In his inaugural policy speech before the Diet on September 13, 2011, Prime Minister Yoshihiko Noda characterized the drafting of a new energy policy as one of the nation's most urgent priorities in the wake of the disastrous nuclear accident triggered by the March earthquake and tsunami. Noda called on Japan to leverage its technological know-how to become an international model for energy conservation and renewable energy use with a view to "reducing the nation's dependence on nuclear power over the long term."

Noda is not the first Japanese leader to appeal for expanded use of renewable energy. Yet Japan has made little headway in increasing renewable energy's share of total power consumption. What are the obstacles to progress, and what must Japan do to overcome them?

Resource-Poor Japan?

The first question we need to ask is whether Japan has sufficient resources to generate the bulk of its electricity from renewable energy technology—namely, wind, solar, and geothermal power. Japan is known as a resource-poor country, heavily dependent on imports for its energy needs. How does it rate with respect to wind and other renewable energy sources?

Last April the Ministry of the Environment supplied some answers to these questions with the results of its Study of Potential for the Introduction of Renewable Energy, released just weeks after the Tohoku earthquake. The study provides estimates of the amount of energy that Japan could derive from various renewable energy sources given the constraints on land use.

Japan's wind energy potential, for example, is 1,900 gigawatts, according to the report. This is an impressive figure, given that the installed capacity of all power generating facilities in Japan was just under 240 GW in fiscal 2009. And inasmuch as the total installed capacity of Japan's wind power facilities was just 2.2 GW in 2008, it seems fair to say that the country has plenty of room to expand its use of wind power.

Geothermal energy is often cited as a promising energy source for Japan, a country peppered with volcanoes and hot springs. According to the same report, Japan's geothermal energy potential is 14 GW—as compared with a total installed capacity of only 530 MW in 2009. In fact, Japan's geothermal resources are among the most abundant in the world. In a 2008 report (Potential for Development of Geothermal Power), the National Institute of Advanced Science and Technology ranked Japan third in the world in geothermal resources, with an estimated 20.5 GW.

As the foregoing suggests, "resource-poor Japan" is surprisingly rich in renewable energy resources. Why have we been so slow to exploit them?

The reasons most commonly adduced are the difficulty of providing a steady supply of electricity using solar and wind energy, which depend on weather conditions, and the challenge of transmitting power from areas suited to power generation (that is, windy and sunny areas) to major centers of consumption.

These are challenges, to be sure, but are they big enough to become obstacles for Japan? International developments suggest otherwise.

An Unlikely Leader in Renewable Energy

In March 31 this year, Red Electrica Espagna, which manages Spain's power grid, announced a milestone that should give Japanese leaders pause. That month wind energy was the single largest source of electric power in Spain, overtaking conventional thermoelectric and nuclear power.

According to REE figures, the breakdown of Spain's electricity supply in March 2011 was as follows: wind 21%, nuclear 19%, hydroelectric 17.3%, coal 12.9%, and solar 2.6%, with the remainder divided among combined-cycle generation, cogeneration, and others. Together, renewable technologies accounted for more than 40% of Spain's power output.

Of course, Spain differs from Japan in many respects. Its land area (510,000 square kilometers) is 135% of Japan's, while its population is a mere 37%. Its total installed capacity (103 GW) is 51% of Japan's, and its net output (295.7 billion kWh) is just 31%. But overshadowing these differences is the startling fact that Spain's installed wind power capacity (20 GW) exceeds Japan's by factor of 866.

It is true that Spain's overall energy needs fall far short of Japan's. Even so, the fact that a country of this size could cover 40% of its electricity needs with renewable energy is quite remarkable.

Why has Spain succeeded where Japan has yet to make headway? The key lies in Spain's approach to managing and controlling power output and transmission.

Dedicated Control Center

As noted above, a major disadvantage of solar and wind energy is that output depends on weather conditions, making it difficult to ensure a constant supply. To cope with this problem, REE established CECRE (Control Center of Renewable Energies) in 2006.

Located just north of Madrid, CECRE monitors all of Spain's renewable energy producers—wind, solar, hydropower, and so forth—along with its cogeneration facilities. Since June 2007, any wind power facility with an installed capacity of 10 MW or more has been under its control.

The CECRE is linked with 21 generation control centers (WGCC), which send it real-time data on the renewable energy facilities' output and operating parameters. They are also required to carry out the CECRE's control directives within 15 minutes of receiving them.

Weather forecasting plays a key role in this system. Simply put, short-term weather forecasts are used to estimate the next day's maximum output from wind and solar energy facilities and to adjust the amount of electricity flowing into the power grid from conventional thermoelectric and nuclear power plants accordingly. This ensures stability of the entire system even with maximum use of weather-dependent renewable energy.

Overcoming Power Gridlock

The other commonly cited drawback to renewable energy is the distance between the populations centers where electricity is used and the locations suitable for solar or wind power generation. In Spain, the greatest demand for electricity is in the areas of Madrid and Barcelona, while wind turbines are concentrated in Galicia and the Barcelona area. This is convenient for Barcelona, but Madrid is at a considerable distance from both Galicia and Barcelona. How has Spain overcome the challenges of transmitting renewable energy?

Spain has a robust meshed grid of 400 kV and 220 kV transmission lines covering the entire country. This system has a large enough surplus transmission capacity to accommodate the large-scale incorporation of renewable energy. Japan's transmission system, by contrast, consists of several distinct grids that are operated by different regional electric power companies and are linked by connecting lines of limited capacity. This places a severe constraint on the flow of power between the regions.

In short, Spain has succeeded in drastically expanding the contribution of wind power thanks to an integrated generation control system and clever use of a meshed transmission grid.

The structural differences between Spain's power industry and Japan's are also instructive. In Spain, as we have seen, transmission is handled by one company alone, REE. Power generation, on the other hand, is handled by quite a large number of companies. In this way Spain is able to preserve a unified, integrated control of its power grid, even while encouraging diversity and preventing the emergence of monopolies.

Japan, by contrast, has 10 major power companies that enjoy more or less a monopoly in their respective regions by controlling both the production and transmission of electricity. Some in Japan have advocated "de-bundling" the generation and transmission functions of the power industry. But Spain's example suggests that this alone will not solve Japan's renewable energy problems. In addition to diversifying energy sources, Japan must build a system that can flexibly control power generation to ensure a stable and secure electricity supply nationwide.

A Matter of Will

To significantly increase the share of renewable energy in the electricity supply, Japan clearly needs to encourage market participation by a variety of businesses ready and eager to develop wind, solar, and geothermal power. Today, independent power companies account for a mere 3% of all electricity sold, the rest being produced by the 10 regional utilities. This is the real reason Japan continues to lag in renewable energy. It also means that genuine progress will not come until policymakers resolve to break up these longstanding regional monopolies.

The Ministry of the Environment has shown that Japan has great potential for shifting to wind and geothermal power, and Spain's example proves that it is possible to build the infrastructure to supply nearly half of the nation's energy needs with renewable energy. Of course, Spain's renewable energy program still has challenges and problems to overcome. Nonetheless, it stands as a model of what one nation can do once it decides to get serious about renewable energy.

Given Japan's potential and the example of Spain's achievement, the only real question is whether our policymakers have the will to shake up the status quo. With firm resolve, it should be possible to overcome the technical and economic hurdles. Without it, real progress in renewable energy will continue to elude us.