Japan's Renewables Push Meets the Same Wall Europe Already Hit

Japan's Renewables Push Meets the Same Wall Europe Already Hit Australia and Japan deepened energy ties as Tokyo tries to shift from LNG dependence toward wind and solar, but negative price risks loom. Australia and Japan signed an energy cooperation agreement this week that also covers critical mineral supply chains. Australia is Japan's top supplier of liquefied natural gas, shipping 26 million tonnes in 2025, and the prime ministers framed the deal as strengthening supply security for a country that imports roughly 90 percent of its crude oil from the Middle East.^5,3 That matters because Japan is trying to build its way out of a structural energy vulnerability. The country's latest energy plan foresees renewables accounting for 40 to 50 percent of electricity generation by 2040, up from around 25 percent last year. Researchers from the Lawrence Berkeley National Laboratory estimate Japan could reliably generate 70 percent from renewables, the Economist reported.⁴ The pace of corporate procurement is accelerating. Toyo Kohan signed a virtual power purchase agreement with HSE for onshore wind under Japan's feed-in premium scheme, one of a growing number of Japanese industrials locking in renewable supply through long-term contracts rather than relying on spot markets. But Japan's renewable ambition is running into the same problem Europe discovered first. France's EDF announced that 842 MW of subsidised solar and wind plants will curtail output during negative price periods starting 14 April, an acknowledgement that surplus renewable generation is now routine enough to require automated shutdowns.¹ The economics of curtailment are straightforward. When wind and solar generate more than the grid can absorb, prices turn negative and every additional megawatt-hour costs its producer money. Europe has been dealing with this for months, and Japan's grid, smaller and more constrained by geography, will face similar physics as installed capacity grows.¹ Japan's energy mix offers some context for the transition ahead. Natural gas accounts for around 32 percent of power generation, followed by coal at 28 percent, nuclear at 9 percent and oil at 7 percent. Around 98 percent of domestic gas demand is met by LNG imports, with the power sector absorbing 55 to 65 percent of total consumption. In 2025, Japan imported 66.3 million tonnes of LNG, down 1.5 percent year-on-year, retaining its position as the world's second-largest buyer after China.³ The nuclear question complicates the picture. Fifteen years after Fukushima, Japan had 54 operational reactors providing 25 percent of its electricity. The government aimed to expand that to 50 percent by 2030. The Kashiwazaki-Kariwa plant, the world's largest, is being considered for restart, but public resistance and regulatory hurdles have slowed progress.⁴ Australia's supply reliability is also under scrutiny. Wood Mackenzie flagged rising problems with Australia's gas, noting that maturing supply sources and seasonal demand mean the east coast faces potential shortfalls without new reserves by the mid-2020s. A cyclone earlier this year affected operations at three production facilities including Chevron's Gorgon platform, which has capacity to produce 15.6 million tonnes annually.^6,5 In Europe, the PPA market is evolving in parallel. Montel reported that "strategic" revamp PPAs covering extra capacity from upgrading old solar plants are set to take off as developers run out of cheap greenfield sites. Uniper aims to invest approximately 8 billion euros in its transformation by the early 2030s, targeting 8 GW of ready-to-build renewable capacity by 2030.^8,7 Data centres are adding a new demand layer. Rising power needs from data centres and electric boilers are expected to support a new wave of Finnish onshore wind investment, industry participants told Montel. In Australia, the Albanese government backed 19 new renewable energy projects to supply clean power for 4 million homes.^9,10 The UK faces its own constraints. Canadian developer Boralex told Montel there is "no way" the UK can meet its 2030 onshore wind target due to supply chain and construction bottlenecks.² For traders watching the Japan-Australia energy corridor, the signal is that LNG volumes may hold steady for years even as renewable capacity grows. Japan cannot curtail its way to energy security, and the transition from imported gas to domestic renewables depends on grid investment and storage that does not yet exist at scale. The next catalyst is whether Kashiwazaki-Kariwa restarts, which would displace gas-fired generation and ease LNG import requirements.^4,3