Cheaper renewables could threaten $71 billion of Japanese coal assets

New research led by the University of Tokyo has found that up to US$71 billion of Japanese coal assets could be at risk of being rendered economically unviable by cheaper sources of renewable energy.

The report, called Land of the Rising Sun and Offshore Wind, stated that Japan’s planned and existing coal capacity could be jeopardised by low utilisation rates and the availability of cheaper renewable energy.

In particular, offshore wind, solar PV and onshore wind could be cheaper than new coal plants by 2022, 2023 and 2025 respectively. Furthermore, offshore wind and large-scale solar PV could be cheaper than the long-run marginal cost of existing coal plants by 2025 and 2027 for onshore wind, said the report.

If Japan aims to meet the globally agreed goal of limiting temperature rise to below 2 degrees Celsius this century, planned and operational coal capacity would need to be shut down and Japanese consumers could face $71 billion in higher power prices as the cost of stranded coal assets is passed on.

The report claims that $29 billion of this amount could be avoided if the Japanese government reconsidered the development of planned and under construction capacity straight away.

In a long-term emission reduction strategy adopted in June, Japan said it aims to cut its dependency on coal-fired power generation to the ‘lowest possible levels’, although it stopped short of giving a specific target.