Can Japan and South Korea Join Forces on Renewable Energy?

While relations are strained in other areas, could shared issues on energy open the door to a better relationship now and in the future?

Editor’s Note: TNI has teamed up with the Japan-ROK Working Group at the Pacific Forum CSIS in order to highlight its recently released report focused on improving bilateral relations through targeted engagement on a range of areas. The “Japan-ROK Series” will feature five timely articles summarizing these recommendations in fields such as cooperation on North Korea, missile defense, counterpiracy, energy security and inter-parliamentary ties. This is the last article in the series.

Rising oil prices and consumption, coupled with economic growth and limited resources, have made energy security one of the most important strategic issues in Northeast Asia. Without many energy resources of their own, both Japan and the Republic of Korea (ROK) have relied heavily on imports of energy supplies, including coal and liquefied natural gas (LNG), and nuclear power. After the March 2011 Fukushima nuclear crisis in Japan and the power shortages that both countries experienced in the summer of 2013 arising from heat waves, however, both have hastened their drive to diversify their energy sources. With global shortages of energy supplies expected in the future and with increasing concerns about environmental degradation, nuclear safety and global warming, both Japan and ROK have a mutual interest in the development of alternative energy sources, such as renewable energy, and the two countries should promote cooperation in this area.

Individually, the two countries have worked significantly on the development of renewable energy. In 2008, the ROK proclaimed “Low Carbon, Green Growth” as a national vision to create a momentum for economic growth through the use of clean energy and green technology, and its implementation was coordinated by a presidential committee. The ROK’s energy policies have concentrated on reducing energy emissions while implementing various energy-efficiency policies, such as applying stricter standards on fuel efficiency and building stronger design codes. Currently, fossil fuels account for roughly 82 percent of the ROK’s energy consumption, as compared to nuclear energy at 16 percent, and water power at 0.5 percent. Meanwhile, the contribution of renewable sources to total primary energy supply (TPES) is said to be the lowest in the Organization for Economic Co-operation and Development (OECD). 80 percent of the existing renewable energy supplies in the ROK comes from waste energy and 20 percent from water power. Use of new renewable energy, such as solar power, wind power and biomass, remains largely limited.

At the end of 2008, the ROK government came up with the “3rd Basic Plan for New and Renewable Energy Technology Development and Usage/Distribution.” It set a goal of replacing 11 percent of the country’s primary energy with renewable by 2030 to become the world’s fifth largest renewable-energy powerhouse by 2015, while also specifying several key technologies, such as photovoltaics, solar thermal, geothermal, and bio energy in the Basic Plan. The government expects to earn $36.2 billion in exports through its renewable energy industry and create 110,000 jobs by 2015. Governmental research, development and deployment (RD&D) is also a crucial part of the ROK’s energy policy and is now among the highest in the OECD.

Unlike its world-class manufacturing industries, however, the ROK has not been able to establish a top-notch business in renewable energy. Reasons for such underdevelopment can be attributed to various factors: lack of full-fledged governmental assistance, small domestic demand and market size and shortage of national awakening on the need for renewable energy. As a nation overdependent on foreign energy resources, the ROK government has sought to modify various domestic laws and regulations to facilitate the development of renewable-energy industries, such as providing government subsidies to venture enterprises and housing that runs on solar panels, as well as giving preferential treatment on taxation to renewable-energy-related facilities.

Japan, for its part, has strived to achieve energy security and independence since the 1950s primarily through its nuclear-power program. For almost four decades until the March 2011 Fukushima nuclear disaster, 26 percent of the country’s power generation came from nuclear power because it was viewed as a cleaner and less vulnerable option to the rather-volatile global oil market. After the accident, however, Japan shut down all of its nuclear reactors for scheduled safety checks. Since then, the country has grappled with the challenge of diversifying its energy sources to create the best energy mix for its future. Japan replaced nuclear energy with imported natural gas, oil and coal, but this has led to higher electricity prices, resulting in the nation’s top ten utilities losing over $30 billion in the last two years. This has also deepened the country’s trade deficit.