Mizuho report aims to spur action to move into alternative energy

To achieve carbon neutrality in an increasingly uncertain world, Japanese companies should focus on innovations for alternative energy and shift their business models toward building a carbon-neutral economy, Mizuho Financial Group says in a recent report.

The report, released on Dec. 5, reflects a sense of crisis that Japan’s economy has depended on heavily emitting industries and that its geography makes it hard to rely on some forms of renewable energy widely seen overseas, such as giant solar plants and onshore plus fixed-bottom offshore wind turbines.

“We published this report to show our future grand design to our corporate customers and encourage discussions in the industry,” Shinichi Tsunoda, the general manager for Mizuho Financial Group’s Sustainable Business Promotion Department, said in a recent interview.

With the heavy industries that supported the country’s postwar economic growth expected to shrink further, the manufacturing sector will need to shift to more value-added products such as components for high-tech devices and high-quality chemicals. Currently, 20% of the country’s GDP derives from manufacturing, higher than the EU’s 15% and the United States’ 10%. Instead, services — mainly for the graying population, inbound tourism and entertainment — need to be a driving force for the economy, Tsunoda said.

“We must support our strength in manufacturing, but that alone won’t be able to help us achieve sustainable economic growth. We have to grow the service sector to further back up the economy,” he said.

In the report, Mizuho presents a bold projection of energy sources in 2050. The financial group expects 59% of Japanese power generation to come from renewable sources, 19% from nuclear power, 13% from hydrogen and ammonia, and 9% from thermal power plants utilizing CCS (carbon capture and storage) technologies. That compares to the 2022 levels of 22% from renewables, 6% from nuclear, 34% from natural gas, 31% from coal and 7% from oil in 2022.

“The biggest challenge in the scenario is how to secure the energy necessary for economic growth,” Tsunoda said, adding that the demand for power will rise amid the electrification of many industries and the evolution of digital technologies requiring a tremendous amount of electricity for semiconductor plants and data centers.

That is why technological breakthroughs will be important to the country’s future. Tsunoda said the most important point concerning Japan’s ability to achieve net-zero emissions in the next few decades is that companies need supply chains and infrastructure that contribute to the use of alternative energy — hydrogen, solar, wind and potential sources such as fusion.

To be motivated, Tsunoda continued, people need to understand why Japan needs to promote renewables. “There have been no such projections, as far as I know. That’s why we have published this report — to encourage active discussions in the industrial world,” Tsunoda said.

Much more discussion will be needed to get closer to a carbon-neutral future, because each energy source has issues to overcome.

Experts see hydrogen as promising, but it currently lacks solid supply chains for production, transportation and consumption, including hydrogen stations for fuel cell vehicles. As for solar energy, the country’s mountainous terrain limits the spaces available for building giant solar plants. However, if next-generation technologies such as thin and flexible perovskite solar cells achieve a breakthrough, they could generate much more power in all sorts of places. Wind power faces similar geographic hurdles. Japan lacks sufficient shallow waters for wind farms like those off Northern Europe. Thus it needs to go for a harder technology: floating wind turbines. The world needs innovations including fusion energy, though they would need time to be commercialized. Fusion, producing power without carbon emissions or long-lived nuclear waste, is often called a “dream technology,” and so startups are pursuing it. For instance, Mizuho invested earlier this year in Zap Energy, a U.S. startup specializing in fusion energy.

“All these technologies are not yet commercialized, so they contain too much uncertainty. We have to move them forward,” Tsunoda said.

The country must simultaneously realize a circular economy, prioritizing the reuse and recycling of products and the reduction of waste. This needs to involve the recycling of natural resources and of materials as well, including the rare-earth metals essential for storage batteries. Japan has depended on imports for these and thus been exposed to geographic risks, the report says.

“If we see decarbonization as the sole purpose, we may reach a limit soon. So it will be important to promote the transition and support economic growth at the same time,” Tsunoda said.