200MW of Geothermal projects

Today's lead energy news in the Nikkei Shinbun is that there are now pending applications for 200MW of new geothermal projects in Japan, following a 12+ year period in which none have been constructed.  Apparently the projects are attempting to qualify for development subsidies in addition to the feed-in-tariff.

JX Kinzoku (part of the JX Group) is planning a 40MW project in Hokkaido (southern part of Sapporo City), while Tohoku Electric Power, an incumbent utility, is planning a 50MW project in Akita Prefecture.  A government-affiliated oil exploration company is also planning a project in Eastern Hokkaido.  While the projects will take up to 10 years to complete (ouch), they apparently already have support from the local governments and, more important, from any potentially affected owners and operators of hot spring hotels (onsen ryokan) in the vicinity.   

METI is planning to offer 20 billion yen (almost $250 million) of subsidies for the development phase of these projects, and further applications could be received by December-end.

These projects do not yet show up on METI's list of FIT certifications, which has a "0" first year target for geothermal, given the long lead times involved.

Trouble on the Nuclear Ginza

The only nuclear plants to reopen in Japan since the March 11, 2011 disasters are Kansai Electric's Oi #3 and #4 plants in Fukui Prefecture, two of the more modern, larger plants in Japan.

Various other plants are now under inspection as one step to reopening.  One of the next in line is the Tsuruga #2 plant, only a short distance to the east in Fukui Prefecture from Oi, on a peninsula along the Japan Sea Coast.  The Tsuruga #1 and #2 plants are located near the older and smaller, somewhat accident prone, Mihama plants, which I suspect will never reopen.  The Tsuruga operator, Japan Atomic Energy, had planned to build Tsuruga #3 and #4 reactors as well over the next 5-7 years.  This area also hosts the accident-prone Monju experimental fast breeder reactor, and is known in Japan as the "nuclear Ginza", because of the crowded real estate and the massive subsidies that Fukui Prefecture has gotten over the years.

Sunset over the Tsuruga Peninsula.  The nuclear facilities are on the far side, out of sight.

The new regulatory agency in charge of nuclear safety, the Nuclear Regulation Authority ("NRA") has been examining claims from some seismologists that a "crush zone" of rock under the Tsuruga #2 Plant (the "D-1 Fault" which is said to branch off of the nearby, active "Urasoko Fault") is an active earthquake fault.  Under pre-existing Japanese rules, "active" means something like "has moved in the past 120,000-130,000 years".  (It would not be surprising to me if any place in Japan is not considered on or near an "active" fault, under that definition, which really gets to the heart of the unique problems with siting reactors in this country).  Based on inspections to date, it seems all members of the relevant commission believe the D-1 Fault is likely an "active" fault, and the commission is considering next steps.  Most likely, they will conclude that the plant should never have been sited at its location ... and will not be permitted to reopen.  This is the lead story in the Japanese press today, and English reports can be found on AP and NHK websites.

Tsuruga Plant #1 was completed in 1970, shut down in March 2011, and was never a likely prospect to reopen, being over 40 years old and relatively small.  Tsuruga Plant #2, however, was completed in 1987 and, when operating, provides baseload power of over 1100MW to the Kansai area.

There is also a pending investigation of "crush zones" beneath the Oi #3 and #4 reactors, and a divided opinion over whether or not they represent an "active" fault.

UPDATE May 2013:  The NRA has completed its process and formally concluded that the "cursh zone" under the Tsuruga #2 reactor is an active fault ... making it virtually impossible that this reactor will reopen.

Meanwhile, efforts to restart the experimental Monju fast breeder reactor (nearby Tsuruga) have been dealt a severe blow, as the operator has been found to have failed to conduct regular equipment inspections over the lengthy period it has been inoperable.

More LNG Imports On the Way

We have heard that it will take a decade or more for Japan to modify its LNG import pricing structures, diversify supply, and deal with the issues raised by the current shut down of its nuclear plants, which seems likely to drag on, and on.  Well, maybe things can happen a bit faster than that.

1.  Jiji Press (via Yomiuri) reported this week the first shipment ever of LNG to Japan by Russia's Gazprom, via the Arctic Ocean.  The tanker left Norway on November 7 and arrived in KitaKyushu on December 5.  With global warning, a new, shorter shipping route is opened.  Of course, LNG losses during shipment can be cut significantly by a shorter routes, and by shipping in colder temperatures.  Also, if the LNG plant is in a cold location, there is a significant cost saving in the liquefaction process, if memory serves.

2.  Osaka Gas announced plans gradually to increase its LNG imports by 25% (to 10 million metric tons annually) over the next 7-8 years, primarily for use in electricity generation.  Sources are expected to include new gas supply from west Africa, and also U.S. supply made possible by the shale gas boom.

3.  Friday December 7's Nikkei reports various plans by Japanese companies to import LNG from the U.S., based on a new U.S. DOE report that LNG exports would be economically beneficial to the U.S. -- an issue that remains controversial.  U.S. natural gas production has increased by approximately 30% from 2005 through 2011, mostly as a result of new shale gas production, and prices are through the floor.  The Washington Post had has a series of articles about these developments, caused by the shale gas boom, including one featuring the DOE report and plans to build export facilities at Cove Point, Maryland, based upon demand from Japan.

Specific potential export sites and Japanese companies involved by Nikkei include:

1.  Freeport LNG (Texas).  4.4 million metric tons per year.  Osaka Gas and Chubu Electric.

2.  Cameron LNG (Louisiana).  8 million metric tons per year.  Mitsubishi Corporation and Mitsui & Co., Ltd.

3.  Cove Point LNG Project (Maryland).  2.3 million metric tons per year.  Tokyo Gas, Sumitomo Corporation.

Of course, note that these projects are at existing re-gasification import terminals, require construction of major infrastructure to support liquefaction for export, and that they are all on the Atlantic side of the U.S.  ...   

But as I understand it, this business can involve swapping cargoes, so that, for example, a Japanese trading house that has rights to gas from Louisiana, could enter into a long term swap with a customer who wants to ship it to somewhere on the Atlantic basin, in exchange for a Pacific cargo close to Japan (maybe from Norway via the Arctic, or from Chile, Malaysia, Indonesia, or NW Shelf Australia, and even eventually Alaska).

More on Dynamic Pricing

A short article in the December 7, 2012 Nikkei reports that IBM Japan, Fuji Electric and Yaskawa Electric are teaming up to develop and implement a system for true dynamic pricing at the retail/residential level in Japan, in anticipation of deregulation by 2015.

The system would permit "real time" notification of demand/supply based price shifts, so that users can modify usage in response and promote conservation.

METI Proposes Gradual Implementation of Residential Retail Electricity Competition

At the conclusion of Japan's late-1990s effort to deregulate the electricity generation and distribution businesses, when many other countries had recently done so, Japan was left with a system still dominated by regional monopoly utilities, though competitive electricity supply is permitted to larger users.  The monopoly is enshrined in law for smaller commercial and residential users (anyone under 50kW).   The late-1990s deregulatory effort was first stalled then cut-off completely by the electric utilities and other powers that be, citing the negative examples of the bankruptcy of Enron, manipulation in the California market, etc.

Post-Fukushima, in rebuilding an electricity system that will rely upon diverse supply sources (including renewables), and where massive investment is needed to implement smart-grid metering, dynamic pricing and other innovations, as well as to encourage conservation, there is widespread acknowledgement that market-based competition of some type will be needed.

The debate is about how quickly such competition should be implemented, how much regulation shoul be retained, and how competition can be layered onto the heavily strained current system.  All of the existing transmission and distribution infrastructure, and 90%+ of the generation, is within the monopoly utilities.  There is no independent grid operator.  And the utilities already suffer from huge imported fuel costs, potentially massive asset write-downs if they cannot get their existing nuclear plants back into operation, and, of course, for TEPCO, the actual clean-up and decommissioning costs of Fukushima Dai Ichi.

METI's advisory committee on power system reform (headed by Prof Motoshige Ito of Tokyo University) last week rolled out a proposal for transition to full liberalization and retail competition.

The proposal would:

--first end the legal monopoly on distribution to sub-50kW users, but would maintain regulated rates for some transition period.

--set a period for continued provision of power at regulated rates for users who request it.

--promote competition by a separation of generation and distribution/grid assets to permit eventual removal of regulated rates.

--include a system for widely borne surcharges to support subsidies that achieve reasonable rates on delivery to users in remote areas.

--permit METI to retain authority to police unfairly high rates.

Based on press reports, the proposal does not make a decision about one of the most important steps, of how to go about separation of the generation and distribution businesses of the electric utilities.  Current proposals would involve either true "legal" division into separate companies, or mere "functional" separation.

And electricity deregulation is one area where the upcoming election (December 16) could have an impact on future course of debate.

Sharp To Join Toshiba and "Outsource some Module Production" to SunPower; SolarWorld Enters Japan

Sharp Corporation has been suffering from widely reported financial distress this past year or two, as its core LCD screen and TV business has been in difficulty, together with many of its smaller businesses.

And, of course, Sharp is one of the major Japanese manufacturers of solar PV cells/modules and related equipment (together with Kyocera and Panasonic/Sanyo and others).

One of the more interesting arrangements in the Japanese PV market has been SunPower's supply to Toshiba.  Toshiba made the (financially wise) decision not to manufacture solar PV modules, and instead has purchased the product from third party suppliers.  At last year's PV Japan exhibition (December 2011), the Toshiba booth could advertise Toshiba-branded modules with the "world highest module-level conversion ratio" -- above 19%.   At PV Japan this year (December 5-7 2012), they again could promote a residential product with the "world highest" conversion ratio, at just over 20%.  According to Bloomberg and other sources, SunPower and Toshiba have now extended their module supply agreement through 2018, at 100MW per year.

So I was interested to read in the Yomiuri a story that Sharp will buy modules from SunPower as well, as it shuts down unprofitable production at several domestic Japanese module factories (but maintains others, and continues its "BlackSolar" residential product).  The Yomiuri story suggests that Sharp is taking these steps in an attempt to cost losses AND increase its share of the PV module market in Japan in response to this year's rapid growth under the feed-in tariff.  No confirmation from the companies themselves.

Lastly, I should note that SunPower is now in the Japanese market directly, targeting the commercial rooftop market.  They had a big booth at PV Japan 2012 last week -- just next to the Toshiba booth, and hosted a marketing seminar on why their product makes economic sense (probably not a difficult case to make in Japan given expensive rooftop space, a high feed-in tariff, high installation costs and premium pricing of Japanese competitors' products).

For anyone not familiar with it, SunPower is a U.S. based and listed company with a long history of innovation and development in the PV business ... but now with majority French ownership (Total) and its modules produced at factories in the Philippines.

If you want an actual "made in the U.S." module, then note that SolarWorld, a large German-based module manufacturer, also now has an exclusive distributor in Japan and had a major exhibit at PV Japan.  In contrast to SunPower, its product does not stand out particularly from a performance/specification perspective, but it does have very modern, large scale, highly automated production sites in the developed world, including the U.S. (just outside my hometown of Portland, Oregon).  And it has been the only named plaintiff in the U.S. (and EU?) cases pursuing trade remedies against the Chinese manufacturers for unfair government subsidies/dumping, etc.

JX Energy Announces Condominium Electricity Supply System with Natural Gas Fuel Cells

The Nikkei Shimbun today (Dec 9, 2012) has a lead story that suggests competitive electricity supply is about to get more interesting in Japan.

JX Energy (the largest oil importer/distributor in Japan -- a combination of Nippon Oil and Japan Energy), has announced a new product line to provide electric power to newly constructed condominiums, reducing the building's need to purchase from the grid by 80-90 percent.  The product is being tested on several JX company housing facilities near Tokyo and will be rolled out to the market by 2014.

The product includes a combination of

(1) a new, more efficient and less expensive natural gas-powered fuel cell generator.  (These have been part of the mix in Japan for some years now, with outrageously expensive natural gas-fired fuel cells for residential use, snapped up quickly to the extent of massive per-unit subsidies);

(2) rooftop solar PV;

(3) battery storage; and

(4) for the remaining 10-20% of electricity needs, a contract with JX Energy's competitive energy supplier subsidiary, which owns an 847MW gas-fired plant in Kawasaki, and will deliver over the existing grid.  (This electricity predicted to be available at 5-10% less than the TEPCO rates).

The article notes that the overall energy cost for the building/residents will be less than buying from TEPCO.  Of course, if natural gas prices can be brought down in Japan in coming years, then the difference could be substantial.

Apparently several other large companies (NTT Group, Daikyo) are also starting to offer discount electricity supply for multi-family housing in Japan, at some savings to the existing utilities.

Finally, the article notes that JX Group has completed development of new, more efficient and less expensive natural gas-powered fuel cell for residential use.  The initial price is expected to be more than 2 million yen, but they are targeting further development to bring the price down to the range of 500,000 yen ($6500) by the year 2015.

Back Again -- Beyond the Nuclear Debate

After a long break, it is time to return to Japanese energy policy.

September and early/mid October saw the confused conclusion of the government's attempt to formulate a new long-term energy policy based upon the "national conversation" that took place over the summer months.

Public sentiment is very much against nuclear power, with a strong majority supporting a phase-out of nuclear plants as quickly as practicable (and a very large number of people opposing the restart of ANY nuclear plants, regardless of economic consequences).   One can regularly see stories in the Japanese media about the ongoing problems in Fukushima, delays in the clean-up process, complaints about compensation, and communities that oppose the location of dumping grounds for radioactive material.  (I was in North Tochigi Prefecture last month and was impressed by the long lines of flags along many country roads announcing opposition to a proposed dump location in the hills nearby.)

Not surprisingly, the public prefers a zero nuclear option, and none of the arguments presented during the national conversation, in town halls, position papers, on television discussion programs or elsewhere seem to have swayed anyone.  Some would say that they were shouted out by a biased media.

However, the Japanese business community and many others -- including U.S. strategic planners who worry about Japanese demand pushing up fossil fuel prices and exacerbating issues around the Middle East, the status of various US-Japan nuclear cooperation initiatives, and increased CO2 emissions -- continue to think that a quick phase-out of nuclear power in Japan is impractical.

As a result, and after one noticeable flip-flop, the government seems to have announced a policy that nuclear policy is to be phased out, as and when possible, sometime between 2030 and 2040, subject to availability of alternatives and to ongoing review of the policy in a "flexible" manner.  These adjectives were seen as a significant victory for the pro-nuclear forces.

Also, the government has bowed to pressure from Aomori Prefecture, which is pretty much a nuclear dependent economy based on the vast plans for the Rokkasho fuel reprocessing facility.   Nuclear fuel reprocessing is still officially part of the "fuel cycle" plan for Japan, even if it takes trillions of yen ($28 billion so far, and counting) and many more years to get the facilities in place, and despite the contradiction that there should be eventually no Japanese spent fuel that needs reprocessing.  Work on the final reprocessing facility is now only 3% complete, and has been delayed repeatedly.

Also, TEPCO's new management (selected by the government, now its majority shareholder), announced last week that it is doubling its estimate of the cost of the Fukushima clean-up, from $60 billion to $125 billion.  Also decommissioning the reactors is likely to exceed the earlier estimated cost of 1.15 trillion yen ($14 billion).  No surprise there, but $125 billion is real money.

Next into this mix is an upcoming election, most likely sometime early in 2013.  The leadership of the main opposition party, the LDP, is of the same view as the business community and supports restarting nuclear plants and continuing to use nuclear power.  They are seen as the favorites to lead the next government.  On the other hand, an election might force them to revisit their positions, if the DPJ (and other smaller opposition groups) try to take advantage of the unpopularity of the LDP's view.  The DPJ is poorly positioned to push the issue, based upon its "flexible" policy.

As these debates play out in the background, we will focus future discussion on other areas -- plans for reform of Japan's electricity grid and distribution system, renewables under the feed-in-tariff and otherwise, the need for cheaper natural gas imports, conservation initiatives, and the like.  These are areas where we can still hope to see real progress made over the next few years.

Smart Meter Spec. Snafu Seems Resolved -- TEPCO discovers Internet Protocol for Communications

One of the early negative signs about the likelihood of "real" reform of the Japanese electricity supply sector was the mess involving smart meter procurement by TEPCO earlier this year.

TEPCO plans to install 17 million smart meters in its service area in coming years ... and then eventually add an additional 10 million for its entire customer base.  There was a significant brouhaha early in the year when TEPCO seemed ready to go forward with a Smart Meter specification that would likely limit procurement to the usual suspects.  As Diamond, a weekly business magazine, explained it in their April 14 2012 issue, the electric industry "village" was fighting against reform, having lived fat and happy off of TEPCO procurement over many decades in a system whereby they would get [over]paid at every step of the way -- paid for holding inventory, paid for shipping meters around, paid for selling the meters, paid for installation and on and on.  Of course, the system involves cross-shareholdings, sending personnel on secondment from TEPCO to serve as executives at the companies, and various other practices that would block new entrants.

As Diamond continued, the four companies that traditionally supply meters in Japan, Toko-Toshiba (controlled in practice by TEPCO), Osaki Denki Kogyo (with the leading share in Japanese electric meters, cross shareholdings involving each of five utilities, various jointly owned ventures, and a management team that originated at TEPCO), GE-Fuji Electric Meters and Mitsubishi Electric had worked jointly with TEPCO to develop a smart meter specification and collectively controlled relevant intellectual property.

In February, TEPCO rushed out a proposed spec., requested comments and announced a procurement schedule whereby the final spec. would be determined in July, and initial orders for over 3 million meters would be placed in October.

Competitors complained that TEPCO had designed an extremely and needlessly expensive -- and not very good -- product, ignoring international standards and needlessly increasing cost.  And the schedule had been set such that it seemed unlikely any company other than the usual suspects would be able to participate in the initial tenders, at which point the game would be over.  And  once TEPCO rolled out these proprietary meters, it would become more difficult for competitors to take over retail supply.

Other reports indicated that the government's Fukushima compensation fund, the Nuclear Damage Liability Compensation Fund, had interjected itself, and warned TEPCO that if it adopted the original specification, it would get a budget of zero yen for smart meter procurement.  TEPCO soliciated public comments on its specification ... and got an earful.

The final specification was announced on July 12.  Based on the Nikkei's report, the initial proposal was "fundamentally revised", now international standards are being used.  Apparently the communications will be based on something called "Internet Protocol" or "IP".  That sounds ... vaguely familiar.  Yes, they will use IP communications, even though the protocol was not invented at TEPCO or one of its usual contractors.  This will make it much easier for the meters to communicate data not only to TEPCO, but to the consumer and "smart house" equipment.

And the much criticized "bucket relay" system of communication under the TEPCO spec has been revised and made more flexible and robust.  Under the new specification, the initial press reports suggest that international companies that design and manufacture smart meters may find it possible to participate.

Nikkei's main article on July 12 suggests that the implementation cost could be cut in half -- not an insubstantial savings if TEPCO would save up to 10,000 yen on each of 27 million meters (that would be 270 billion yen or about 3.5 billion dollars in savings, over a 10-year period), for a better product.

An English summary explanation of the new specification is available here.  If you take a look, you can see that numerous pages are marked "newly added" or "modified".  Of course, the devil is in the details.  


I take this as a very positive sign -- a sign that electricity reform is an important enough issue for Japan that national interest will take precedence over the usual "village" politics.  Backsliding will not be tolerated.  At least not this month, or next, or maybe for some time thereafter.

Future Energy Mix -- Conversation with the Citizens

While Japanese energy policy remains in flux a year after the Fukushima accident, significant progress is being made.  The next couple of months may see some decisions on fundamental matters -- a relatively orderly and speedy policy process compared with other advanced industrial democracies, to say the least.

The policies under discussion have a number of components, all of which interconnect with each other.  One might even say that energy policy is a seamless web.  No, as every lawyer knows it is law that is a seamless web.  Energy policy is more like an interconnected grid.

One of the key decisions for a new Japanese energy policy is some kind of idea of what the future "energy mix" should be.  This is crucial, given the need for government policy to support development infrastructure, markets, technologies and other building blocks to achieve any particular mix.  It is even more crucial given Japan's unique circumstances as

(1) already one of the most efficient consumers of energy among developed nations so less "low hanging fruit" from adopting conservation practices already in use elsewhere,
(2) almost utterly lacking domestic fossil fuel resources,  (3) lagging behind in many of the deregulatory steps taken in other developed nations over the past 20 years and still captive to a system of nine regional electric utility monopolies, and, of course  (4) having poured huge resources into nuclear power and with pre-2011 plans calling for an expanded nuclear role in order to reduce dependence on imported fossil fuels and to cut CO2 emissions ... but forced to revisit that strategy after the Fukushima accident. METI and its advisory committees have put forth a massive number of documents in recent months, culminating on June 19 with the publication of a draft report on the choice of "Energy Mix" for Japan to the year 2030.  The intent is to solicit public comments of various types on several alternatives and in August to reach some conclusion which can inform actual legislation, rule-making and investment thereafter.
Whatever choice is adopted, the METI draft suggests policy will include several core elements:

1. Strengthen efforts at energy conservation.
2. Accelerate the development and use of renewable energy sources to the maximum extent possible.
3. Beginning with a shift to natural gas, and with careful consideration of burden on the environment, promote the efficient and "clean" use of fossil fuels.
4. Reduce reliance on nuclear energy to the maximum extent practicable.

There are 3 alternatives for the 2030 energy mix being put forward for public debate:

• Alternative 1:  Nuclear Power 0%, Renewable Energy 35%, Fossil Fuels (coal, LNG, gas) 50%, Cogeneration 15%.
• Alternative 2:  Nuclear Power 15%, Renewable Energy 30%, Fossil Fuels (coal, LNG, gas) 40%, Cogeneration 15%.
• Alternative 3:  Nuclear Power 20-25%, Renewable Energy 25-30%, Fossil Fuels (coal, LNG, gas) 35%, Cogeneration 15%.

For comparison sake:

• The actual mix in 2010 was  Nuclear Power 26%, Renewable Energy 11% (of which all but 1% was large hydro), Fossil Fuels (coal, LNG, gas) 60%, Cogeneration 3%.
• The 2010 energy plan for 2030 was to get to Nuclear Power 45%, Renewable Energy 20%, Fossil Fuels (coal, LNG, gas) 27%, Cogeneration 8%.

METI's draft report takes the view that there will be some serious negative consequences to the shift away from nuclear power in terms of reducing GDP, increasing electricity rates and hindering Japan's efforts to cut CO2 emissions.

According to the report, under the "no nukes" option the impact would be the greatest, with GDP at 2030 reduced somewhere between 1% and 5%, household consumption reduced between 0.9% and 6%, and electricity rates increased from 2010 by somewhere between 41% to 102%.  And under the "no nukes" plan CO2 emissions would be reduced by 16% from 2010 (and would remain 5% higher than in 1990), as compared with a 31% reduction from 2010 (27% reduction from 1990) in 2030 under the pre-Fukushima energy plan.

In Japanese, you can download the draft report here, and many other documents linked to the advisory committee meetings on June 19, 2012 ... and more and more documents linked from other  subsequent meetings.

A few themes that stand out to me are that, under any of these plans:

1. Renewable energy (other than large hydro) is supposed to go from under 1% of the mix to between 15% and 25%.  A 1500% to 2500% increase over 17 years.  Japan needs AS MUCH NEW RENEWABLE ENERGY AS POSSIBLE under any of these plans.  This dovetails perfectly with the adoption of a feed-in-tariff structure.

2. Efficient cogeneration is to go from 3% to 15% of supply, a 500% increase.  Of that, natural gas cogeneration is to go from 2% to 12% -- a 600% increase, even as other LNG based fossil fuel generation decreases from its 2010 share of 27% to somewhere between 8% and 17% by 2030.

And it is a safe bet that the public will not choose the 20-25% nuclear option, but instead will on a total phase-out or, if not, then on a gradual phase-out for many years ... to be revisited when memories of Fukushima have faded and a new generation of plants has developed an excellent track record in other countries.

So for any company or entrepreneur, foreign of local, considering investments in electric generation in Japan, this gives you some very clear guidance.

Cost.
Of course, the actual increase (or decrease) in cost of electricity under any new plan will depend entirely on how expensive (or cheap) the key sources -- renewable energy and LNG/natural gas for cogeneration -- are in the future.
When Japan starts out with some of the highest electricity rates in the developed world, and Japanese importers of LNG are paying something close to $15 per MMBTU whereas U.S. domestic natural gas prices this year moving between $2 and $3 per MMBTU, and at a time when one of the main themes of the global economy over the past couple of years is that cheap gas is here to stay for a long, long time  ... it is difficult to see how increasing reliance on gas cogeneration should not cut Japan's cost of electricity.  And given that natural gas cogeneration is targeted to increase from 2% to 12% of supply under ANY scenario, now would be a good time to get into the natural gas cogeneration business in Japan -- whether selling cogeneration turbines, or developing projects.

And as for the cost of renewable sources, the key is whether Japan can manage quickly to push down the cost of solar PV toward "grid parity" from the initial world's highest feed-in-tariff rate of 42 yen per kWh, and whether it can implement at a large scale the most efficient and low cost types of renewable energy --  geothermal and large wind farms situated either offshore or in Hokkaido/Tohoku areas.

In the solar PV area, Japan benefits from what has happened in global pricing for PV equipment over the past few years, and from the promise of future technical advances.  If only there can be increased competition and a quick scale-up in the domestic system of EPC providers and systems integrators, and if land use and other regulations can be reformed quickly enough, then costs should come down dramatically based upon these factors and the pressure of much lower global pricing for equipment that is now, in many respects, commoditized, or at least for which there are very attractive, low cost sources outside Japan.

In geothermal, regulatory reform has already moved ahead to allow development of resources in national park areas, but there either needs to be a change in attitude among those who can block projects (i.e. hot spring resort owners), or new laws, regulations and practices need to somehow remove their veto rights.  (I have not heard ANYONE in the Japanese government or bureaucracy suggest that veto rights of hot spring owners over geothermal projects, or veto rights of fishing associations over offshore wind projects, should be eliminated.  These are, I guess, sacred.  Or maybe sacred cows.  Or at least very politically powerful, well-connected groups.)

In order to expand wind energy, there needs to be a major investment in transmission and interconnection -- an investment which, based on informal conversations with bureaucrats and Diet members, the government seems likely to commit to as part of other announcements in coming months.  It also would help if there were a further reduction in the amount of time needed for environmental impact assessments for wind farms -- recently cut from 5 years to 3, but typically closer to 1 year in most other jurisdictions.  Wind is a mature enough technology so that the impact should be capable of being assessed -- and the project either allowed or prohibited -- much more quickly.

And there needs to be flexibility to place modern wind farms -- with their massive machines that soar into the sky -- on land that has other uses, such as agricultural land, instead of just on mountaintops.

What could possibly increase Japan's already very high costs of energy?

Well, ... of course, there is the risk that oil prices go up as we enter a "peak oil" era and demand continues to grow in Asia, especially China and India.

And how about spending hundreds of millions of dollars per year on the Monju fast breeder reactor, more on nuclear fuel reprocessing schemes that are necessitated by the lack of any long term nuclear waste storage solution, and way, way more on long term clean up and compensation to Fukushima and surrounding areas, plus decommissioning the Fukushima Dai-ichi reactors (and other reactors)?

How about ill-fated efforts to "pick winners" and subsidize some technologies that seem to have powerful backers, but do not look very likely to provide cheap electricity in my lifetime -- the Enefarm program residential fuel cell subsidies, or the effort to build massive fixed on-grid Li-Ion battery storage (instead of focusing on a smart grid system that would use electric vehicle and plug-in hybrid batteries for on-grid storage -- an idea being promoted here for "smart houses", but not as a way to balance supply on the broader grid).  Why not let Japan's battery suppliers develop their technology through supplying the automobile industry, and give consumers a chance to make some money from purchasing an electric or plug-in hybrid, instead of throwing massive subsidies at them to build fixed storage?

And how about domestic systems integrators and suppliers of equipment who interpret the feed-in-tariff pricing scheme as METI having "blessed" their pricing at its early 2012 level, rather than as intended to aggressively drive down costs?  (Yes, we have actually heard it -- systems integrators suggeset that since METI's pricing committee agreed that solar PV systems cost 325,000 yen per kW of peak installed capacity, integrators are "correct" to charge that much, taking advantage of a market in which there are too few experienced providers and they are positioned to try to capture any fruits of declining module and inverter costs, rather than passing through such declines to project owners and, via the FIT's price adjustment mechanism ... eventually to the impoverished ratepayer.)

Update:
NHK had a program Saturday evening with various panel members -- professors and think tank types -- supporting each of the options, and others offering general commentary, and with selected/edited public online comments running across the bottom of the TV screen.  Not only I, but the public generally, seem suspicious of government projections of how much electricity is going to cost under the various proposals.  Also, the panel member advocating Alternative #3, the 20-25% nuclear option, made his point and then sat quietly, pretty much left out of the conversation as the program went on.  The only other member who was supportive was the Keidanren (big business group) representative, but he also seemed marginalized, as the discussion continued over renewables and how Japan can try to get cheaper, more secure natural gas.  There did not seem to be interest from anyone else in Alternative #3.  Of course, it was just one panel discussion, but NHK, as the national broadcaster, had invited a group that reflects a pretty broad spectrum of "elite" opinion, so I found it telling.

I also found it of interest that one reason for rejecting Alternative #1 (zero nukes) was U.S.-Japan relations, and the various intergovernmental agreements that support Toshiba's acquisition and ownership of Westinghouse, GE's cooperation with Hitachi, and joint efforts to promote nuclear power in other countries.  This actually seemed to get more than just lip service -- hard to imagine if a similar debate were to go forward in the U.S. or Europe.

Jelly Fish Protest?

The Oi #3 reactor finally reached 100% generation capacity on Monday of this week, easing concerns about energy shortages in western Japan this summer, but adding to worries of anti-nuclear advocates.  The Oi #4 reactor should be restarted by late July.  No other reactors are scheduled for restart anytime soon.

Meanwhile, as a regular reader of Nihon Keizai Shimbun, I barely realize that there is any public controversy about this.  Every once in awhile, I will happen to read Asahi Shimbun, or turn on the television news, and see that in fact there are some fairly big protests -- hundreds or even thousands of people marching in Tokyo or Osaka.  But I would not realize it from reading Nikkei.

On Sunday, I happened to turn on the NHK news and saw an interim report on the Oi #3 restart, with a different kind of protest.  The process slowed as the cooling water intakes were in danger of being clogged up ... by a massive swarm of jellyfish (kurage, in Japanese).   Even the jellyfish seem to be against restarting the nuclear plants.

The jellyfish threw themselves at the plant and many anti-nuclear kurage were martyred as they were pulled out of the intake by screens.  Kurage are quite tasty when properly prepared, so we can at least hope that the martyrs did not sacrfice themselves in vain.

After the screens were cleared, Kansai Electric proceeded with the operations as planned.

Japan Feed In Tariff Regulations Finalized. Renewables Ready, Set, Go!

METI released its final feed-in-tariff regulations on Monday, June 17.

Based on the public announcement, there were no major changes from the preliminary regulations.

You can read (in Japanese) the METI response to over 5700 submitted comments.  (Use the link on the right hand side of this page to go to the renewable energy section of METI's website.)

The FIT comes into effect on July 1, 2012.

Grand Plans for Gas Pipelines

Yet another Nikkei Shimbun report, on June 13,  indicates that the METI "Natural Gas Shift Basic Infrastructure Specialist Committee" (my attempt at a translation) issued a report.  In light of the expected future global increase in gas supply, including from U.S. shale gas and other sources, there is a need to improve the Japanese network of gas pipelines and gas storage facilities.  METI wants to establish a basic policy this year on future facilities. 

The plan includes new pipelines from Yokohama to Aichi (near Nagoya), from Himeji (Hyogo) to Kita Kyushu, from Nagaoka (Niigata) to Saitama Prefecture, and also from Nagaoka to Shiga Prefecture.  There also is a plan to store gas by re-injecting it into depleted fields in Niigata near Nagaoka.

The government proposes that the cost of these pipelines be borne by the gas companies and consumers, but with government assistance on regulatory and tax matters to help get the pipelines built.  

Japan clearly needs to take advantage of what looks like many years, even decades, of future cheap natural gas around the world, if it is going to survive as an industrial power.  And Japan needs this kind of infrastructure if it is going to attract investment in gas cogeneration power plants that can help to fill the gap left by nuclear power -- which seems at best likely to decline gradually as the current plants go through a run off mode.

Electricity Rate Update

TEPCO announced on June 12, 2012 that it intends a 10% reduction in the fee it charges alternative electricity suppliers for use of its transmission lines.  Since 2008 these rates have been in the range of 2.25 to 4.24 yen per kWh, and will be cut to 1.99 to 3.89 yen per kWh.

Meanwhile, discussion continues on TEPCO's request for a 10-15% increase in residential rates.  It is now clear that the increase will not be in place by July, as TEPCO has hoped, and the earliest will be August or later.  Apparently one of the major issues in the deliberation over the TEPCO rate increase request is the treatment of Fukushima Daiichi Reactors 5 and 6, and the 4 more reactors at a facility 20+ kilometers to the south along the coastline, Fukushima Daini.  The head of the commission reviewing the rate increase request has noted that if there is no realistic chance those 6 reactors would restart, then they should not be included in the TEPCO rate base.  That would reduce TEPCO's recoverable costs by 90 billion yen per year (about $1.2 billion).

On the bright side, Nikkei also reports that in response in connection with the rate increase request, TEPCO has agreed to reduce its costs for introducing "smart meters" by 1.6 billion yen per year over 2012 to 2014, and to accomplish this by revising its TEPCO-specific standard for smart meters, allowing effective foreign participation in the bidding process for the contract, and thereby reducing the cost.  If they follow through, it would be a sign of hope.

Nuclear Policy Creeps Forward

This week, according to press reports, the legislation for a new, more independent 5-person nuclear safety regulatory board apparently moved forward.   The body will take on 800 staff from METI and the Science/Education Ministry, and those staff will in theory be prohibited from returning "home" -- or to any other governmental entity that has as one of its functions the promotion of nuclear power.

Apparently part of the compromise to get the LDP to join in the government's proposal is that the new legislation offers some ability to revisit a mandatory 40-year limit on operation of reactors.  The LDP had wanted this provision eliminated entirely, but a compromise instead allows the new regulatory board to revisit  whether such a policy is necessary.  So for the time being at least, this issue remains open.  (Maybe the utilities can avoid taking immediate huge write-offs on their 40+ year-old  nuclear plants -- to the extent not already fully depreciated -- since in theory these plants may yet generate electricity?)

Friday morning June 15's Nikkei Shimbun notes that the legislation will include provisions that delegate to the regulatory board certain details of response to a nuclear accident, removing these items from the political judgment of the Prime Minister.  This would include a decision on whether to use seawater to attempt to cool a reactor that had lost power -- the decision that Prime Minister Kan is said to have delayed on March 12, 2011 while asking whether the salt in seawater might risk reactor recriticality.  (Kan apparently knew just enough nuclear physics to be dangerous ... and TEPCO's Fukushima Daiichi plant manager ignored the instruction and went ahead without yet further delay at this point.  But the anecdote lives on.)  I hope we never need to learn whether the new approach actually works better than the old.

A formal announcement regarding the government's favorable decision to restart Omi Reactors #3 and #4 this summer, is forthcoming any day.

Mega Solar Announcements

With the feed-in-tariff (FIT) regulations likely to be finalized in coming weeks and the FIT to come into effect on July 1, 2012, we are starting to see more announcements of mega solar (i.e. utility scale 1MW+) projects.  

This week, NTT announced that its property owning/managing subsidiary, NTT Facilities, plans over 60MW of solar PV projects by early 2015, using land it owns at over 20 sites around Japan.  NTT Facilities has been moving in this direction for some time.  It is doing systems integration and operation & maintenance business, and since at least 2006 has been involved with a NEDO-affiliated test/research mega solar facility in Hokuto City, Yamanashi Prefecture, that continues to grow.

One of the largest projects announced earlier this year is the 70MW Kyocera, IHI, Mizuho project in Kagoshima, southern Kyushu.  Kyocera is one of the larger Japanese manufacturers of modules.  It has a long history in the business and was the #1 manufacturer in the world back in 1998, 1999.  And it claims a leading position in the commercial/industrial market in Japan.  Assuming they are following through on  previously announced investments, they would have module capacity of 1GW per year by March of 2013.  So they will have lots of product they need to push out the door -- with not too much to distinguish it from the products of other manufacturers -- and could probably use many more similar projects.

SOFTBANK, through its SB Energy subsidiary, is teaming with prefectural and local governments around Japan, and is planning a number of large projects.  The largest by far is a proposed 200MW plant in Hokkaido.  (Apparently SB wants to build a 340MW plant, but Hokkaido Electric can only accept 200MW given its current transmission network).  SB Energy's other announced projects are each less than 10MWs.  SB Energy also has established a testing center in Hokkaido that provides real time data to the public on performance of various manufacturers' proposed modules/systems.  

Likewise, about a week ago major real estate developer and owner Mori Trust announced plans for a mega solar project in Shirakawa, Fukushima Prefecture, on the site of its La Foret Shirakawa resort development,  that suspended operations following the Fukushima Daiichi nuclear disaster.  The project will initially have 2MW peak capacity, but potentially add an additional 8MW later.  I rode my bicycle within a mile of this site during Golden Week, and remember it as particularly beautiful countryside.   But it is difficult to get customers to buy resort condominiums when you need to spend too much time talking about cesium 134 and 137 contamination levels.  This area in south central Fukushima, though far outside the evacuation zones, got a a pretty significant dusting of contamination, as did northern Tochigi and Gunma prefectures.  Not good for second home values.

Dynamic Pricing ... Finally

There have been lots of reports lately about attempts to limit peak electricity demand through dynamic pricing schemes.  These are well known in the rest of the world (our residential electric bill had such a scheme in Maryland almost 15 years ago) ... but have been absent from Japan.

Wow.  Japan really is entering the 21st century, or at least the latter part of the 20th century.  Maybe next Japan will introduce daylight savings time, and our dog will start waking up and asking to be let outside, fed and walked at 5:30AM, instead of 4:30AM?  That would be really nice, but I will not hold my breath.

In any event, both TEPCO and Kansai Electric (KEPCO) announced optional peak pricing plans ... but the plans were underwhelming, did not offer particularly steep off peak discounts, and the response has been dismal.  TEPCO has gotten 130 households to sign up, and KEPCO only 230 households, out of the tens of millions in these service areas.  Probably the 360 households are all childless working couples, who use no electricity at all during the "peak" hours at least 5-6 days a week, so the reduction in electricity consumption will be ... zero.  And the plan requires installation of meters that are actually able to measure consumption at specific times of day ... as opposed to the existing base of meters.

And nothing about any of the preceding efforts is "dynamic" -- just peak and off-peak.

Finally, today, a story in the Nikkei that one of the new electricity supply entrants (power producer and supplier or "PPS"), Ennet (新電力 エネット), which has the NTT group and Tokyo Gas as its lead shareholders, will introduce a summer peak pricing scheme to encourage conservation by its large scale customers.  (Ennet does not -- cannot -- serve residential customers, under the current regulatory regime).  It has actually signed up contracts for the new structure with major customers such as the Aoki menswear chain, Mitsukoshi/Isetan Department Stores, Oji Paper and various schools/universities.  There will be off peak, peak and middle pricing.

And provided that notice is given the evening before, there are two additional special peak pricing features.  (It is this advance notice that is the "dynamic" feature).

Under one plan, pricing on the off peak and middle periods will be reduced by several yen per kWh below normal, and during the 13:00-16:00 peak, pricing will soar to 3x normal -- around 50 yen per kWh!

The other alternative does not offer any discount for the off peak and middle peak hours, but will pay a rebate of around 15 yen per kWh by which consumption is reduced against a benchmark.

Ennet suggests the new plan will actually save customers money if they can make minor shifts in demand.  And it avoids a need to go and beg customers to cut peak demand ... the approach taken by the incumbent utilities.

Prospects for Geothermal Generation in Japan

At first glance, Japan would seem a prime candidate for widespread geothermal electricity generation.  The resource exists -- one of few types of energy where Japan's domestic resources can be rated as good-to-excellent.

And Japanese suppliers and contractors have even built some of the most successful geothermal generating stations in the world -- in leading jurisdictions such as New Zealand.

Until March 2011, however, there was little prospect for expansion.  First, went the common refrain, Japanese geothermal resources were focused in national park areas where development was prohibited.  Second, it is not possible to develop a geothermal plant without the consent of hot spring operators in the vicinity, who fear that their hot water resource will be damaged.  

Despite an increasingly good understanding of underground resources, and a strong basis to believe that hot spring resources are separate and distinct from the much deeper resources used for geothermal power generation, the fear continues.

In late 2011, headlines announced proposed regulatory reforms intended to allow geothermal plants to go forward in national park areas, with appropriate protections.  Likewise, other regulatory reforms were to cut the amount of time required to launch a geothermal plant from the current 15 years to ... only 10 years.

Ten years, to develop a renewable plant using relatively mature technology?  At that point, I lost interest.

Still, there was an announcement in March that the Ministry of Environment had followed through on the deregulation of parklands, and Idemitsu Kosen and a group of other large Japanese companies announced plans for a project in NW Fukushima Prefecture -- what better place, after all, to win public support for a renewable energy project?  The NW Fukushima project, in Bandai-Asahi National Park, was made possible by this very reform, with a 270MW plant envisaged, near several active volcanos and excellent geothermal resources.

In early April, Bloomberg reported that its own consulting arm believed the regulatory reforms and feed-in-tariff should revitalized geothermal power in Japan, with capacity nearly quadrupling from a current 530MW to over 2GW by the 2020s.

The regulatory reform is intended to allow some development in national park areas, with appropriate environmental protections and consent of any affected users of the geothermal resource.  Also, approval of the relevant prefectural government would be required.  (Fukushima Prefecture's support for the Idemitsu plan was widely reported).

Even better, the results of a Nikkei Shimbun survey were announced on June 3, 2012.  Nikkei asked 21 prefectures with favorable geothermal resources for their views on development.  Twelve of the prefectures agreed with the idea of pursuing geothermal development pro-actively, while 9 others were more cautious and indicated that "consent of the affected localities (地元) is a pre-condition".

Reality comes crashing down with reports today (June 5)  that the Fukushima headline project is now stalled.  The companies began to approach local residents in April, and "met with opposition from hot spring resort operators who are worried about how the development could affect spring water".  Apparently the nuclear accident, fear of power shortages, loss of tourists to Fukushima over the past year, and everything else, is not enough to shift long held views.  The pace of change in Japan is slow.  Very slow.

It would be nice if this were not the end of the story, and if something (other than massive pay-offs) would shift the opposition.  We shall see.

Japan Electric Vehicle Developments

Update October 2014:

One of the items mentioned below -- use of EV batteries for inexpensive on-grid electricity storage, is the subject of a new study in California, at UCLA/UC Berkeley law schools.  (The issues are primarily regulatory and legal, not technological, so this is a sensible sponsorship, contrary to initial impression).  This study posits "re use" of batteries taken from used EVs -- which should ease any concerns that automakers had about concurrent use. And it would, of course, increase EV resale value if the old, used battery were seen as having a high value.  See the study at the hyperlink.


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Original Post 2012:

It seems like forever that the Toyota Prius has been the monthly #1 or #2 top selling car make/model in Japan.   And if you look around the streets of Tokyo, you see lots and lots of other hybrids -- from delivery trucks to minivans, SUVs, luxury sedans and mini-cars, not to mention Honda Insight and Fit hybrids -- with a few of the all electric Nissan Leafs mixed in.

Of course, any self-respecting middle class housewife in Tokyo with multiple small children needs a "dendo jitensha" -- a bicycle with rechargeable battery pack and small electric motor to help her get up the hills with a heavy load of groceries and two children on child seats, front and back.

And Japan has long been a leader in battery technologies, for automotive, lighting, consumer electronic and other uses.  The Sanyo (now Panasonic) Eneloop rechargeable NiMH batteries (AA and AAA) that I have really are far better than any others I have ever used.

So Japan is well-placed to play some kind of role in the expansion of electric vehicles, and implementation of "on grid" battery storage, and the reforms of the electicity industry now being discussed post-Fukushima present the perfect opportunity to accelerate related initiatives.

1.  May 27 newspapers report that an initiative is underway to promote hydrogen stations, in order to support next generation fuel cell cars.  The plan is to have 100 stations by the year 2015.

2.  The Japanese press report regularly on the discussions among automakers and regulators around the globe over competing standards for electric vehicle charging systems.  Japan (led by Nissan with its Leaf) is promoting its "CHAdeMO" standard, while Europe and the U.S. favor a "Combo" system that allows for fast DC charging as well as 3-phase and 1-phase AC charging, all using the same plug.  There is at least some stated desire in Japan to modify the standards to make them more compatible.  CHAdeMO actually has an installed base in Japan (and a few places elsewhere), but with the major US and European automakers supporting the Combo system, it may not be easy for CHAdeMO to carry the day without some kind of compromise, if still possible.  China, on the other hand, is said to be promoting a separate, incompatible standard.

Meanwhile, use of plugged-in electric vehicles for storage seems to be an ideal solution to many issues that arise from distributed generation in a deregulated electric system ... and with a large number of plug in hybrids and electric vehicles sitting around in parking lots, Japan just needs to implement the required charging and smart metering systems.  This seems to me like a much more cost effective use of rechargeable batteries than large in home rechargeable batteries; or the utility scale on-grid Li-Ion battery facilities that are also under discussion now in Japan but very high cost and some years away.

Energy conservation measures on the way

More energy conservation measures are being unveiled, as the summer heat approaches and Japan's nuclear reactors remain shut down -- with the the focus on reopening only two Kansai Electric-operated reactors by July.

About 10 days ago an interesting report about JR East's efforts to improve the efficiency of its commuter train networks.  Already, JR East generates a significant portion (57% as of 2010) of its own electricity from four generation facilities.

It has for many years used "regenerative braking" technology -- similar to automotive hybrids, but sending the electricity back onto the wires -- and this system is now installed on 88% of its trains.

But the current system only works when one train served by the same substation needs to draw power from a second train that is braking.  It does not work for uncrowded lines that have only a single train on a long section of track.  The system will be expanded, with addition of NiMH battery storage and upgraded IT/communications systems, so that regenerated energy can be used more widely across the netowrk and stored until needed.

The new IT/communication and storage network will also permit JR East to effectively utilize solar power that it plans to generate using installations on train station rooftops, rights of way, etc.

Private railways and the Tokyo Metro subway are studying similar measures, implementing LED lighting in train carriages, etc.

Another report in the May 31 newspapers notes that JR East also has developed a superconducting cable that it believes will be relatively easy to install on its network to replace existing cables.  The existing cables lose 10% of the electricity in the form of heat, whereas with the superconducting cable loss is near 0%.

Finally, consumers are buying large numbers of electric fans this year, as last -- for cooling at much lower energy consumption than air conditioning units.  Consumers also are installing LED lighting to replace incandescent and even compact flourescent bulbs.  A survey company reports that in one week in May, ceiling lighting fixtures sold in the Kanto/Tokyo area were 66% LED, while in Kansai/Osaka they were 71% LED.  Of course, LEDs now form a large share of aftermarket bulbs sold.

And under the new "cool biz" guidelines, you can wear Hawaiian shirts and sandals in the office to try to keep cool.

Japan Electricity Deregulatory Initiatives Under Discussion

According to the May 30, 2012 evening Nikkei, it is now possible to identify a number of METI initiatives under consideration for future deregulation the electricity market based on yet another METI advisory committee (電力システム改革専門委員会 -- roughly translates as the Electric System Reform Specialist Committee).  Ideas being pursued include the following:

To energize (no pun intended) an existing exchange where utilities and new entrants (so called "PPS" or "power producers and suppliers") can trade electricity futures, in order to stabilize electricity price and supply and support competitive entrants. Currently, futures transactions cover only 0.6% of retail electricity demand.

This reform involves restructuring the exchange, which is capitalized 80-90% with equity from the regional utilities, and whose directors are also mostly sent from the utilities.  The proposal is for METI to return the capital and replace directors at the exchange with non-utility executives. Also, end users may be permitted to trade electricity futures on the exchange, and utilities may be required to provide bids for purchase and sale of electricity to make sure that there is always some "bid" and "ask" price.

At least as important, the committee proposes to advance to detailed discussion over the appropriate way to separate transmission grid from the utilities, and make transmission a common facility that can be used by all market participants on fair, objective terms, in order to encourage new generation entrants.  METI is studying currently whether to propose a "legal" or just a "functional" separation of transmission -- whether I believe means whether transmission (1) will be spun off into an independent company, or (2) will just be shifted into a separate unit within the existing utility, that has a mandate to treat internal and external customers equally.

There is also discussion about deregulating the generation market and electricity distribution down to the level of retail/residential consumers -- whereas any competitive market is now limited to users above 50 kilowatts.

Japan Future Nuclear Mix -- The Debate Narrows Slightly

The last week in May saw a number of reports about deliberations of METI's Advisory Committee on Energy and Natural Resources.  The Fundamental Issues Subcommittee issued a major report on December 20, 2011 flagging "Discussion Points" on the establishment of a new basic energy plan for Japan, following the Fukushima nuclear disaster.  Each plan is assessed in terms of what kind of CO2 reductions can be achieved versus 1990 levels.

This subcommittee is, officially, where the "rethinking" is going on regarding Japanese energy policy.

Of course, the area of greatest focus, public attention, and indecision, is the future role of nuclear power.

The pre-Fukushima plan had looked to nuclear to grow to provide 45% of Japan's electricity needs by the year 2030, with renewables providing 20%, and a 31% reduction in CO2.

Over 24 meetings since last year, the subcommittee has not been able to decide on recommendations among 4 alternatives:

1. 0% nuclear, 35% renewables, 16% CO2 reduction.
2. 15% nuclear, 30% renewables, 20% reduction.
3. 20-25% nuclear, 25-30% renewables, 23% reduction.
4. 35% nuclear, 25% renewables, 28% reduction.

An additional option was that, based upon deregulation of electricity supplies, consumers can choose their power source (with an impact on the rate they pay) -- which I guess works if you can accurately assess surcharges to cover the externalities of each source.

Reports in the Nikkei Shimbun on May 27 and 29 suggest that the options have limited somewhat.

The 35% nuclear option is, effectively, off the table and out of the report.  (Did anyone think it would be achievable in practice?  or acceptable to the public?)

There are also numerous reports that the DPJ government, and especially Mr. Hosono, minister in charge of the response to the Fukushima accident, supports option #2 -- 15% nuclear power, 30% renewables, in the year 2030.  That plan provides for no construction of new nuclear plants, and that existing plants will not have their licenses renewed or extended beyond the initial 40 year operating period.  This option essentially would put nuclear power into a "run off" mode in Japan ... a very, very long run off.  This seems pretty realistic, though ultimately it is a decision for the Japanese people and their government.

While the debate over future mix continues, the mix as of May 2012 is nuclear 0%, renewables (mostly traditional hydro) less than 10%, and fossil fuels 90%.

Japan's "energy self sufficiency" in 2011 as reported by the IEA fell to 13%, the lowest since 1981, and it will probably be lower yet in 2012.

TEPCO Residential Rate Increase Likely to Be Pushed Back

According to reports in the Nikkei, the TEPCO rate increase for its regulated customers (small users -- mostly residential) is not likely to be approved in time for implementation on July 1.

The rate increase would need to be approved and announced by June 20 to meet a July 1 date, and that is not going to happen.  The panel reviewing the rate increase is still debating to what extent the ratepayers should bear the burden of TEPCO's costs in containing and paying compensation relating to the Fukushima crisis.  The panel is not likely to reach a conclusion before late June, at the earliest.

Separately, the Yomiuri notes that TEPCO's submission to METI for the panel showed that while regulated consumers comprise 38% of its electricity demand (the other 62% goes to large users), 91% of profit comes from the regulated customers, and 9% from large users.

Local Governments Pursue Renewable Energy

Many observers of Japanese politics see a lot more energy, initiative and creativity in SOME local governments than at the national level.  This is true in the response to the tsunami disaster -- where the governor of Miyagi Prefecture comes in for regular praise, for example.  It is also true in the energy area.

Softbank's solar PV strategy involves teaming with prefectures -- no doubt great partners in finding sites, moving through regulatory barriers, and making sure that the utilities cooperate on matters of interconnection.  The Tokyo government is making a major push into gas-fired generation and various other efforts to reduce its reliance on TEPCO.

A May 24, 2012 story in Yomiuri English version highlights the city of Wakkanai in Hokkaido, which now has a 5 Megawatt solar plant, as well as 74 large wind turbines -- covering almost 90 percent of the city's demand. Of course, the story does not note that this plant has been in operation since 2006, so it is nothing new.   There is a lot going on at the local government level in renewables right now around Japan, but we need to be careful about these "re-announcements".  The newspapers have figured out that the public is very interested in this topic, and so they have regular stories, with or without news, and with or without real analysis.

The article also mentions the IHI/Kyocera plan for a 70 megawatt solar PV installation in Kagoshima -- southern Kyushu.  And the need to add transmission capacity and improve the grid if more wind power capacity is to be installed in Hokkaido or NE Japan.

Limited Reactor Restart Looks Likely for Summer 2012

It has been about a month since the last functioning Japanese commercial nuclear reactor, in Hokkaido, shut down for their "regular maintenance."

Each reactor is shut down after 18 months of operation, on a regular schedule. And by custom/policy it is  not restarted by the operator until the prefecture and locality in which it sits have signed off.  This need for local sign-off, plus government-mandated "stress tests" and a review of tsunami and earthquake resistance standards, has meant that no reactors have restarted since the March, 2011 Fukushima disaster.

(As an aside, the requirement for shutdowns at 18-month intervals, and numerous sign-offs before restart, are one reason that even pre-March 2011, Japan had VERY low capacity utilization for its nuclear reactors, compared with the United States, France or other major developed economies -- I think something close to 60% in Japan vs 90% in the U.S. in recent years.  Ironically, low capacity utilization made it was necessary to build many more of reactors, dramatically increasing the cost of generation, and the risk of accidents such as Fukushima.)

In some parts of Japan where nuclear is a small part of the electric energy mix (Chubu region, for example), it has been relatively easy to replace nuclear generation by firing up dormant fossil fuel plants.  Even TEPCO (Tokyo Electric) expects to meet summer demand this year without mandatory conservation requirements, by using fossil fuel generation.  The result has been a huge increase in Japan's import of hydrocarbons, and a national swing from current account surplus to deficit.

But in Kansai (Osaka, Kyoto, Kobe and surrounding areas) and Kyushu, nuclear power is a huge part of the electric generation capacity mix, and is difficult ("difficult" in Japanese actually means "impossible") to replace on a short-term basis.  For peak usage in July and August 2012, Kansai predicts at least a 15% shortfall.  Kansai and Kyushu are implementing mandatory conservation measures for large users, requesting all users to cut consumption significantly, and arranging to purchase power from nearby regions.

This lack of supply, coupled with pre-existing high electricity prices that will only get higher, make the situation dire enough to influence factory relocation decisions and drive away employers.

Also, there is a hint of panic in the debate among establishment players -- the utilities, major suppliers, business groups, more conservative politicians, et al., over whether or not to restart reactors to deal with the 2012 summer peak demand.  Lurking in the background is a realization that, if no reactors restart for the 2012 summer peak, and somehow creative conservation measures manage to deal with the situation as they did in 2011, the argument will have been lost that reactor restarts are somehow essential, that the existing nuclear reactor base MUST be utilized, or that Japan will sink into chaos without nuclear power.

Unlike Prime Minister Kan, who favored getting rid of nuclear power in its entirety, as quickly as possible, Prime Minister Noda takes a much more nuanced approach, trying to navigate between public anti-nuclear sentiment, on the one hand, and demands of the business community and bureaucracy, on the other.

So no target has been set as of yet for Japan's target future electric generation mix of sources.  Nuclear could be 0%, or 30% of the mix, or somewhere in between.  At least the 45% option is off the table!  And Mr. Noda has followed through based on the results of the government "stress tests" clean bills of health, and has made every indication that the government will push ahead to restart two of the Kansai Electric reactors (Omi Nos 3 and 4) for this summer, as soon as the necessary arm-twisting is done at the local level.

It seemed likely from the start that Fukui Prefecture and the actual town where the Omi reactors sit would sign off.  Both are heavily dependent financially on the nuclear industry (a topic for another post) and have little option, unless it is to somehow use their current leverage to extract further benefits.  The sticking point has been the surrounding prefectures -- Kyoto, Shiga, and Osaka, whose governors have pushed hard for their own veto rights, since they are major population centers well within the danger zone should a Fukushima-like event occur again.  The Osaka Governor, Toru Hashimoto, is worth special focus, since he is a young, charismatic politician who leads an populist, insurgent group that may run a large number of candidates and try to gain significant national power in the next general election.

But even Kyoto, Shiga and Osaka governors must be alarmed at potential implications of summer shortages.  The latest news, reported in Friday's major Japanese newspapers, was that the Kyoto, Shiga and Osaka governors are likely to acquiesce in restart of the Omi reactors, but want it to be on a temporary basis, only to address this summer's demand.  So it seems very likely, as of today, that we will see a limited restart by July, in time to ease the summer peak demand in Kansai.

Of course, the legal framework does not provide any backing for a "temporary restart", and to allow it is to lose the battle for anyone who believes that Japan must eliminate nuclear power as soon as possible.  If the reactors really are not "safe", they should not restart, regardless of demand.  If they are "safe", then why shut them down in mid-September?  And if the Omi reactors are "safe" to restart, then why not others?  If the stress test results are sufficient for the Omi reactors, then why should we not consider and abide by the results for others as well?

So it seems likely that the debate of the future of nuclear power in Japan is not over.  It is just starting.

All that said, I think there are some boundaries we need to recognize as a practical matter.

The fallout (literal and figurative) of the Fukushima disaster will be with us for our lifetimes and beyond.  Just when you think life has returned to normal, you read that bamboo shoots from Chiba, just across the bay from Tokyo, were not allowed onto the market due to high cesium levels, or that cesium levels have continued to increase monthly in Tokyo Bay's silt at the month of the Arakawa river.  And the "clean up" effort to reduce radioactivity in towns nearer Fukushima ... will inevitably have mixed results, at very high cost.

So I think it is very safe to predict that the Japanese public will not accept construction of any new nuclear plants in the next 20 years, or perhaps much longer.

And the public will not accept the restart of any existing plants that have any identified special risk factors -- a newly discovered earthquake fault nearby, or aging components.

I predict that none of the 40+ year old reactors will restart or have their licenses extended/renewed.  The utilities should simply save their money and start focusing on decommissioning these (but they will not).

I predict that the Hamaoka reactor in Shizuoka will not likely restart anytime in the next 10 years -- despite all the ongoing expense to build a higher seawall against a future tsunami.  Again, money better spent elsewhere.

And, whatever the decision about future nuclear mix, it is clear that Japan needs huge efforts at each of

1. energy conservation (not just turning the thermostat up in summer and down in winter, but efforts that do not cause direct discomfort, please!);

2. new renewable generation -- solar, wind, geothermal, biomass, small hydro, etc.; and

3. new, efficient natural gas generation.

And these need to occur at the same time as a fundamental reform of its electric supply and distribution system -- deregulated markets, access to transmission and distribution for competitive suppliers, peak pricing regimes to shift demand, on-grid storage technologies using electric vehicles and other new battery technologies, smart meters, and much much more.

So if nuclear policy is still unclear, what needs to be done on other fronts is gradually coming into focus.

WSJ blog report here and article (subscription required) here.  Japan Times here.   Bloomberg report of up to a thousand anti-nuclear protesters at the prime minister's office in Tokyo Friday here.