Japan Energy Currents
Japanese Aid for California Fire Victims; Flexibility for Offshore Wind; Energy Efficiency for Data Centers; Hokkaido Gets Serious About GX; Global Risks; Trump Leaves Paris
Hey Power Japan readers,
Both the international and Japanese media landscapes are deeply anxious about the incoming Trump Administration in the US and its potential impact on, well, everything. And of course, I include a news piece about that in this week’s newsletter (scroll to the very bottom).
But digging a bit deeper, there’s plenty of energy- and climate-related stories in Japan not related to the 47th president of the United States.
Like what? For example, the Japanese government is showing leniency to offshore wind developers to attract more investments. It’s also working on a new standard to make new data centers more energy efficient, an important move because of how power-hungry data centers are projected to become in the future. The prefectural government of Hokkaido is getting very serious about capitalizing on its potential as a magnet for new energy and digital investments.
Oh, and the World Economic Forum published its glossy and sophisticated Global Risks Report for this year.
Questions or comments? Leave a comment or let me know in the subscriber chat.
Every week, Japan Energy Currents will highlight recent news and analyses that give us a better understanding of the current moment in Japan’s energy landscape and its role in the global energy transition.
*Some articles will be in Japanese and some will be paywalled. But I’ll aim to summarize each article with enough detail so you won’t miss out.
Japan
1. Japan commits to give USD 2 million in aid to California for wildfire relief (Kyodo News)
Chief Cabinet Secretary Hayashi Yoshimasa announced that Japan will provide USD 2 million (~JPY 300 million) in aid for relief efforts through the American Red Cross in response to the multiple wildfires ravaging Southern California.
The aid is intended to be used for securing evacuation shelters and food and offering psychological support to victims and those who have been displaced from their homes.
2. Offshore wind power tenders to reflect up to 40% rise in material prices from fiscal 2025 (Nikkei | in Japanese)
Starting in fiscal year 2025 (which starts this April), METI will allow up to 40% of inflation-caused cost increases for wind turbines and other infrastructure to be reflected in electricity prices. This is designed to reduce investment risks and promote offshore wind power bidders in future auctions.
Security deposits for project delays will be nearly doubled, from JPY 13,000 ~ JPY 24,000 per kilowatt of capacity, to encourage operators to adhere to planned schedules.
Offshore wind power is set to play a larger role in Japan's energy mix, with a target of 4-8% of total electricity generation by 2040, up from its current 1% share.
But like in other markets, Japan's wind power sector is running into challenges from inflation-driven cost increases, but lessons from overseas examples like the UK and Denmark are helping Japanese policymakers craft new policies to mitigate worries over profitability and attract investments.
3. Government mulls energy efficiency standard for new data centers (Denki Shimbun | in Japanese)
The Agency for Natural Resources and Energy (ANRE) under METI is discussing an energy efficiency standard for new data center operators.
This standard will require operators with annual energy consumption of 1,500 kiloliters or more (in crude oil equivalent) to aim for an average Power Usage Effectiveness (PUE) value of 1.4 or lower for new data centers of a certain size.
Note: “PUE” measures a data center's energy efficiency by comparing total facility energy use to the energy consumed by IT equipment. A lower PUE indicates higher efficiency, with the target of 1.4 reflecting a focus on reducing non-IT energy usage.
The new standard under discussion would also require operators of data centers greater than 300 square meters to submit medium- and long-term plans and regular reports on electricity consumption annual efficiency improvement rates, utilization rates, etc.
The 7th Strategic Energy Plan, which is expected to be adopted by March this year, prioritizes data center energy efficiency improvements.
4. Hokkaido proposes GX master plan to cut national corporate tax for semiconductors and wind power (Nikkei | in Japanese)
Hokkaido has put together a plan to attract semiconductor, wind energy, and hydrogen investments — often called Green Transformation (GX) businesses. The plan calls for a reduction in national corporate tax for GX businesses in 167 cities and towns designated as "promotion zones." Combined with the prefecture's own tax incentives, which were granted as a special financial and asset management zone, the prefecture will put in place a system to attract GX investments.
The plan was compiled based on the national government’s Regional Future Investment Promotion Act, which supports companies that take advantage of each region’s unique characteristics. With METI’s consent, the prefecture plans to publish the plan in the 2025 fiscal year. The plan aims to attract 40 GX businesses and create a total of over JPY 2.6 billion in value in five years.
The three target fields are manufacturing, digital, and energy. These include, for example, manufacturing precision equipment used in next-generation semiconductors, data center construction, and production and supply of hydrogen and sustainable aviation fuel (SAF). Companies in these industries that meet certain criteria will be eligible for national corporate tax cuts and prefectural fixed asset tax.
Nikkei separately reported that regional banks will play a key role in promoting renewable energy, offshore wind, ammonia co-firing, and SAF in Hokkaido.
Global
5. Global risks 2025 (World Economic Forum)
I haven’t explored this in detail yet, but the World Economic Forum published its Global Risks Report for 2025 ahead of its annual meeting in Davos, taking place Jan 20-24.
The report lists an alarming number of global risks both short and long term. What caught my attention was the prevalence of environmental risks in both time horizons: “Extreme weather events” is ranked 2nd and “Pollution” 6th in the 2-year horizon, while “Extreme weather events,” “Biodiversity loss and ecosystem collapse,” “Critical change to Earth systems,” and “Natural resource shortages” occupy the top 4 in the 10-year horizon.
6. Trump to sign executive order to exit from the Paris Agreement (CNN)
No one needs to be told that Jan 20 marked Donald Trump’s inauguration as the US President. There’s already a torrent of news on his Day 1 activities. But this one in particular is big.
This CNN article has a lot more than just Trump’s unilateral exit from Paris. Well worth a read.
That’s it for this week’s Japan Energy Currents. Be sure to share this edition with your network.
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