralManager(EUside)oftheEUJapan CentreforIndustrialCooperation,Mr.HiroshiTsukamoto,GeneralManager(Japanside) oftheEUJapanCentreforIndustrialCooperation,thestaffoftheEUJapanCentrefor IndustrialCooperation,Mr.LyckleGriekandeveryonewhohasmadethetimeintheir busyschedulesforaninterview. vi TheCleanEnergySectorinJapan 1 Introduction TheEUandJapanhavetraditionallybeenattheforefrontofpromotingcleanenergy and developing clean energy technoloGies. The EU has set ambitious targets on renewableenerGy,emissionreductionsandenergyefficiencyinthe2020framework and will continue these efforts towards 2030 and 2050. Japan has dominated solar photovoltaic