Marking a “monumental” shift that energy market analysts say is “the start of the end for thermal coal” major Japanese investors, including those most indebted to coal, are seeking to back large-scale renewable energy projects across Asia.
At the same time, Japanese banks and trading houses are walking away from coal investments, selling out of Australian mines and scrapping plans to build coal-fired powerplants.
The Guardian Online reports Japan is Australia’s largest export customer for thermal coal.
Of the proposed pipeline of coal power projects in Japan in 2015, figures from the Global Coal Plant tracker show three-quarters are now unlikely to proceed.
The Guardian reports the most recent proposal likely to be shelved, a 1.3 gigawatt (GW) coal-fired power station in Akita, in Japan’s north-west coastal region, follows the cancellation of two others earlier this year.
Sojitz Corporation this week announced further divestment from thermal coal, following Itochu announcing a coal exit last month, and Mitsui in November.
The Guardian reports sources in the Asian renewable and energy finance sectors say Japanese banks, trading houses and two prominent state-backed enterprises, the Japan Bank for International Cooperation and Japan International Cooperation Agency, have in recent months expressed their intention to invest more heavily in the renewable energy sector.
The increased interest in renewable energy comes, notably, from investors and companies with existing exposure to coal.
Demand for electricity in Japan is declining, as the population declines.
In that market, coal appears to be crowded out by additional capacity provided by nuclear restarts, solar and other renewable energy.
Other developers have their eyes on Akita, which is next to the Sea of Japan, as a site for offshore wind developments.
Across Japan, 13 offshore wind projects are undergoing environmental impact assessments, with the total investment opportunities worth up to $25 billion; according to Mizuho Bank estimates published this week.
The Guardian reports Kimiko Hirata, the international director of Japan’s Kiko Network, a climate action campaign group, said she had noticed a shift in sentiment among several big players in the Japanese business world.
“From last year we’ve seen some changes from the major banks and megabanks and also insurance companies as well as trading companies, their positions have changed on coal power policy,” she said.
“So we are clearly seeing that they’re thinking that continued support for coal power, both domestic and international, is no longer acceptable by the international community and also in Japan. We very much welcome the big change happening.”
Ms Hirata cautioned, however, that many of these financiers’ policy changes related to entirely new coal projects, not ones already in the pipeline.
Kiko’s own figures show plans for a total of 15GW of coal-fired power remained active, with some plants under construction and due to start operating next year.
Campaigners are awaiting the release of a long-term strategy to guide Japan’s approach to tackling climate change up to 2050, believing it will be a key test of the government’s seriousness.
The government is tipped to release it in the lead-up to June’s G20 summit in Osaka, where Prime Minister Shinzo Abe has signalled he wants to show leadership on climate change.
Some members of Mr Abe’s cabinet have been pushing for stronger climate action.
The government’s latest energy plan suggests fossil fuels will still account for 56 per cent of the energy mix in 2030, while nuclear will account for 20 to 22 per cent.
The developers behind the Akita proposal are reviewing their plan and considering other options, including biomass and liquefied natural gas, according to local media reports.
Asked about the review of the Akita project, Australia’s Trade Minister in the conservative Liberal-National government, Senator Simon Birmingham, told ABC Radio the government was aware there would be a transition in the global economy away from thermal coal.
Tim Buckley, the director of energy finance studies for the Institute of Energy Economics and Financial Analysis (IEEFA), said any shift in Japan was monumental for the rest of Asia.
“This is the start of the end for thermal coal,” Mr Buckley said.
“When Japan moves, it’s not just Japan, it is our number one thermal coal customer, but it’s also the funder of the growth agenda that the coal industry has been relying on.”
Most international projections, including those that envisage little action to address climate change, rely on an assumption that thermal coal demand from developed countries such as Japan will decline in the coming decades.
Mr Buckley said coal-fired power in developing Asian countries required government underwriting to attract significant private financial investors.
Such projects would be looking to JBIC, JICA and the Korean equivalent, the Export-Import Bank of Korea, which has also made significant recent moves into the renewable energy sector.
“Once you remove that capital subsidy, private enterprise is not going to put their own capital at risk on $4bn and $5bn capital projects in a foreign market.
“Projects that have been endorsed, announced, in train for five years all of a sudden become total stranded asset proposals.
“If Australia doesn’t understand that, if we as the exporter fail to transition our economy, we leave entire communities absolutely stranded and the workforce is not going to be protected by multinationals,” Mr Buckley added.
