INVESTIGATING COST-EFFECTIVE POLICY INCENTIVES FOR RENEWABLE ENERGY IN JAPAN: A RECURSIVE CGE APPROACH FOR AN OPTIMAL ENERGY MIX

Author:

HUANG MICHAEL C.1ORCID,KIM CHUL JU2

Affiliation:

1. Ocean Policy Research Institute, The Sasakawa Peace Foundation, 1-15-16 Toranomo, Minato-ku, Tokyo 105-8524, Japan

2. Asian Development Bank Institute, Japan

Abstract

The Great East Japan Earthquake (GEJE) and Fukushima nuclear disaster that occurred in 2011 gave a sharp reminder to Japan’s energy security to reconsider the reduction of nuclear power dependence with a better energy mix. We use a recursive CGE model based on Japan’s renewable energy input–output model to analyze the energy composite of power generation and consumption to investigate cost-effective policy incentives to achieve an optimal energy mix to reduce the nuclear power dependence to less than 5% within 10 years. Moreover, we create scenarios of: (1) nuclear power decommission, (2) renewable energy promotion and (3) virtual power plant (VPP) implementation with public R&D expenditure and power infrastructure investment. The simulation results show that renewable energy could gradually replace nuclear power with capital-use subsidies. Under the direction of nuclear power decommission, the VPP installation could reduce the fiscal cost of wind power by 13%, solar energy by 8% and the social cost by 36%. We provide empirical evidence that the implementation of VPP should be promoted in addition to the renewable policy promotion policy to facilitate power allocation and overcapacity problems better.

Publisher

World Scientific Pub Co Pte Lt

Subject

Economics and Econometrics

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