Ms Yamashita is the director of the Energy Data and Modelling Center (EDMC) at the Institute of Energy Economics, Japan (IEEJ). EDMC is involved in the quantitative and econometric analysis of issues relating to energy policy, energy demand and energy supply. Through its work, the Center aims to aid the development of Japan’s energy sector and formulation of the country’s energy policy. Today, its research areas have expanded to include environmental issues and international cooperation in the global energy sector.
In addition to her role at the EDMC, Ms Yamashita serves on several government councils and committees related to energy, science and technology. She also leads several international programs focusing on energy efficiency and energy modeling.
1. How can energy data and modeling help governments formulate better energy policies?
Yukari Yamashita: The Institute provides the data and develops sophisticated models designed for that purpose, so my response comes from that point of view. We believe that models can assist not only policy makers but industries as well. Numbers help to visualize and provide better perspectives on the future energy demand and supply situation.
The models supply sensitivity analysis with different assumptions in economic growth and energy prices, for instance, and show the range of variance, for users to have some sense of outcomes based on their assumptions. The models supply scenario analysis to indicate the type of demand & supply situation there will or could be in future. Such analysis is useful as the basis for discussion, as it employs quantitative information as a starting point. Those in the discussion may not agree with the resulting numbers, but having numbers in front of them is useful for starting an informed discussion.
The recent debate over the energy mix for power generation in Japan is a good example of how models are important. The national debate was not specifically focused on the total primary energy mix, but the models provided a consistent base to analyse the given assumptions and conditions, and showed how much electricity would be supplied by nuclear, renewable or thermal power plants.
Without quantitative analysis, our discussion may not have been accurate, as the energy demand and supply system had not been thoroughly analysed. Modeling enables the policy makers to analyse relevant implications for individual sectors while maintaining the consistency of the energy system.
2. Energy efficiency is an area many governments struggle with due to the complexities involving the cost of implementation, technology adoption and changing behaviours. How do you think governments can be helped to better tap into the potential of the "fifth fuel"?
Yukari Yamashita: Improving energy efficiency (EE) or energy conservation is something Japan has been continuously promoting for the past 100 years. Being a resource poor country, it was the basic requirement for economic and social activities in Japan. Once the energy prices go down, it is easy for consumers and policy makers to stop responding to the national requirement.
In many countries, energy efficiency improvement has not been considered as the government’s responsibility but simply considered as part of the economic activities of the manufacturing industries. It is primarily because saving energy means reducing costs and pursuing such objective should not require policy intervention.
But in today’s world, we need to go beyond the manufacturing industries. When it comes to the residential and commercial sectors as well as road transportation (i.e. passenger cars), customers’ satisfaction and people’s comfort are more important than improving energy efficiency and saving energy. As long as the cost is covered by consumers, the service sector would not risk disappointing them by trying to save energy at the expense of customers’ satisfaction. This is the area many governments are struggling with while addressing the need for energy efficiency improvement. No government has a readily available policy tool to directly influence consumer’s choices. That is why changing consumers’ behavior is essential. Increasingly, many governments have become aware that tapping into EE potential within these sectors is key to economic development.
From my experience in exchanging views at the international level, I am seeing more and more governments seeking successful EE and conservation policies, as they are cost effective and an essential part of their overall energy policies, regardless of national circumstances. For example, many energy-producing countries are introducing EE laws and regulations to make full use of EE’s potential to reduce CO2 emissions or pursue sustainable development objectives.
I believe that there are still many more ways to tap into the EE potential as long as the price signals are correct. I also believe that the consumers are capable of becoming responsible; having experienced the way people responded to the "request" for electricity saving following the shutdown of nuclear power plants in Japan in 2011. Of course, it is not a situation that all countries should face before realizing the potential is there. I now believe that industries and the government are rapidly developing new systems and technologies applicable and realistic for the market and thus, energizing the economic activities.
Policymakers who are struggling with implementing EE in their countries can talk to other governments via policy forums to exchange views on proven regulatory or incentive policies and measures. Such forums offer direct and immediate access to those who have designed - and succeeded with - such policies and measures. Policy designs may need to be adjusted to the each national circumstance but tips for success may be helpful especially if such tips were not previously documented. Japan also benefitted from such government networks in designing its electricity saving programs immediately after the nuclear incident and power supply shortage.
In the international forum, many governments are sharing good practices. One of them is the so-called "multiple benefits" policies, which features an energy efficiency improvement. That is to share the required costs of implementing policies by setting multiple targets as benefits of the outcome. For example, public investment to refurbish the homes of lower-income households will achieve at least three major objectives: energy savings for the lower-income households; improved health of these residents; and a resulting smaller burden on the local government’s budget for related programs and measures.
Another important criterion is to prepare good data collection systems. In our urgent attempt to encourage all consumers to save electricity in Japan, providing information on how to save electricity during the peak hours and how much one can save by taking specific actions did encourage people to take appropriate action. Measuring the energy consumption, identifying opportunities and analysing the outcomes are essential in motivating people and making it sustainable. These latest technologies utilize IT and ICT, such as smart meters, but also traditional methods like collecting and disseminating accurate data and statistics. These help both policy makers and consumers to keep track of their energy efficiency improvements.
Recognizing those who achieved EE improvement on shop floors, production lines, in offices and at home is also a proven tool. A combination of such essential tools has proven successful in other countries which have faced sudden power supply shortages. We learned from these previous practices to prepare our own national emergency action plans after the 2011 tsunami. We had all the policy instruments used in our existing programs but we also learned from other countries how to combine these instruments into our new programs in time for proven results.
There are many new programs developed and implemented worldwide in the area of energy efficiency and conservation that we can reference and adapt in our own countries.
3. What do you think will be the energy outlook for Asia as the US shale gas revolution unfolds in the coming years?
Yukari Yamashita: The development of the US shale gas revolution has had dynamic implications for the rest of the world, particularly in Asia. In the coming decades, Asia will demonstrate the largest growth in energy use. The implications of this growth are not negligible because natural gas is rapidly becoming the preferred energy source for power generation. With the import of natural gas increasing in the region, the widening price gap among different gas markets cannot remain unnoticed. There are concerns over competitiveness and energy security as well as other economic and social impacts.
The Japanese government, in 2012, launched an initiative between producing and consuming countries of LNG to discuss how the world gas markets can be balanced and priced. There are talks about establishing a regional gas market hub, an adjustment to the current utilized pricing mechanism as well as other related topics. It may be safe to say that the market discrepancies should slowly diminish over time and eventually disappear, but we are not in a position to say when.
Aside from the pricing issues in Asia, there is a big paradigm shift in energy use induced by the arrival of the shale gas boom in the US. Europe is an example as it is slowly shifting away from gas and towards coal. There are questions of how much and where unconventional gas will become available in the world; how that will influence the energy balance, and; what should be the favored technologies in the demand sectors. We would like to understand the kind of dynamics that will appear among different energy sources and the implications of such dynamics to address economic development and climate change issues.
The Energy Data and Modeling Centre at IEEJ is currently preparing its annual Asia/World Energy Outlook with a specific scenario analysis of such a paradigm shift brought upon by the arrival of the US shale gas production, and subsequently, the potential production of unconventional oil and gas in other countries. We would like to draw some implications on energy demand and supply in Asia through our analysis. The findings from the analysis are scheduled to be announced on 21st October and the main results will be shared at the Gas Asia Summit 2013 in my presentation. I hope that our findings will contribute to a constructive discussion at the Summit and in Asia.
4. In your opinion, how can Asia's emerging economies balance the need for economic growth and sustainable development?
Yukari Yamashita: First, the definition of “sustainable development” may vary depending on the national circumstances and, second, not only Asia’s emerging economies are facing such challenges. The current situation in emerging economies, however, is challenging in the sense that they have both energy supply shortages and energy access issues which require totally different approaches. We can share good practices among industrialized countries with emerging economies to help them leapfrog and achieve their respective national targets.
In Japan, we have our own struggle in planning for the future of an aging society. We are also facing concerns over the gap between urban areas and rural areas. Steadily growing urban areas maintain a certain level of population despite the decreasing population with an aging society, while rural areas host an unevenly increasing heavy percentage of senior citizens, with health concerns and limited access to many types of services.
After Fukushima, we were forced to recognize that sustainable growth for Japan must be discussed and revisited by changing such assumptions that natural disasters would not eliminate entire villages and surrounding landscapes in just one sweep. To live is a very basic need and it comes first. Supplying these basic needs requires uninterrupted energy supplies, infrastructures, lifeline services and places to live. Therefore, energy supply is one of the most important issues that need to be addressed in Japan now.
Designing a robust energy supply system is an important first step for the governments of emerging economies as well. Understanding the current and future situation of those, such as demographics, economic growth potential, local strength as well as energy needs is the first step in designing the roadmap for economic development. With the current data and expected growth path, we can plan and prepare for future energy requirements and associated policies.
For good planning and policy-making, the establishment of a solid statistical and data system is essential. It is true for both central or local governments and for the private sector. Quality data enables informed quantitative analysis. Political leaders and top management should recognize the importance of statistics and data. Transparent and high quality data will take us a long way.
5. How has your work on quantitative research informed your views about how the global energy landscape will evolve in the years ahead?
Yukari Yamashita: There are few things in the long term that do not change annually despite rapidly changing conditions in the global energy industry.
Asia’s energy consumption will be the fastest-growing with the largest share of global consumption by 2035. Fossil fuels remain the key energy sources for Asia and the rest of the world. Electricity demand continues to grow steadily globally and securing power supplies is becoming increasingly important for the governments to ensure economic growth. Global CO2 emissions from fuel combustion and other energy-related activities will not be halved by 2050, unless more innovative technologies become available. With the recent evolution in unconventional energy, we also foresee price discrepancies among regional gas markets developing, and that interdependence will be strengthened between the Middle East and Asia while Europe and America become energy self-sufficient with slower economic growth or more unconventional sources of energy.
These changes will have an impact on the dynamics of energy demand and supply. Quantitative analysis is a lengthy process but gives us guidelines and better perspectives to understand the mechanisms and factors which define the energy landscape.