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Role of energy finance in geothermal power development in Japan

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  • Taghizadeh-Hesary, Farhad
  • Mortha, Aline
  • Farabi-Asl, Hadi
  • Sarker, Tapan
  • Chapman, Andrew
  • Shigetomi, Yosuke
  • Fraser, Timothy

Abstract

The Fukushima nuclear disaster in March 2011 drastically changed the energy consumption pattern of Japan. Not being able to rely on nuclear energy, the country turned to fossil fuels and attempted to increase the share of renewable energy in its electricity generation mix. This paper will explore why geothermal energy is stagnating in Japan, despite the availability of resources and technologies. The paper first analyzes the various barriers to geothermal energy deployment in Japan from social, legal, economic, financial and technical viewpoints. The major contribution of this study is the quantification of the magnitude each barrier and supportive policy has on the development of geothermal power, with a special focus given to energy finance measures. The analysis is performed using a Vector Error Correction Model (VECM) using data from 1974 to 2017 and identifies the existence of a long-term relationship between variables, public research and development expenditures and the Feed-in-Tariff scheme. The latter appears to be the most efficient stimuli to foster geothermal power generation. Subsidies in their current form, on the other hand, have mixed results both in the long and short term. Environmental concerns and social opposition appear to be among the major barriers in both the short and long term.

Suggested Citation

  • Taghizadeh-Hesary, Farhad & Mortha, Aline & Farabi-Asl, Hadi & Sarker, Tapan & Chapman, Andrew & Shigetomi, Yosuke & Fraser, Timothy, 2020. "Role of energy finance in geothermal power development in Japan," International Review of Economics & Finance, Elsevier, vol. 70(C), pages 398-412.
    • Handle: RePEc:eee:reveco:v:70:y:2020:i:c:p:398-412
    DOI: 10.1016/j.iref.2020.06.011
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    13. Wei Liu & Youfa Sun & Serhat Yüksel & Hasan Dinçer, 2021. "Consensus-based multidimensional due diligence of fintech-enhanced green energy investment projects," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-31, December.
    14. Taghizadeh-Hesary, Farhad & Yoshino, Naoyuki & Inagaki, Yugo & Morgan, Peter J., 2021. "Analyzing the factors influencing the demand and supply of solar modules in Japan – Does financing matter," International Review of Economics & Finance, Elsevier, vol. 74(C), pages 1-12.
    15. Bojaj, Martin M. & Djurovic, Gordana & Fabris, Nikola & Milovic, Nikola, 2023. "Top 1% and inequality connectedness in the EMU and WB," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 139-155.

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