BIG DATA IN JAPAN

The ripple effect of history’s largest disruption to oil and gas supplies continues to spread dread throughout the world’s energy importing nations.

A short term stranglehold on 600 miles of water has exposed the long term vulnerability of numerous economies’ energy security. 

And those most reliant on Middle Eastern fuel to float their domestic markets are now darting desperately for makeshift measures to prop up national prosperity. 

Globally, the greatest concerns emerged in the Asia Pacific basin – a region known well by PowerWood’s Director of Business Development Michael Cook.

Singapore, South Korea, the Philippines and Thailand all recognised their predicament quickly, acting hastily to initiate ideas ranging from emergency rationing to expediting nuclear power plans.

Unquestionably though, the Asia Pacific nation facing the most daunting threat to its long term energy security is Japan – home to the world’s fifth largest economy.

Japan imports approximately 95 percent of its energy needs, including almost all of its oil and the majority of its gas. Around 90 percent of Japan's oil imports pass through the Strait of Hormuz.

Rebalancing that sudden energy deficit would be challenging enough without it being compounded by the country’s obligations to become a key data hub for the East’s AI boom. Japan's data centre market is mid swift expansion. 

Already the second largest data centre market in the developed world, after the US according to the MSCI World Index, it has more than 200 operative data facilities, mostly in Tokyo and Osaka.

The country’s data centre market is projected to become a $30bn industry this year and it continues to surge with a compound annual growth rate of above six percent.

Just this month Microsoft committed to invest $10bn in Japan over the next four years – to build AI data centres and related infrastructure – two years after it made a $2.9bn investment to strengthen the country’s cyber defences and bolster its AI push.

Japan has committed to be a carbon neutral country by 2050, banking on a mix of renewable solar, wind and biofuel energy to support its goal.

Power consumed by data centres, cloud computing, AI and chip plants in Japan is expected to triple over the next eight years, rising to 57 billion kWh by fiscal 2035. 

Cooling requirements will claim much of that energy supply. Japan’s data centre cooling market alone is projected to be worth $7bn by 2034.

Alongside protective policy, such irrepressible momentum and big business commitments have forced Japan into a reluctant decision to temporarily relax constraints on some power plants burning coal – the dirtiest of fossil fuels. 

The country will let less-efficient coal-fired generating stations compete again in capacity market auctions from April 2026.

Such drastic actions go firmly against Japan’s steadfast commitments to reduce greenhouse gas emissions from 2013 levels, by 46 percent before 2030, and 60 percent by 2035. 

The country’s 6th Strategic Energy Plan approved in October 2021 pledges to reach carbon neutrality by 2050. It prioritizes renewable energy as “a major power source”.

And with power delivery times for new AI-related projects reaching ten and five years in Tokyo and Osaka respectively, where competition for grid power is tight, greener national strategies are already maturing.

Fukuoka on Kyushu island is being fashioned as a data centre city supported by renewable energy infrastructure to support Japan’s AI boom.

Establishing Fukuoka (on Kyushu island) and Tomakomai (on Hokkaido island) as dedicated AI data cities with large scale decarbonized energy infrastructure provide clearer routes towards Japan’s digital objectives.

They’re how the country plans to reach its declared climate targets, mitigate vulnerability to future energy shocks and accelerate Eastern AI growth. For all three reasons, Japan remains focused on raising its reliance on renewable energy rapidly.

So, despite re-categorizing old energy infrastructure temporarily, it is highly unlikely Japan sees coal as anything but a short term fix for countering one global energy shock.

And, as a result, the country’s need to burn and stockpile net-zero black biofuel pellets is likely to grow – a prospect acknowledged by PowerWood’s director Michael Cook.

Having advanced a large part of his C suite career in Japanese boardrooms, Michael is positioned to appreciate and interpret the country’s business culture and rationale. 

Few understand Japan’s industrial impetus and decision-making like Michael.

Speaking to PowerWood’s communications team about Japan’s “momentary shift in energy strategy,” Michael explained: “The effects of this Middle East war are unprecedented. They’re widely accepted to surpass even the consequences of the Abadan oil crisis in the 50s.

“The conflict has resulted in a huge glitch in energy production, the full extent of which is yet to be felt in manufacturing and global supply chains.

“It is natural that, while reviewing long term energy security, many countries are putting temporary measures in place to mitigate the immediate shock to their energy supply.

“Japan’s small businesses especially are beginning to suffer from a commodity price shock, as the result of a standstill in the Hormuz Strait. 

“Those businesses are either being priced out of the energy market or having to raise prices for consumers, while halting wage rises. There is genuine concern growing in Japan around factory closures in some industries.”

Reflecting on the Japanese government’s response, Michael added: “Japan has implemented emergency measures. It has released significant oil reserves. It has relaxed constraints on burning coal, for now. 

“It is also one of a few countries to have successfully extricated tankers from the Hormuz Strait.

“Prime Minister Takaichi has promised whatever it takes to ease cost of living pressures and these are her responses to a crisis. They aren’t long term policies. They are a momentary shift in energy strategy.

“Japan is one of the world’s most committed nations to reaching carbon neutrality and nothing will have changed in that respect. Its unwavering commitment to renewable energy will remain as it was.”