Can Nuclear Be Japan’s Answer to Meeting Its Energy Demand Expansion

Commentary by Jane Nakano

Published June 28, 2024

Policymakers in Tokyo and Washington alike are grappling with the prospect of soaring energy demand from data center operations and semiconductor manufacturing. While the need to meet such energy demand is a common challenge, conversations on what resources might meet the energy requirements are strikingly different between the two countries. In the United States, the question has re-elevated the role of natural gas while also furthering a push for renewable energy capacity as well as nuclear energy. In contrast, Japan's high import dependence on fossil fuels and landmass constraints that limit significant, additional renewables capacity have revitalized its interest in nuclear energy. A full-fledged restoration of nuclear energy may be a key to Japan's competitiveness as an advanced, industrialized economy while safeguarding its energy security and decarbonization commitments.

Japan has seen a remarkable build-out of data centers in recent years. A tally of media reports suggests both domestic and foreign capital inflows, including some strong investment interests from leading U.S. data service and information technology companies, including $15 billion through 2027 from Amazon Web Services (announced in January 2024), $2.9 billion through 2026 from Microsoft (announced in April 2024), and $8 billion over the next decade from Oracle (announced in April 2024). Japan believes that data centers and related industries will generate significant economic and infrastructure benefits for the country. A study by the Development Bank of Japan notes that the database industry created a $16.5 billion (at $1 = JPY150) market for Japan in 2019.

Expanding data centers would mean growth for Japan's power demand, which has been stagnant since the early 2000s. In fact, when the Japanese government announced its electric supply outlook for 2030, which is based on the sixth strategic energy plan published three years ago, it assumed a 10 percent decline in power consumption, to a total of 934 terawatt hours (TWh). According to the outlook, the 2030 demand would be met by nuclear energy at 20-22 percent, renewables (including hydro) at 36-38 percent, and fossil fuels at 41 percent.

The anticipated expansion of energy requirements necessitates a fresh look at which resources to leverage and to what extent. In 2022, the power requirement from data center operations accounted for about 0.8 percent of Japan's total power consumption of 939 TWh. Notwithstanding multiple unknowns, such as advancements in technologies, changes to processes, as well as the rate of efficiency improvements, the new and expanded data center operations could generate an additional electric power demand of 21 TWh to 198 TWh in 2050, according to scenario-based forecasting by the Central Research Institute of Electric Power Industry, a leading electric power research institute in Japan.

The looming challenge of meeting the energy demand will shape Japan's energy policy. Just this spring, the Japanese government launched its triennial exercise of revising its strategic energy plan (the seventh plan) and updating a companion national energy outlook for 2040. The updated outlook will be particularly informative regarding how Japan plans to meet its mid-century carbon neutrality pledge and what its nationally determined contribution (NDC) for 2035 under the Paris Climate Agreement may look like against its 2030 NDC of a 46 percent reduction (against the 2013 level).

Against this background, it comes as no surprise that support for nuclear energy is expanding among policymakers and industrial stakeholders. Following a government policy reversal in late 2022 that allows Japan to maximize the use of existing nuclear reactors by accelerating restarts and by extending the lifespan of nuclear reactors beyond 60 years, Japan's powerful business association Keidanren also called for maximizing nuclear energy use, viewing it as "indispensable."

Additionally, a recent Nikkei survey of leading Japanese corporate executives shows that over 70 percent of 144 respondents support nuclear restarts, including nearly 55 percent supporting new nuclear construction (both of existing and advanced technologies). The same survey also showed that nearly 70 percent of the surveyed executives support a coal phaseout, underscoring the headwinds against coal-fired power generation in Japan, although 20 percent wished to preserve coal in the country's energy mix. The latest opinion poll by Japan's Atomic Energy Commission, which has been carried out annually since 2007, also shows that the public opposition to nuclear energy use is lessening, with the share of those supportive of restarts and expansion having nearly doubled to 19 percent since 2014, although 42 percent wish to see it gradually phased out.

How quickly Japan manages to fully restore its nuclear fleet is a key variable in the country's ability to capitalize on the build-out of data centers and semiconductor industries. Nuclear currently accounts for about 5.5 percent of the country's electric power supply-far short of the 20-22 percent share envisioned under the current strategic energy plan. One after another, Japan's 36 remaining technically operable reactors are slated to restart in the next few years. For the share to reach the government outlook level, however, the operating nuclear capacity will likely need to more than double, from 11 gigawatts today to 24 gigawatts in 2030. The ongoing formulation of the strategic energy plan and the deliberation on what role nuclear energy may play will be consequential for Japan's ability to address its trilemma of preserving its industrial competitiveness while strengthening energy security and advancing decarbonization.

Jane Nakano is a senior fellow in the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C.

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