Tokyo: Japan’s rapidly growing battery energy storage sector is facing potential headwinds as proposed government policy changes spark concerns among industry players about the future of investment and growth. Since December 2023, Japanese companies have committed more than $2.6 billion to battery storage projects, highlighting the nation’s drive to stabilize its power grid and manage renewable energy curtailments. However, new rules under consideration by the Ministry of Energy, Trade and Industry (METI) could alter the attractiveness of these projects.
The surge in battery energy storage systems (BESS) is fueled by Japan’s increasing electricity demand and the ongoing challenge of integrating renewable energy sources into a grid that continues to rely on imported fossil fuels for around 70% of its power. Regions such as Tohoku and Kyushu have experienced frequent curtailments, prompting companies to invest in storage solutions capable of smoothing supply fluctuations and providing backup power during peak demand periods.
Major projects exemplifying this growth include a $618 million initiative by Gurin Energy and TotalEnergies’ Saft unit to develop a 1 gigawatt-hour (GWh) battery in Fukushima, capable of delivering 240 megawatts (MW) for four hours. The project, slated to begin operations in 2028, reflects a broader trend of ambitious storage projects across the country. Overall, companies have submitted requests to connect 113 gigawatts (GW) of capacity to the transmission grid, nearly triple the total from the previous year.
Despite the optimism, METI’s proposed revisions to the long-term decarbonized capacity auctions (LTDA) are generating unease in the sector. The changes could reduce the battery allocation from 1.7 GW to 800 MW and require longer minimum storage durations, favoring long-duration batteries over shorter-duration systems that are typically more profitable. Analysts warn that such adjustments may discourage investment in battery projects, limit the expansion of storage capacity, and slow Japan’s progress toward renewable energy integration.
Industry observers also caution that the policy revisions may inadvertently favor fossil fuel and nuclear power sources, undermining the decarbonization objectives of the LTDA. Companies investing in battery storage could face reduced incentives, while Japan risks lagging behind international competitors that continue to offer supportive policies for energy storage technologies.
As Japan navigates the transition toward a more resilient and sustainable energy system, the balance between policy objectives, renewable energy goals, and the needs of the battery storage industry will be critical. How the government addresses these concerns could determine the pace and scale of battery deployment and the broader trajectory of the nation’s energy transition.