Coal-de-sac: Advanced coal in Japan

A report exploring the role of advanced coal technologies in decarbonising Japan’s electricity sector

Fossil Fuels

Japan has a long-term climate target to become net-zero by 2050. Meeting this goal will require a rapid decarbonisation of Japan’s electricity sector. Yet as a country heavily reliant on coal for around a third of its electricity generation, Japan appears not yet ready to bid farewell to coal. Its Sixth Strategic Energy Plan, which details Japan’s energy policy plans in the coming decade, still has coal meeting close to one-fifth of its power demand in 2030.

At COP26, Prime Minister Fumio Kishida fleshed out Japan’s plans to reconcile Japan’s reliance on coal with its net-zero ambitions through “converting existing thermal power generation into zero-emission power generation”, through the use of advanced coal or so called ‘clean coal’ technologies.

This report aims to inform strategies for Japanese policymakers, electricity utilities and global investors, by providing a techno-economic analysis of the advanced coal technologies being considered and promoted in Japan.

The advanced coal technologies covered in this report are ammonia co-firing, coal gasification (IGCC) and carbon capture and storage (CCS). We also analyse the potential of renewable energy to meet Japan’s energy needs. In doing so, our hope is to prompt an urgent re-evaluation of the role of advanced coal in the electricity sector.

Download the Coal-de-sac report

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Prime Minister Fumio Kishida speaking at COP26 Photo credit: 首相官邸ホームページ (CreativeCommons)

Key Findings on Advanced Coal in Japan

Our analysis finds that advanced coal technologies are high-cost with limited carbon-reduction potential in the electricity sector.

Advanced coal is high-cost

The current Levelised Cost of Electricity (LCOE) for advanced coal technologies ranges from US$128/MWh for IGCC applications to US$296/MWh for green ammonia co-firing. The average is around US$200/MWh, which is more than double that of solar PV projects.
Even when including battery storage to manage the variable nature of renewable energy, solar PV and onshore wind was already cost-competitive against most advanced coal technologies in 2020.
This trend is set to continue, and by 2030 solar PV and onshore wind plus battery storage will outperform all advanced coal technologies and even unabated coal.

Advanced coal technologies are inconsistent with net-zero

The average carbon intensity of non-CCS equipped advanced coal technologies is five times higher than the Japanese energy grid needs to be in 2030 to align with a net-zero pathway.
While CCS appears the most viable of the advanced coal technologies from an emissions intensity perspective, Japan’s limited geological storage potential means it is not a sustainable solution to keep coal in the energy mix. Japan’s carbon storage capacity could run out in just one decade. High costs and exorbitant energy penalties present additional hurdles.

Policy recommendations for Japan’s electricity decarbonisation

Based on our analysis, TransitionZero offers the following high level recommendations to help stakeholders navigate risk and opportunities in the energy transition.

Re-evaluate the role for ammonia co-firing for power generation
Prioritise applications of green ammonia in “no-regrets” sectors
Reconsider the role of IGCC in future energy landscape, both domestically and internationally
Invest in CCS capabilities, but be prudent with Japan’s limited storage sites
Adopt an integrated approach to reduce integration cost
Pivot from nascent advanced coal to mature renewables for the short term
Push for offshore wind to unlock significant RE potential and deliver on steep learning curves

Please see the full report for more detail on these policy recommendations and the report findings.