Nov 10, 2014

Is a Contracts for Difference Scheme the Right Move for the Japanese Energy Sector?

3 min
In the wake of Fukushima nuclear crisis, Japan’s energy sector has been in a state of relative uncertainty. Though the government is looking to...

In the wake of Fukushima nuclear crisis, Japan’s energy sector has been in a state of relative uncertainty. Though the government is looking to bolster its renewable energy targets, it is also entertaining the option of restarting its nuclear plants.

According to, Japan could soon move to a ‘contracts for difference’ (CfD) scheme similar to the UK’s, effectively overhauling the country’s renewable energy policies. Under the CfD scheme, energy generators would be in competition with one another to provide the lowest price for energy. All generators would also be drawing from the same pool of funding, ramping up competition.  

First and foremost, however, the government needs to outline a clear energy policy for the country—something that’s likely to occur by the end of the year. This policy will shed light on the mix of energy the government aims to utilize.

Regardless of the energy mix the government decides on, some are worried CfDs are not the best answer for Japan.

Japan Renewable Energy Foundation’s (JREF) director Mika Ohbayashi believes a move toward CfDs would bolster the country’s argument for nuclear energy.

“They [the Japanese government] are considering CfDs, but the UK is using CfDs to allow it to build new nuclear power plants while Japan is looking to use it to justify restarting existing ones,” she told PV-Tech. “It’s a crazy system I think.”

CfDs, which have found a strong footing in the UK, garner mixed reactions from the renewable energy sector. The CfDs tend to favor large, established companies and energy sources, such as wind and solar. Less established forms of energy, such as offshore wind, have a much more difficult time acquiring a CfD, leading to their disdain for the scheme. With the CfD allocation in the UK much lower than expected, members of the offshore wind industry are concerned about its future.

“Offshore wind developments are huge infrastructure projects with investment lead times of several years,” Lindsay Leask, senior policy manager for offshore renewable at Scottish Renewables, told Wind Power Monthly. “A stable framework which provides certainty and clarity over the long term is therefore absolutely crucial to the sector's success. Without a CfD offshore wind projects simply cannot proceed. The budget for the first allocation round of CfDs was far lower than anyone in the sector had anticipated, has clearly impacted the confidence of existing and potential investors in the sector.”

This then begs the question: Could the same thing happen in Japan and what would it mean for renewable energy? A work group has already been tasked with determining the amount of available capacity on the grid for renewable projects and their findings haven’t been entirely promising. Ohbayashi was skeptical about the approach of the group and their motives.

If a CfD scheme is put in place, nuclear energy is Japan could be a major part of the country’s energy profile. All of this, however, remains to be seen. 

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Jul 29, 2021

Carbon dioxide removal revenues worth £2bn a year by 2030

Dominic Ellis
4 min
Engineered greenhouse gas removals will become "a major new infrastructure sector" in the coming decades says the UK's National Infrastructure Commission

Carbon dioxide removal revenues could reach £2bn a year by 2030 in the UK with costs per megatonne totalling up to £400 million, according to the National Infrastructure Commission

Engineered greenhouse gas removals will become "a major new infrastructure sector" in the coming decades - although costs are uncertain given removal technologies are in their infancy - and revenues could match that of the UK’s water sector by 2050. The Commission’s analysis suggests engineered removals technologies need to have capacity to remove five to ten megatonnes of carbon dioxide no later than 2030, and between 40 and 100 megatonnes by 2050.

The Commission states technologies fit into two categories: extracting carbon dioxide directly out of the air; and bioenergy with carbon capture technology – processing biomass to recapture carbon dioxide absorbed as the fuel grew. In both cases, the captured CO2 is then stored permanently out of the atmosphere, typically under the seabed.

The report sets out how the engineered removal and storage of carbon dioxide offers the most realistic way to mitigate the final slice of emissions expected to remain by the 2040s from sources that don’t currently have a decarbonisation solution, like aviation and agriculture. 

It stresses that the potential of these technologies is “not an excuse to delay necessary action elsewhere” and cannot replace efforts to reduce emissions from sectors like road transport or power, where removals would be a more expensive alternative.  

The critical role these technologies will play in meeting climate targets means government must rapidly kick start the sector so that it becomes viable by the 2030s, according to the report, which was commissioned by government in November 2020. 

Early movement by the UK to develop the expertise and capacity in greenhouse gas removal technologies could create a comparative advantage, with the prospect of other countries needing to procure the knowledge and skills the UK develops.

The Commission recommends that government should support the development of this new sector in the short term with policies that drive delivery of these technologies and create demand through obligations on polluting industries, which will over time enable a competitive market to develop. Robust independent regulation must also be put in place from the start to help build public and investor confidence.

While the burden of these costs could be shared by different parts of industries required to pay for removals or in part shared with government, the report acknowledges that, over the longer term, the aim should be to have polluting sectors pay for removals they need to reach carbon targets.

Polluting industries are likely to pass a proportion of the costs onto consumers. While those with bigger household expenditures will pay more than those on lower incomes, the report underlines that government will need to identify ways of protecting vulnerable consumers and to decide where in relevant industry supply chains the costs should fall.

Chair of the National Infrastructure Commission, Sir John Armitt, said taking steps to clean our air is something we’re going to have to get used to, just as we already manage our wastewater and household refuse. 

"While engineered removals will not be everyone’s favourite device in the toolkit, they are there for the hardest jobs. And in the overall project of mitigating our impact on the planet for the sake of generations to come, we need every tool we can find," he said.

“But to get close to having the sector operating where and when we need it to, the government needs to get ahead of the game now. The adaptive approach to market building we recommend will create the best environment for emerging technologies to develop quickly and show their worth, avoiding the need for government to pick winners. We know from the dramatic fall in the cost of renewables that this approach works and we must apply the lessons learned to this novel, but necessary, technology.” 

The Intergovernmental Panel on Climate Change and International Energy Agency estimate a global capacity for engineered removals of 2,000 to 16,000 megatonnes of carbon dioxide each year by 2050 will be needed in order to meet global reduction targets. 

Yesterday Summit Carbon Solutions received "a strategic investment" from John Deere to advance a major CCUS project (click here). The project will accelerate decarbonisation efforts across the agriculture industry by enabling the production of low carbon ethanol, resulting in the production of more sustainable food, feed, and fuel. Summit Carbon Solutions has partnered with 31 biorefineries across the Midwest United States to capture and permanently sequester their CO2 emissions.  

Cory Reed, President, Agriculture & Turf Division of John Deere, said: "Carbon neutral ethanol would have a positive impact on the environment and bolster the long-term sustainability of the agriculture industry. The work Summit Carbon Solutions is doing will be critical in delivering on these goals."

McKinsey highlights a number of CCUS methods which can drive CO2 to net zero:

  • Today’s leader: Enhanced oil recovery Among CO2 uses by industry, enhanced oil recovery leads the field. It accounts for around 90 percent of all CO2 usage today
  • Cementing in CO2 for the ages New processes could lock up CO2 permanently in concrete, “storing” CO2 in buildings, sidewalks, or anywhere else concrete is used
  • Carbon neutral fuel for jets Technically, CO2 could be used to create virtually any type of fuel. Through a chemical reaction, CO2 captured from industry can be combined with hydrogen to create synthetic gasoline, jet fuel, and diesel
  • Capturing CO2 from ambient air - anywhere Direct air capture (DAC) could push CO2 emissions into negative territory in a big way
  • The biomass-energy cycle: CO2 neutral or even negative Bioenergy with carbon capture and storage relies on nature to remove CO2 from the atmosphere for use elsewhere

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