Renewable energy business in oil companies - Case studies in Japan

Abstract

Renewable energy has been the top preference among new business domains of Japanese oil companies. Applying qualitative research method, the paper aims to analyse the practices of renewable energy projects in these companies, highlighting various influential factors on investment decisions in this field.

The fact is that five among seven Japanese oil companies choose at least one renewable energy sector as new business, including hydrogen stations, fuel cells, bio-fuel, biomass, solar energy, wind energy and geo-thermal. It is stakeholders concerned such as governmental agencies, consumers, users, suppliers, competitors, shareholders, investors, and employees that have impacts on a company’s policies toward renewable energy. Especially, in Japanese oil companies, the important internal motivation is business transformation into total energy companies. Besides, national policies are the catalyst for renewable energy investment in most of the cases.

However, in order to retain the business, profits are the crucial element which could be granted through feed-in tariff (FIT) mechanism. Over the time, FIT, an economic instrument of the government, would be reduced as renewables become more cost competitive with traditional energy sources. In turn, companies’ efforts to manage production cost and output quality as well as to enhance internal capacity or international co-operation would play a significant role in making renewable energy business become sustainable in the long run.