WHERE ARE JAPAN’S EVS?
One Young World Japan Director, Daren Afshar, sits down with electricity market expert, Dan Shulman, to find out why Japan has been so slow in joining the world’s EV craze.
OK. Before we start, Dan, I think I need to introduce you to our OYWJ community first. Would you mind telling everyone a little about yourself and what Shulman Advisory does?
I’m from the US, and I’ve lived in Japan on and off for the last 21 years. For 15 years, I’ve worked in the electric power industry. Shulman Advisory helps foreign companies and other stakeholders thrive in the Japanese energy market, utilizing our deep understanding of the market’s structure, combined with our ability to bridge cultural, language, and other barriers between Japan and the rest of the world.
The next thing I need to do is clarify why we’re having this discussion here at OYWJ. A lot of our OYWJ Ambassadors are extremely passionate about the United Nations’ SDGs. In fact, Japan as a whole has responded fairly positively to the SDG movement and some of our Ambassadors have already created business models around them.
There are 17 SDGs in total and SDG #7 is AFFORDABLE AND CLEAN ENERGY and that is part of YOUR business model, right, Dan?
That’s right. My company’s major areas of focus are renewables, technologies needed to properly integrate renewables into the power grid, and the healthy growth of Japan’s deregulated electricity market in a direction that gives consumers more control over where their power is coming from while also pushing their costs downward.
OK then… let’s dive in to see how Japan is doing with regards to SDG #7 and how that is affecting my EV (electric vehicle) options in the marketplace today. First question: is Japan’s energy, in fact, affordable and clean? Second question: where are my EV options?
To look at some other high per-capita income countries, Japanese consumer electricity rates are quite high compared with most of the US, but pretty well in line with rates found in the European Union.
The majority of Japan’s nuclear plants remain offline, so even with the healthy growth of renewables over the last eight years, on the order of 75% of power is presently being generated with fossil fuels. Even in the government’s current goals for 2030, about 55% will continue to come from fossil fuels. Generation mix targets are expected to be updated by mid-2021 following PM Suga’s recent declaration of Japan’s goal to reach carbon neutrality by 2050.
75%?!?! Really? And here I thought we were in the middle of a solar and wind boom.
We are, actually. But, without nuclear, Japan has had no choice but to rely on fossil fuels until more progress can be made in renewable energy technology and expansion.
So, affordable? Maybe. Clean? No.
How do batteries fit into the overall energy strategy? That seems like the big topic these days overseas…allowing batteries in homes and cars to essentially create microgrids or energy islands. I don’t see any battery use in Japan where I live. Homes rarely have them. Condominiums definitely don’t and most of the cars are still gasoline or traditional hybrids with limited to no EV range.
Batteries have an almost inevitable role to play in any significant continued growth of renewables in Japan, but it depends on a lot of interlocking factors.
The growth of home rooftop solar over slightly more than the last decade in Japan was driven by a net-metering framework imposed on the utilities by the government. Under that system, if you installed solar panels on your rooftop, then at the end of the month the utility would only charge you for the net usage of power they supplied to you, which means that your electricity charges would be partially offset by the power you generated for yourself. The value of each kilowatt hour you generated for yourself was set by the government at an elevated rate that incentivized you to make the investment in the panels in the first place. In this type of scheme, because one kWh of power you generate from your panels could be more valuable than a kWh the utility sells you (the utilities’ rates were also fully regulated by the government until 2016), then depending on your electricity usage patterns, it’s theoretically possible to net out in your own favor at the end of the month, wherein the utility actually owes you money.
Household net-metering contracts started expiring at the end of 2019, and installing batteries is one way that consumers can continue to extract maximum value from the panels on their rooftops, but it’s a more complicated proposition. Since the electricity market was deregulated in 2016 – meaning that most electricity rates are defined by supply and demand, not by the government – it’s becoming harder to predict how quickly you can offset enough of your utility electricity charges to recoup the investment you put into the battery. There’s a very good chance that regulation and market design by METI will facilitate new schemes that give higher assurance about recouping of investment in batteries and other hardware in the coming years, but things are still under discussion and much is yet to be decided.
OK. That sounds like a policy problem to me. But, 2030 is right around the corner and this is Japan. We’re plagued with typhoons, earthquakes, and multiple natural disasters on a seasonal basis. Japan tends to lose power quite often in these cases, much like California experiences blackouts now during fire season. I would have thought that creating a number of independent power sources would be better for everyone and that THIS would be the focus of government policy. But, let’s save that for another discussion.
My real question is, that despite having some of the best battery tech in the world, it seems that Japan, Inc. as a whole has simply just refused to take the lead here. I’m not sure that everyone is aware of this but, for years, Panasonic has been the main reason why Tesla cars run in the first place. Teslas are powered by Panasonic batteries; hundreds of them, right? So, again I ask, where are my Japanese EVs?
I jumped online today and here is my count of Plug-In Electric Vehicles, Electric Vehicles, and Fuel Cell Vehicles currently available from Japanese auto makers. If you throw vehicle styling into the mix, I’m left with no options at all, really. So, what’s keeping Japan from joining the rest of the world here, Dan?
| Maker | PHEVs | EVs | FCVs |
|---|---|---|---|
|
Toyota |
2 |
0 |
1 |
|
Lexus |
0 |
0 |
0 |
|
Nissan |
0 |
1 |
0 |
|
Honda |
1 |
1 |
1 |
|
Mitsubishi |
1 |
2 |
0 |
|
Suzuki |
0 |
0 |
0 |
|
Mazda |
0 |
0 |
0 |
|
Daihatsu |
0 |
0 |
0 |
I’m not going to make excuses for the Japanese car makers. Surely, with so many people traveling such short distances in Japan, it is puzzling why they didn’t lead the global market in EV tech especially given Toyota’s expertise and experience in delivering hybrid tech to the world.
However, with EVs, there are some additional factors at play. The environmental value of EVs, particularly from a carbon emissions reduction perspective, is closely tied to how the power which is used to charge the EVs is generated. As we discussed a few minutes ago, power production in Japan since the Fukushima accident skews heavily towards fossil fuels. In a recent study my team did on EVs and hydrogen fuel cell vehicles, we learned that, based on the average nationwide power generation mix in Japan, the difference in carbon emissions savings between hybrid vehicles and fully electric vehicles is not nearly as great as one would hope.
Keep in mind that the mechanism for the increased environmental value of a hybrid over a conventional internal custom engine vehicle is physically contained in the car itself – it’s essentially a battery which makes the car a bit more expensive and gives it a substantial improvement in gas mileage. Pure EVs require charging infrastructure to continue expanding around the country, and that’s an investment which is not immediately offset on a per-unit basis by the purchase of a vehicle. As long as the power used to charge the cars is generated in a relatively dirty manner, it’s hard to see how the incentives will line up for enough consumers to be willing to spend extra money for EVs to compel companies and government to really ramp up the rate of installation of charging infrastructure.
Industrial strategy also plays a role here. Japanese automakers simply want to get the most out of their existing ability to produce high quality, economically priced hybrid vehicles. They sell well here in Japan and overseas. As pure EVs grow in popularity overseas, this will push Japanese automakers to invest more in EV production, and that should also increase the availability of EVs in Japan. Given that the current power generation mix in Japan negates much of the environmental case for a concerted domestic shift to EVs, it seems likely that much of the impetus will have to come from the outside world for at least another decade. And during that decade, Japanese industry seems more intent to invest in hydrogen power technologies – again, less for domestic environmental reasons, and more for export potential.
There are really several different balls of wax fused together here.
The Japanese government declared its intention to phase out internal combustion engine cars by 2035 following on PM Suga’s recent declaration of Japan’s goal to reach carbon neutrality by 2050, but details remain undefined.
I will concede that hydrogen is a promising alternative. But, I’m really interested in NOW and not 10 years from now. There are still plenty of emission-spewing vehicles on the road (mine included). I would love to see a revolution here in Japan in both EV production and styling in general. Maybe the new Nissan Ariya or BMW i4 will invigorate the Japanese auto makers?
Maybe. Nissan has its own problems right now, which is also a real shame considering how aggressive they have been in the adoption of battery-power for their vehicles.
Indeed. Thanks for sitting down with me today, Dan. For those unfamiliar with your company and the services you provide, where can our readers go to learn more?
https://shulman-advisory.com and it was my pleasure. We’re really passionate about SDGs 7, 9, and 11. So, I hope we can do this again and dive a little deeper on Japan’s energy challenges.
Absolutely, Dan. Thanks again.
