Japan Pushes Renewable Growth Amid Global Solar Surge, Facing Key Challenges
September 8, 2025
Despite remaining heavily reliant on coal and gas, Japan is steadily advancing toward its 2050 decarbonization goal. Between 2014 and 2024, the share of solar power in electricity generation grew almost fivefold from 2% to nearly 10%, and the first half of 2025 marked the first time fossil fuels contributed less than 60% [8]. Nonetheless, surging demand, more complex system operations, and uncertainties from geopolitical instability continue to pose significant challenges to this transition.
Exhibit 1
Solar Remains the Dominant Renewable in Japan and Globally
Global solar generation grew by 474 TWh in 2024: its largest increase ever recorded and the biggest absolute growth of any energy source. Solar has been the fastest-growing power source in terms of electricity generated for 20 consecutive years, while its installed capacity has doubled in just three years, rising from 1 TW to 2 TW. Combined with a similar expansion in wind energy, this momentum has enabled clean power to exceed 40% of global electricity generation in 2024 for the first time [1].
Japan reflects this global trend, with solar remaining its leading renewable energy source by generation, having surpassed hydro electricity at the start of the decade [2]. The country continues to rank as the world’s fourth-largest generator of solar power and also has the highest solar capacity per unit of land area among major economies [3].
Japan’s solar outlook remains strong. Its 7th Strategic Energy Plan, released in February 2025, projects solar to rise from its current 10% share of electricity generation to between 23% and 29% by 2040, more than any other renewable energy source and even exceeding the forecasted nuclear share of 20%.
Key Hurdles in the Energy Transition
Despite the optimistic outlook for solar, Japan’s energy policy framework acknowledges several challenges still ahead.
One is the volatility of electricity prices, stemming from Japan’s dependence on imported fuels and the impact of geopolitical tensions in Europe and the Middle East [3].
Exhibit 2
Moreover, despite the continued growth of solar generation, capacity growth has slowed down compared to the period following the introduction of the feed-in-tariff (FIT) system largely due to a shortage of suitable project sites. High-voltage installations (50 kW- 2000 kW) are particularly affected, often facing environmental concerns, opposition from local communities, and a shortage of electricians certified for high-voltage work.
Low-voltage installations (less than 50 kW) face a different set of hurdles. While land lots are widely available, small-scale facilities tend to be less cost-effective: they face higher installation costs per kW, and day-to-day operations such as trading, reporting and asset management can quickly become cost-prohibitive as portfolios expand. Feedback from independent power producers (IPPs) tells us they are seeking not only reliable operational analytics and transparent profit projections for large installations, but also solutions for managing low-voltage portfolios at scale.
Challenges seen at the global level are also present in Japan. One example is the unexpected rise in electricity consumption, which increased in 2024 by 4.0% globally, and 0.9% in Japan, with heatwaves playing a significant role in this increase [1]. 2024 was the hottest year on record in Japan [4]. With July 2025 marking the third consecutive year of record-breaking July temperatures [5], the pattern of extreme heat impacting electricity demand appears likely to continue.
Growing adoption of EVs and heat pumps, as well as rising electricity use by data centers, are additional global demand drivers [1]. In Japan, data centers, combined with planned semiconductor fabrication facilities, could raise peak demand by 7.15 GW and annual demand by 46.5 TWh by 2034. This increase is expected despite negative growth drivers such as population decline and energy-saving efforts [6, 7].
While Japan aims to meet future electricity demand by maximizing renewable use, the variable nature of these resources will require robust measures to maintain grid stability and reliable supply-demand management.
Enabling the Energy Transition with Affordable and Digital Solutions
Given the expected role of solar in the coming decades, there is a clear need for technologies that enable seamless and cost-effective integration of solar and other renewables into the grid and electricity markets.
Battery storage systems will be pivotal in this transition. Global BESS capacity nearly doubled in 2024, partly due to declining costs from economies of scale and more affordable battery chemistries [1]. In Japan this trend is evident: our data shows a 160% increase in battery-enabled grid operations in April and May 2025 versus the same period in 2024. Furthermore, Japan proactively introduces policies that enable batteries to play a key role in grid stabilization and supply-demand balancing as part of the country’s decarbonization strategy.
However, both solar power plants and battery systems require intelligent platforms to manage increasingly complex operations. In discussions with solar plant owners and IPPs, we frequently hear about the need to streamline operations, simplify market participation, and automate daily tasks. This aligns with the government’s push for digitalization and the adoption of AI and IoT in grid operations, particularly in balancing markets, which are expected to be critical for maintaining stable energy supply in the coming decades.
The low-cost and fast-to-build nature of solar can enable significant market growth within a single year. Key to an accelerated energy transition will be to enable low-cost and fast-to-deploy throughout the energy technology stack.
The Road Forward
The main challenge for the upcoming years will be to provide enough decarbonized electricity at competitive prices and without hindering economic growth. This will increasingly depend not only on expanding renewable capacity but also on managing the operational and market complexity that comes with it. This includes coordinating distributed solar and storage assets, anticipating demand fluctuations driven by electrification trends and heatwaves, and integrating emerging technologies such as AI and IoT for grid balancing.
Addressing these challenges effectively will require forward-looking planning, robust data analysis, and adaptive operational strategies that align with long-term decarbonization goals, supporting both energy security and economic resilience.
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Authors
Andrés Salazar
Data and Energy Scientist