Background and objective

Japan government published the 7th Strategic Energy Plan (the Strategic Plan) in February, 2025.In the plan, the demand and supply balance of energy and electric power in 2040 was indicated, emphasizing that there are many uncertainties including demand and supply of electric power and energy, energy network, fossil fuel supply and price, carbon emission cost. In the planning process, the authors participate in the integration cost estimation (LCOE*) of generation technologies.

The penetration of variable renewables has been impacting an operation of a power system all over the world. In order to make the best use of zero emission generation such as variable photovoltaic and wind generation (vRES) and nuclear, and to keep the economy and security of electric power, it is critically important to secure flexibility in a power system.

In this study, we analyze the impact on operational cost under different scenarios of generation, flexibility supply from traditional generators, distributed generators, demand responses and energy storages in Japan in 2040.

Methods used

The method used is a production cost analysis tool “MR” with network constraints using real demand and supply condition of the future power system of Japan.

MR has a capability to set the requirement for different flexibilities and to define supply capability of various sources including traditional generation and distributed resources to optimize the generation dispatch, flexibility dispatch and demand shift to minimize the operational cost. MR also has a capability to analyze transmission system congestion and short circuit capacity of the nodes in the transmission system.

Main results obtained

We estimate the several demand and supply scenarios of Japan in 2040 based on the Strategic Plan and publicly available data. We also estimate the future requirements for flexibilities (FCR, S-FRR, FRR, RR, and RR-FIT) dependent on the capacity of vRES and demand level in the future from the current requirements in the flexibility market. Flexibility supply from traditional generators and DERs are estimated current and future technology establishment.

The results of the production cost analysis will show the followings:

Distributed resources such as vRES, demand technologies and batteries are heavily expected to supply flexibilities in cooperation with traditional generators, and

The requirement for flexibilities has a critical impact on the cost of system operation to affect the selection of the desirable transition pathways of a power system.

The implications from the analysis results are:

It is essential to diversify the supply of flexibilities and improve the flexibility needs,

To show the future requirement of flexibilities is important as a market information.

It is critical to establish rules including a grid code in order to enable DER involvement.