Japan's power transformation: opportunities ahead
Japan’s energy transition accelerates as LNG, hydrogen and ammonia co-firing reshape its power sector, offering strategic opportunities for global partnerships By Aisyah Sarjuni, Research Analyst, EIC Kuala Lumpur

Japan’s energy landscape is undergoing a profound transformation as the nation navigates towards its target of zero-emissions by 2050. Under its recently approved Seventh Strategic Energy Plan, Japan reaffirmed its commitment to energy security, anticipating surging demand from digital and green initiatives.
The country’s Cross-regional Coordination of Transmission Operators (OCCTO) projects an additional 5.37GW in peak power demand by 2033, fuelled by the expansion of data centres and semiconductor chip plants. To ensure a stable, long-term energy supply, Japan’s energy plan highlights the pivotal role of upcoming gas and nuclear power plants.
Gas power dominates
As of Q1 2025, gas-fired power projects account for 10.5GW of the total 12.8GW of power capacity to be added to the Japanese grid by 2035. Nuclear comes second, with 2.1GW capacity. Despite the nuclear power sector’s resurgence, especially since 2024, gas-fired power plants will continue to play a major role in the country’s future energy landscape.

LNG auctions accelerate
Between April 2023 and March 2024, Japan launched its long-term zero-emissions power auction, which aims to accelerate progress towards decarbonisation goals by 2050. Though the auction targets clean energy options, power plants fired by liquefied natural gas (LNG) were included to facilitate the gradual transition away from coal; 5.76GW out of 9.77GW was awarded to 10 LNG power projects, focusing on the expansion of existing coal and LNG power plants by 2030.
Co-firing push
Notable projects include Kansai Electric Power’s 1.8GW Nanko LNG Power Plant and JERA’s 1.18GW Chita LNG Power Plant. As Japan progresses through its decarbonisation efforts, ammonia and hydrogen co-firing will be progressively integrated into its LNG power plants. The auction also included project awards for 770MW of ammonia co-firing and 55.3MW hydrogen co-firing, however, further details regarding the projects remain undisclosed. The auctioned projects will receive an annual funding of US$1.12bn over a 20-year period.
With that target in mind, Japan’s LNG terminals require significant infrastructure upgrades to accommodate additional storage and blending technologies for ammonia and hydrogen. Japan’s Mitsubishi Power spearheads the development of co-firing turbines, which have been largely contracted in upcoming gas power projects across Japan and the Asia Pacific region.
However, current hydrogen-capable turbines are limited to 30% hydrogen by volume, while ammonia-capable turbines are still undergoing an active development phase. The Ministry of Economy, Trade and Industry (METI) has acknowledged that high hydrogen and ammonia costs pose a substantial challenge for co-firing initiatives. To address this, METI has allocated up to US$20bn to bridge the gap between low-carbon and fossil-based hydrogen, which can improve the profitability of future co-firing projects.
Japan’s energy transition opens critical opportunities in grid upgrades, terminals and advanced gas technologies
LNG surplus challenge
While Japan has a stable LNG supply from long-term supply agreements, the rapid rollout of renewable energy and nuclear restart projects has contributed to a recent LNG surplus. This surplus offers higher project profitability with lower fuel prices, but risks market volatility for long-term agreements. Grid limitations may also hinder the deployment of upcoming gas power plants, potentially driving up electricity prices as demand outpaces supply.
Government support initiatives
Despite these challenges, Japan remains steadfast in providing strong regulatory and financial support to its gas power sector. To foster its supply chain development, tax credits will be approved for companies that are investing in advanced gas turbine technologies. Government-backed financial institutions such as Japan Bank for International Cooperation offer loan guarantees to mitigate large-scale LNG infrastructure development and upgrades. Japan’s open-door policy also targets a balance of US$666.4bn in foreign direct investment by 2030, including strategic partnerships within the energy sector.
Regional LNG partnerships
The government strategically plans to stabilise its LNG market by reselling surplus LNG through gas power plant developments across the APAC region.
For instance, JERA has shown strong interest in supporting upcoming LNG power plants in Vietnam, including Ca Na, Hai Phong and Nghi Son LNG-fired power plants.

Grid modernisation plans
To support grid infrastructure development, METI has drafted the Wide-Area Grid Long-Term Policy to outline domestic grid expansion within the next decade. OCCTO forecasts investments of up to US$52.9bn for transmission and distribution by 2050.
A platform for innovation
Japan’s realistic transition strategy provides a clear outlook for a reliable shift towards its targeted energy mix. As the government curates its energy framework around LNG as a transition fuel, its path forward is not without its own set of challenges. The government’s significant support for the gas power sector through technology upgrades, incentives and LNG market stabilisation strategies creates a fertile foundation for industry partnerships.
Significant supply chain gaps, such as the modernisation of terminal and grid infrastructures and the advance of gas turbine technologies and components present opportunities for domestic and foreign collaborations to drive Japan’s power sector towards its long-term objectives.
Are you ready to export? Email: aisyah.sarjuni@the-eic.com
Image credit | iStock
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