Demand Response Comes to Japan

On December 10, a JV was announced between EnerNOC, a U.S. listed company, and Marubeni, a major Japanese trading house.  The JV will provide demand response services to commercial and industrial users in Japan.  EnerNOC already has done a pilot program with Kansai Electric in 2012, and will start a new program with TEPCO via the new JV in 2013.

Some English language reports can be found here and here.

At a Massachusetts-Tokyo trade mission event in Tokyo timed to coincide with the announcement, EnerNOC CEO David Brewster indicated that commercial/industrial demand response systems have the potential to shave 10% off of Japan's peak electric energy demand.  He noted that further regulatory reform will be needed to change electricity contracts -- and provide for "dispatchable" power -- in order to reap the full benefits.

This kind of demand response technology -- that can shut down demand for literally gigawatts in seconds or minutes -- is "low hanging fruit" for Japan.   It can avoid the need for a lot of new centralized generation -- nuclear, coal or otherwise -- and can dramatically ease the implementation of renewables into the electricity grid.

Marubeni seems like an obvious partner for EnerNOC -- they have a long history of involvement with overseas power investments, they have energy trading businesses, and they are familiar with the transition to competitive electricity markets.

Sekisui Chemical Battery and Solar Announcements Grab the Eye

There was a press release last week that really caught my attention.  The Nikkei carried a story about a new process for making lithium ion batteries that promised to dramatically reduce cost and increase energy storage capacity.  The story indicated a 3x increase in storage capacity and much lower production costs.  Wow, I thought, if this is actually commercializable then it will accelerate the shift toward PHEV and EVs.  And also storage systems for renewable energy.  And unlike other battery technologies I have been reading about, the story indicated it should be on the market in a little more than a year.

The press release issued by Sekisui Chemical (click link) adds detail, and more important, photos of the new battery -- a flexible, film-type, sprayed on product.  Wow.

 

Then a few days later, I see on the Sekisui Chemical website yet another remarkable press release: for a cheap, flexible organic dye-sensitized solar cell produced at room temperature with an 8% conversion efficiency, a world record for this type of cell.  This was based upon work done with Japan's National Institute for Advanced Industrial Science and Technology (AIST).  Again, the company hopes to have a product on the market -- for use in building integrated applications (BIPV) such as office windows -- by 2015.

These are the kind of advances -- that could be on the market in the next few years and represent a significant jump from today -- they are a reason to be very optimistic about Japan's (and the global) energy future, and to wonder whether it is really good value to be spending trillions of yen on trying to restart a portion of the existing nuclear power fleet.

LNG and Gas Market Developments

With Japan's nuclear reactor fleet shut, much of the focus on reliable, affordable generation over the decades required to transition away from nuclear will be on LNG.  The press is full of reports of developments in Japan relating to new gas-fired generation, changes in the gas markets, and liberalization efforts.  Japan pays $15-20 per MMBTU for its LNG upon import, whereas gas trades for 20-25% of that price within the U.S.A.  A crucial item for Japanese energy policy is thus to obtain cheaper, diversified sources of LNG supply.  A few reports:

November 8.  Tokyo commodities exchange announces a plan for LNG commodities trading market, to support the move away from oil-linked long term pricing structures -- currently over 80% of Japanese LNG is purchased based upon 10~20 year oil-price-linked agreements.  This is the first step to a futures market in LNG in Japan.

November 13.  TEPCO announces it is considering outsourcing some fuel procurement activities to reduce its LNG acquisition costs.

November 28.  Tokyo, Osaka and Toho Gas companies announce support for full retail price liberalization and competitive schemes.

November 28.  Japanese shipbuilders have a huge increase in orders for LNG tankers -- 90 ships on order now for delivery by 2020.

November 29.  The Tokyo commodities exchange reports negotiations with the CME (Chicago Mercantile Exchange) for a business tie-up in the area of LNG trading.

First Solar announces Japan Market Entry

First Solar has been looking around the Japanese market for some time, and finally (according to company announcements and various press reports over the past few weeks) is going to jump in, both selling modules and developing and selling completed "mega solar" projects.

First Solar acquired Tetrasun earlier this year, a company that has high conversion efficiency traditional crystalline technology -- a good match (at the right price and other factors) for the Japanese rooftop market.  They are teaming with JX Nippon Oil for eventual roll out in Japan.  And they announced their first smaller project with existing First Solar CdTe thin film modules.  The planned total First Solar investment in Japan is $100 million.

UPDATE:  In summer 2014, XSOL announced a supply agreement to import and sell First Solar CdTe modules in Japan.

News Flash -- First Electricity Industry Reform Legislation Passes

The first of 3 proposed electricity industry reform bills passed into law yesterday, Wednesday Nov 13.

There are lots of reports in the Japanese press about what all this might come to mean, but for now let me just note the occurrence of the event, which could be a watershed in Japan's economic history.  

For the Reuters English report, see here.

UPDATE December 2, 2013:  Work gets in the way of blogging.  My apologies for not following up on this news flash, but I intend to do so ... eventually.  At this rate, it may not happen before the year-end break.

TEPCO Potential Split into Generation, Transmission and Retail Subsidiaries

Just last week, we commented that it would be a wasted opportunity if the main TEPCO restructuring were to go ahead as a split of TEPCO into "good" and "bad" companies, in order to hive off the Fukushima decommissioning and compensation burdens, shift them onto the taxpayers and provide comfort that the work will have adequate expertise and funding.

So it was a relief to read in Friday (November 8) press reports that TEPCO indeed is planning a further restructuring, as part of the quid pro quo for additional public help with Fukushima.

The restructuring will divide TEPCO's main businesses into 3 subsidiaries under a common holding company -- a fuel and traditional generation company, a transmission company, and a retail company.  Such an organizational separation is not contemplated by current Japanese law, but would be permitted under the electricity reform legislation expected to pass the Diet next year with support of the ruling LDP.

Division of utility assets into separate entities under a holding company is not the last step in reorganization, but it is essential.  And if implemented it will show the way for Japan's other electric utilities and their financial institutions.

A related announcement involves a plan to eliminate 10 of TEPCO's 80 regional branch offices. Apparently 1000 out of 4000 related jobs would be eliminated, while the remaining employees would be reassigned.

Personalized cooling device?

Japan faces both summer and winter peak energy usage periods, related to cooling and heating demands.  The summer peak demand is the higher, and the solutions seem more difficult.  In a big city like Tokyo, one building's cooling system heats the great outdoors and boosts the cooling requirements for the building next door.

Even worse, on a global scale, as air conditioning is set to spread in large newly developing countries such as China and Brazil, global energy consumption will soar, and with it CO2 emissions, fossil fuel prices, air pollution, etc.

What if there were a revolutionary way to make us comfortably cool or hot, adjusted to our personal preferences, portable, that eliminated most needs for air conditioning ... and also reduced the need for heating in the winter?

Some graduate students at MIT are working on a very simple device, almost a toy, that could get us part of the way there.  

Wired Magazine reports on their "Wristify" band.

This might make Tokyo bearable in the summer.  I want one for walking around in stifling heat, for taking a train packed with people in stifling heat, for meetings in government offices that are stifling, and for turning off (or down) the cooling at home or office!

Higher FIT Considered for Offshore Wind Projects; Lower FIT Possible for Solar PV from April 2014

Japan does not have the kind of shallow offshore waters that form the ideal environment for offshore wind.  Instead, the ocean surrounding Japan drops off deeply, and conditions can be harsh.  The offshore wind projects now being tested is for massive floating platforms, anchored with huge chains. The project participants are major companies, with big company overhead and long planning horizons.

That is expensive, to say the least.

In addition to the 1GW Fukushima project mentioned earlier this year, Marubeni is reported to be leading a 125MW project offshore of Kashima, Ibaraki.  Other smaller demonstration projects are planned elsewhere, from Kyushu to Hokkaido.

So it was not such a big surprise to see reports in the press last week that a higher feed-in tariff rate is being considered for offshore wind.  The current year's FIT for wind generated power is 22 yen per kWh.  From next year, according to Nikkei, a tariff for offshore projects is being considered of 30-40 yen per kWh, likely around 1.5 times the rate for land-based wind.  Such a differential is not uncommon in European feed-in tariff regimes.

Meanwhile, according to the same source, it is likely that the solar PV tariff (now 36 yen) will be reduced to a level somewhere between 30 and 35 yen (plus tax).  It was recently announced that residential solar installations are down 15% from last year.  Perhaps the FIT pricing committee should consider retaining 36 yen pricing for residential rooftop and "mini" solar projects, even if the tariff is cut to somewhere in the 30-35 yen range next year for larger open field installations?

Unfortunately, a high FIT rate does not seem to be enough to jumpstart some of the other renewables areas.  Geothermal, in particular, needs some kind of boost to get around NIMBY complaints and unproven worries about projects' impact upon hotspring water resources.  Onshore wind requires accelerated environmental assessment procedures if it is to make an impact.

Retail Competition -- New Entrants to Access Usage Data

METI indicated recently that it plans to require the incumbent electric utilities to provide new entrants with access to electricity user consumption data.  The data is needed in order for new entrants to run simulations and prepare pricing offers, so that retail customers to make comparisons among providers based upon actual consumption.

The government is still working on how to deal with issues about protection of personal information, in light of Japanese hyper-sensitivity about sharing such information.

Good Utility, Bad Utility

An LDP committee responsible for studying ways to accelerate the Tohoku recovery from the March 11, 2011 tsunami and nuclear disasters is recommending that TEPCO be separated into two separate companies, one of which would deal with the "bad" Fukushima clean-up and decommissioning problems, and the other of which would take over the remaining “good” businesses.

Of course, like a “good bank” and “bad bank” strategy for resolving a financial institution, this would allow “good” TEPCO to go forward, raise capital, provide service and function as an electric utility.  

But unlike a bank resolution, the bad TEPCO contains not just an uncertain recovery on existing assets, but a huge and uncertain future liability for Japan’s taxpayers.  The government and taxpayers will bear the cost of the cleanup and decommissioning, cost of securing and preparing sites for medium-term storage of waste from the massive Fukushima clean-up.  TEPCO's bondholders and banks get a free pass.  Of course, the report does not mention this, and the LDP committee argues that a "good utility, bad utility" structure is all part of making sure that the Fukushima clean-up goes forward properly, with the government assuming a bigger role after TEPCO's failures.

The same committee is apparently considering a relaxation of the Fukushima accident compensation rules, to allow additional nuclear accident compensation payment if residents are prevented from returning home for more than 6 years.

Splitting up TEPCO is not such a bad idea, but this division does nothing to help with the reform of the industry structure, it merely frees TEPCO from a problem that even TEPCO lacks the financial and organizational resources to deal with.  Why not also consider a broader division – splitting off generation, transmission and distribution into 3 companies and paving the way to a new energy future?

Meanwhile, TEPCO itself has announced a plan to place all of its Fukushima clean-up and decommissioning-related activities into a separate subsidiary.  They plan to recruit an outsider to run the operation. The internal reorganization seems a pre-cursor to the government takeover of clean-up responsibility, both financial and operational.

The Future of Solar - Part 1

Given the Japanese feed-in tariff and current prices for solar PV modules, the economics of open field mega-solar projects favor a simple fixed tilt installation using cheap, reliable, 60-cell 250 watt polycrystalline modules, typically with a conversion efficiency of slightly better than 15%.  

One or two axis trackers?  Thin film modules?  Concentrating lenses with high efficiency PV cells? Expensive storage solutions?  None of these make economic sense under normal circumstances, at least in the Japanese market.  Here are some ideas that may make sense, either today or in the very near future.

1.  East West Installations

An "East West" installation achieves a much flatter power curve -- more even production during daylight, and thus can be preferable where the aim is self-consumption, or where power is sold onto the grid at market-based prices in a region where other solar output depresses mid-day pricing.  As you can see from the photos below, East-West installations can also pack a large number of modules onto a limited size site and so are ideal for an environment where modules are cheap and land is expensive.

IBC Solar recently completed a 6.36MW open field East-West installation in Kaiserlautern, Germany -- the largest so far in that country.  The plant will supply 2 nearby industrial users.

2.  Water-based Installations

Another recent innovation is to install a large solar installation on a pond, lake or reservoir.  The site can continue to be used for irrigation, flood control or other purposes, so any revenue from a solar lease is purely additive -- pennies from heaven for the owner of the pond.  Also, if the modules are installed on floats relatively close above the surface of the water, the water exerts a cooling effect on hot days, and can significantly improve output.  

Ciel et Terre, a France-based company, has the leading current system of floats for this type of installation.  Their first Japanese system was installed in Okegawa, Saitama in a West Holdings project.  A number of others are now in the planning stage.

TEPCO Procurement Reform

TEPCO has indicated that it plans to dramatically reform its procurement methods.  It will expand by a factor of 4 -- from 15% to 60% -- the portion of its material and construction purchasing that is subject to competitive bidding, and open the bidding process to further participants rather than the "usual suspects" approach where relationships are favored over pricing.

According to Nikkei, TEPCO's annual outside purchasing is approximately $20 billion per year.  It expects to save $1 billion in annual costs once the new structure is in place, over the next 2 fiscal years.

This decision was forced upon TEPCO by its current financial predicament, its government ownership, negotiation with its banks and delays in its nuclear restart.  In the absence of such extraordinary factors, TEPCO would not have done it -- since the entire "mura" derives great benefits from the money that leaks out to affiliates, subcontractors, former employees/directors and other friends ...  But the system is one reason why Japanese electricity is so expensive, and why it costs 2X or 3X for TEPCO to do something as compared to the cost in Europe or the U.S.  The consumers are the victims; the system is not transparent, intentionally.  But TEPCO's current crisis is forcing change.

The big question now is will the utilities will take similar measures?

First Nippon Paper, now Oji Paper to enter retail electricity sale business

We recently noted Nippon Paper's plans to sell electricity at the retail level.  Now Oji Holdings, a competitor, has announced similar plans.  These companies each have generation for self-consumption, and they may have excess capacity available as the paper industry has reduced production and consolidated.  Plus, they have access to feedstock for biomass, given their relationship with the wood products suppliers and the waste material from their paper businesses.

In addition to its current facilities, Oji Holdings plans a 30 billion yen ($300 million) investment in new hydro and biomass generation in 4 locations.  

It forecasts annual sales to third parties of 1.1 billion kWh, which would place it 4th among competitive electricity suppliers after NTT/Tokyo Gas-backed Enet, F-Power, and JX Nikko Nisseki Energy.

Nippon Paper, on the other hand, is building a new gas-fired plant, in addition to numerous existing power facilities.  JX Nikko Nisseki is planning a new generating facility which can utilize as fuel various waste products from a refinery.  Tokyo Gas also is planning to increase its electric generating capacity in anticipation of liberalized retail competition.

Yaskawa Electric profits to increase 2.3X -- 10kW solar inverters help out

I happened to see a note that Yaskawa Electric's forecast net profit for the year ending March 2014 is now 15.5 billion yen, up from an earlier forecast of 12 billion yen and 2.3 times the profit for the prior year.   On the same day, the company announced its actual results for the half year ended September 2013.  Profits more than doubled, to 7.1 billion yen, ... with the primary driver being increased sales of solar PV "power conditioners" as they are known in Japan (referred to as inverters in most markets, since they function to convert power from DC into AC).

Yaskawa makes a wide range of products, and has leading market share in the 10kW solar PV inverter class in Japan.  These "string inverters" are in great demand under the FiT, with few foreign competitors and not much interest from the Hitachi's and TMEIC's of the world either.  In 2012 Yaskawa had over 30% of the Japanese market in 10kW-class inverters,  while Shindengen had another approximately 25%, and Sanyo Electric (not the same "Sanyo" as was acquired by Panasonic in recent years) and GS Yuasa (famous for its batteries) each had under 10%. 

Unfortunately, these 10kW inverters are rated as much lower efficiency than their European counterparts, so the area cries out for new entrants.  Fuji, Hitachi and TMEIC 500kW and larger central inverters are competitive products with those of SMA, Power One or ABB.  So why does an SMA 10kW inverter sold in Europe show a conversion efficiency around 98%, while a Yaskawa 10kW inverter in Japan has a 94% conversion efficiency or lower?  True, the measurement standards are different, but there must be some other reason.  

Is it that the Japanese products are inferior, but foreign products have been kept out by protracted qualification requirements with utilities or for JET certification?  Will the Japanese products improve, as they have in other areas when foreign competition is presented?  Is there some other reason?  Please, if you know, offer a comment.  I find it difficult to understand.

Renewables Inbound Investment into Japan

Japan has the lowest level of inbound foreign direct investment of any major economy.  It is a very attractive market, but also a difficult one, given language and cultural barriers, high costs and long lead times to get established.  And in many industries, Japan's slow economic growth, aging (and, as of now, shrinking) population, have made domestic markets challenging even for Japanese companies, let alone foreign new entrants.

So it was heartening to read the lead story in Saturday's Nikkei Shimbun touting 700 billion yen ($7 billion) in planned foreign investment in renewable energy, triggered by the Japanese feed-in-tariff that has been in place from July of 2012.  The story highlighted a number of different plans from different origins:

1. Australia - Macquarie plan to invest 100 billion yen in solar and wind projects (primarily lease-type financing, I believe).
2. China - GCL Poly Energy targeting 100 billion yen in solar -- both equipment supply and ownership.
3. USA - Goldman Sachs plan to invest 300 billion yen in solar and wind renewables projects over 5 years (primarily third party debt, I believe, with the equity investment much lower).
4. Germany - Photovolt Development Partners (PVDP) of Berlin plan for 90 billion yen of solar projects.  (PVDP is a little known developer in Germany that has announced a number of huge projects in Japan, none of which has yet to enter construction).
5. Spain - Gestamp Solar plan for 90 billion yen of solar projects over 3 years.
6. Korea - Hanwha Q-Cells plan to invest 30 billion yen in 2013.

The articles notes that as growth slows for renewables in Europe, Japan has become seen as a very attractive market.  Indeed, the feed-in-tariff presents a rare opportunity for foreign investment into Japan, and is one of those rare opportunities for a business to establish a position in the Japanese market in an industry that should be very interesting over the coming decade or more.

The article ends on a mixed note, however, suggesting worries about a solar PV "bubble" in Japan, with comments on the high purchase price under the feed-in-tariff (FIT) for solar PV, even though it was reduced by 10% from the first to second year of the FIT; the fact that consumers will pay a surcharge on their electric bill for renewables; and noting the perceived problems with excess renewable supplies in Germany (after 10 years of a FIT that has resulted in many, many times the installation of solar PV and wind that is likely in Japan over the next few years).

Of course, without the initial generous FIT, Japan would never have "jump started" its renewables businesses in 2012, and never would have attracted such ambitious foreign investment plans.  Foreign investment in renewables is essential to modernize the Japanese project development business.

Japanese construction companies look at the FIT as a way to make a killing -- taking a fat margin when their other businesses are suffering.  Foreign developers, on the other hand, want to implement projects at as low a cost as possible.  This is a matter of self interest, of course, to maximize profit.  But it is also a process of transferring know-how, and of generating the cost data that will show, indeed, it is possible to do renewables projects in Japan at a price somewhere in between the "domestic" price level and the "international" price level.  Without foreign entrants, Japan's renewables business would have remained stranded in a world full of uncompetitive and anticompetitive practices, dominated by the incumbent utilities and the major construction companies and domestic equipment suppliers.

Chubu Electric Invades the TEPCO Region; Others to Follow

Chubu Electric recently acquired Mitsubishi Corporation's Diamond Power subsidiary and began selling power in the Kanto region -- on TEPCO's home turf -- effective October 1, 2013.  Kansai Electric plans to start selling power in the TEPCO region from Spring of 2014.  Thus, the gentlemen's understanding that the big regional utilities not compete in each other's home turf ... is broken.  Pandora's box is opened.  Or as Nikkei quoted a Hitotsubashi University Professor, Chubu Electric has "crossed the Rubicon."

On the first day of operation as a Chubu Electric affiliate, 48 wholesale customers switched from TEPCO to Diamond Power.

Chubu Electric has only a 10% reliance upon nuclear generation, and so will face less of a nuclear "ball and chain" than the other utilities.  Further, its service area is adjacent to Tokyo geographically.  And it has already announced plans for 2 large thermal generating plants in the TEPCO region, one in eastern Shizuoka with Mitsubishi Corporation and Nippon Paper, and the other in Ibaraki with TEPCO.   On the other hand, Chubu Electric's home region is just over the dividing line in 60 Hz West Japan, so it cannot readily sell power into the 50 Hz TEPCO region in large volume.

Will competition spread to other parts of Japan, or will the gentlemens' agreement survive elsewhere?

If this is really TEPCO vs the rest of the utilities, then why wouldn't a restructured TEPCO eventually attempt to sell power in other areas of Japan?

Why doesn't Chubu Electric launch a business in Kansai Electric's home territory?  Kansai Electric has the HIGHEST degree of nuclear dependence among the major utilities, its territory is also adjacent (to the west) of Chubu, and there is no 50 Hz/60 Hz problem.

Time will tell.

Beyond Lithium Ion Batteries - Multivalent Ion Batteries?

One of the key issues to a transition toward distributed generation based upon renewables is energy storage.  Battery technology needs to get better and cheaper.  Of course, battery technology improvements will also drive, or at least accelerate, the transition to electric and plug-in hybrid vehicles.

So it was with interest this past week that I read an article in Nikkei regarding a symposium on battery R&D held in Kansai on the 8th and 9th of October.  The article discusses the announcement of what are claimed to be major advancements at Osaka University and Kyoto University in so-called multivalent ion batteries.

The battery uses oxide material (酸化物材料) at its positive electrode and magnesium and aluminium at its negative electrode.  The battery does not have the problems of lithium ion -- risk of becoming unstable and starting a fire, for example.  And it would have a MUCH higher energy density, such that the research teams speculate it would permit an electric vehicle with a greater range than current gasoline-powered vehicles.

The goal is that within five years these batteries would be commercialized to the point where they can be used for residential battery storage for solar PV generated power.

It goes without saying, but there are research programs as well on various new battery technologies,  including multivalent ion batteries in the U.S and elsewhere.  That said, Japan has shown real leadership in commercializing other battery technologies -- including lithium ion -- and may well get there first in the next major transition.

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UPDATE:  In 2014, we have seen numerous announcements about vanadium and other redox flow batteries for on and off grid storage with renewable energy projects.  These are large systems, lacking the energy density to be used in vehicles, but for energy storage they offer the benefit of nearly unlimited cycles -- with expected lives of 10 years or more.  The costs are coming down and there are actually several products on the market.  See this later post for more.

Smart Meter Introduction -- Acceleration Needed

According to the Yomiuri Shimbun, most of Japan's electric power utilities have agreed to push up the schedule for replacing customer meters with a new generation of "smart meters".

The power companies had collectively decided to roll out these meters over a leisurely schedule of 20 years.

The "growth strategy" released by the government of Prime Minister Abe in June had instead set a much more aggressive target to implement smart meters by the early 2020s.

The scheduling issue apparently came to a head at a METI Energy & Natural Resources Agency meeting in mid-September, where the utilities presented their plans, to great skepticism of other participants.  According to Yomiuri, six of the ten regional monopoly utilities have since indicated they will revisit their schedules, including TEPCO and KEPCO, the two largest in the group.

Both TEPCO and KEPCO also have apparently indicated a willingness to permit open bidding for suppliers of smart meters instead of relying upon their existing, uncompetitive "fat and happy" network of related company suppliers.

See our note last year about the Smart Meter Snafu.

UPDATE:  According to the October 28, 2013 Nikkei, TEPCO has further accelerated its schedule and will have "smart meters" installed in its entire service area by 2020.  According to the article at least one U.S. based "venture company" intends to offer demand management service starting in July of 2014.  TEPCO will start installing the meters from April 2014, and according to its former plan was aiming for 1.9 million in FY2014, 3.2 million in FY2015 and a total of 27 million by 2023.  This will be accelerated.  Kansai Electric has been faster in its roll out, but TEPCO will catch up and exceed Kansai quickly at this pace.

Renewable Energy Capacity in Japan -- up 15% in Year 1 of the Feed in Tariff

According to METI statistics released last week, the total newly installed capacity of renewable electricity generation in Japan during the first year of the feed-in-tariff (July 1 2012 to June 30 2013) amounts to 3.666 Gigawatts of capacity, a 15% increase in Japan's renewable energy generation capacity.

More than 95% of the newly installed capacity is solar PV -- no surprise given the comparative difficulty of siting, permitting and building other types of renewables in Japan.  Of the new capacity, 1.379GW is residential solar PV, and 2.12GW is commercial/utility scale, so-called "mega" solar installations.

The 3.5GW of new solar far exceeded METI's plan for 2.0GW installations.  Wind power,  on the other hand, barely shows up as a blip on the radar.  Siting of major wind farms takes a very long time in Japan, and NIMBY opposition makes it nearly impossible.

The 3.5GW of installed solar is only a small fraction of the 22GW that has been METI "certified" solar PV.  The bulk of the to-be-built projects are mega solar.  Even if many of those projects are never built due to issues with land rights, land use approvals, utility interconnection and/or financing, a portion of the 22GW will be build, and yet further project will be certified.  It should be easy to exceed 3.5GW of newly installed solar PV in Japan during July 1, 2013-June 30, 2014.

Many sources indicate that the new renewables capacity is equivalent to "3 nuclear power plants".  That is not quite accurate.  There is no technical reason that a nuclear plant with 1GW generating capacity should not operate 80% or more of the time.  The U.S. nuclear reactor "fleet" operates at higher than 85% load factor (capacity utilization).  In fact, prior to March 11, 2011, Japanese nuclear plants had a very low average load factor -- more like 60%.  Solar facilities, on the other hand, operate at or near their rating peak capacity for only a few hours a day, so have only 10-12% of the annual kWh generation of a 24x7 plant operating at full capacity.   When this discount is applied, 3.5GW of solar PV installation is closer to one half of a Japanese nuclear reactor.)

Japan Auto Fuel Efficiency to Soar

The Toyota Prius Plug in Hybrid version.  Rated at 61 kpl of gasoline (143 mpg)

Japan's auto fleet has always been very fuel efficient.  In contrast to the U.S., where cheap gas and free highways and parking are (or were) in many areas considered basic human rights, akin to the right to bear arms (guns), Japan has always had very expensive 100% imported fuel, crowded roads with high tolls and, in metropolitan areas at least, very limited parking.  For someone who lives in Tokyo, the question is not so much "which car will I get" but "do I need or want a car at all"?

And of course the Japanese manufacturers first made in-roads into the U.S. market by having a fuel economy advantage over Detroit and its big "gas guzzlers".

Of course, Japanese conditions are not so different from some parts of Europe -- expensive gas and tolls, limited parking.  But the Japanese "Galapagos" industry structure has seen the automobile market evolve in a very different way than Europe -- for example, Japan has almost no diesel passenger cars, much more like the U.S. than Europe.  Only in very recent years has Mazda implemented a "clean diesel" version of its CX-5 SUV, and Nissan its X-Trail SUV.  Volkswagen is present in the Japanese market, ... but does not try to market its diesel TDI engines.

And of course, Japan has been the leader in introducing hybrid gas/electric vehicles, with Toyota and Honda very much in the lead in commercializing these technologies.

And within the past few years, MANY new Japanese cars now feature the "idling stop", with engines turning off and restarting automatically at intersections.

Another feature of the Japanese market is the widespread role of "kei" cars -- light cars with less than 1000cc displacement engines and meeting other requirements.  They are recognizable by their yellow license plates.  The kei cars are assigned significantly lower automobile taxes -- an incentive that foreign manufacturers have often complained about, since their models do not meet the requirements, and the requirements do not relate directly to fuel economy.  Japanese car companies such as Daihatsu or Suzuki are known primarily for their kei cars.  The major companies also have a large number of choices of kei models.

And, of course, there are a few electric-only cars in Japan, notably the Nissan Leaf and Mitsubishi i-MIEV.  To date these have only limited presence (range anxiety), despite efforts to implement networks of charging stations and despite the relatively short distances of average urban Japanese auto trips.

And just as in other markets, the government currently offers substantial incentives -- cash rebate, tax reduction, etc. -- for "eco cars" that meet fuel efficiency, emission and other requirements.

How far has Japan gone toward a post-modern, fuel efficient automobile fleet?

A few commonly available statistics should help:

In FY2012, approximately 40% of Toyota's Japanese passenger car sales were of hybrid gas/electric models.  For the first six months of the current fiscal year (April to September 2013) period, the top selling car models in Japan were:

1.  Toyota Aqua subcompact hybrid.  127,993 units.  Rated* at 35.4 km/L (83.26 mpg equivalent)

2.  Toyota Prius compact hybrid.  121,634 units.  Rated at 30.4 to 34.6 km/L (71.5 to 76.7 mpg)

3.  Honda N Box kei car.  110,155 units.  Rated at up to 24.2 km/L (56.9 mpg) with a small (less than 1000cc) advanced gasoline engine and continuously variable transmission (CVT).  List price from around 1.36 million yen (~$14,000).

4.  Daihatsu Move kei car.  107,591 units.  Rated at up to 29 km/L (68.2 mpg) with an advanced gasoline engine, CVT and list price between $10000 and $12500.

5.  Suzuki Wagon R kei car.  88,071 units.  Rated at 30km/L (70.5 mpg) with an advanced gasoline engine and, of course, idling stop (which kicks in when the car slows to under 13 kph).  Suzuki also heavily promotes its regenerative braking -- the car battery is charged largely by recapture of braking forces.  Even without a hybrid powertrain, mileage goes up when all the electronics, including A/C, get power from recaptured brake energy.

If these are the best selling cars in Japan, then imagine what the entire fleet's fuel economy will look like in 5-10 years time!

*Of course, the fuel economy ratings (using "JC08" mode--more conservative than "JC10/JC15" modes used in the past) are based on assumptions and do not necessarily prove out in real driving conditions.  I rented a Toyota Aqua hybrid this summer and drove it mostly on expressways, including some long climbs and descents and generally at speeds of 100 kph or so with A/C on for two days, and ended up with mileage of just under 25 km/L (58 mpg).

After leading the market with its near-experimental Honda Insight in the 1990s, Honda has trailed Toyota in the hybrid "race" in recent years, as it used a "weak" style hybrid in its Civic Hybrid and 2010 Insight (introduced around the same time as, and upstaged by, a new version of the Toyota Prius that had better fuel economy).

1990s Honda Insight

2010 Honda Insight

Honda has changed its approach and in June 2013 introduced a version of its mid-sized Accord Sedan that is rated at 30 km/L.  The Accord is a near-luxury car in Japan and will never reach the "top 10" sales list.  The Honda Fit, on the other hand, is Honda's main compact (by U.S. standards subcompact) model, and has often been a top seller.  Honda recently introduced a hybrid version of the Fit that is rated at 36.4 km/L (85.6 mpg), topping even the Aqua.   Look for the Honda FIT hybrid to return to the "best seller" list in short order.

Honda Accord hybrid - now with 30 km/L hybrid version

Honda Fit -- 36.4 km/L hybrid version available

Toyota's line-up of cars and small trucks sold in Japan now includes 16 different hybrid models, including the new best-selling Aqua and the plug-in hybrid version of its venerable Prius.  The Toyota Lexus brand includes another 6 hybrid models (though these are "performance" rather than "fuel economy" hybrids, with a flagship Lexus GS getting 18.2 km/L in the hybrid version versus less than 10 km/L for the GS350 non-hybrid).

The plug-in Prius will drive the initial 26 kms using only its electric engine, and so actual gas mileage can be infinite if you never drive further than that.  It is rated at 61 km/L using JC08 mode. (If that is not good enough for you, the plug-in hybrid Mitsubishi Outlander, an SUV-like model, if fully charged will go the first 60 km on its electric engine, and is rated at 67 km/L overall (not on the best seller list, but the family of one of Misako's friends has one).

Toyota hybrid models

Toyota's Lexus mark hybrid modeles

Honda's line-up includes 8 hybrid models, and another 9 models of "kei" mini cars with engines of under 1000cc displacement.

Nissan's line-up includes a dizzying mix of "eco cars", including the all electric Leaf, several hybrids, the 25 km/liter "eco supercharger" equipped Nissan Note.

Even Subaru now has a hybrid version of its SV "all wheel drive" small SUV.  Going from the regular 2.0L engine to the hybrid model boosts rated mileage from 15.8 km/L to 20 km/L (47 mpg).

Of course, there are some imported cars and foreign makes in Japan.  Mercedes Benz, BMW, and VW/Audi are doing well.  Then again, the Mercedes closest to me  (my next door neighbor) is one of these -- a Daimler/Mercedes Benz group Smart all-electric two seat car, with a 180 km range (measured in JC08 mode, more like 140 kms based on US/European measurements).

So even if Japan trails Europe in wind, solar and other renewables, its automobile companies are doing their part at the transition to a green energy future.

Further Electricity Deregulation coming down the pike

Although the first of three proposed electricity deregulation bills was delayed by this summer's Upper House election, progress on the topic continues within METI and its advisory councils.

The METI electricity system reform subcommittee's working group on "system design" held its second meeting on September 19, 2013.  According to materials presented by the ministry at that meeting, retailers of electricity will be subject to a registration (rather than a full approval/license) system.

The registration will allow for greater new entrants than approval/license system, but will still allow for the ministry to sanction retailers who fail to perform their contracts with customers.  In contrast, companies wishing to engage in transmission business will need to apply for licenses and go through a more rigorous approval process.

Retail competition is targeted for residential and small commercial users in 2016.  Prices will remain regulated for some 5-7 years until 2020-22, in order to protect consumers.  There is a lot more detail (in Japanese, of course) in these proposals to work through -- essential reading for anyone trying to understand what is being planned.

Cleaning up the power utility poles/lines for the 2020 Tokyo Olympics

The Abe government's schedule for restructuring the Japanese electric power system -- ultimately leading to some kind of separation of generation, transmission and distribution functions -- leads to the year 2020.  

By coincidence, 2020 is also the year of the Tokyo Olympics, which will be the target of an effort by the Ministry of Land, Infrastructure, Transport and Tourism (MLITT?) to bury power cables in core areas of Tokyo.

The story in Nikkei (September 29) indicates that whereas 100% of electric cables are buried in London, Paris and Hong Kong, in Tokyo 23 wards the percentage is more like 40%, Osaka lower yet, and Nagoya only 20%.  Overall in Japan only something like 15% of electric cables are buried.  Indeed, for many decades the mess of overhead cables and numerous reinforced concrete poles criss-crossing the countryside are one of the most remarked-upon aspects of Japan--the nation's worst eyesore. 

As Japanologist Alex Kerr wrote in 1994 in his classic Lost Japan:

"And the electric wires!  Japan is the only advanced nation in the world that does not bury electric lines in its towns and cities, and this is a prime factor in the squalid visual impression of its urban areas.  Out in the suburbs, the use of electric lines is even worse."  

"I was once taken to see the new Yokohama residential district Kohoku New Town, and was amazed at the multitude of enormous steel pylons and smaller utility poles clustered everywhere--a hellish web of power lines darkening the sky above one's head.  This is a site considered a model of urban development. ..."  

The plan just announced is now to eliminate all utility poles from areas in Tokyo near train stations, airports and other places that tourists are likely to visit.  The reasoning is said to be for both improved view/aesthetics and also for greater resilience in event of natural disasters.  The plan covers approximately 130 kilometers (80 miles) of streets.

The total cost is estimated at 78 billion yen (approximately $780 million).  Bear in mind that this price tag will only deal with the issue in the most crowded and central areas of Tokyo -- an area in which 80% of cables are already buried.  The cost will be shared, one-third borne by the national government, one-third by the Tokyo Metro government, and one-third by the electric utilities whose wires will be moved (NTT and TEPCO, in this case).  As a taxpayer to both the national and Tokyo governments and a forced customer of both NTT and TEPCO, I guess I am a significant contributor to the effort. Still, in this case, the expense is long overdue.

TEPCO Turn-around Effort

September 25 (Wednesday's) evening NHK newscast had coverage of the President of TEPCO meeting with Governor Izumida of Niigata Prefecture to present paperwork including details about plans to make the TEPCO Kashiwazaki Kariwa ("K-K") reactors safer and apply for a restart of reactors 6 and 7.  The last meeting between these two, a few months ago, featured the Governor on camera screaming, loudly, at the much smaller, weaker looking TEPCO president, angry because TEPCO was taking steps to apply for a restart of Reactors 6 and 7 before obtaining the Prefecture's approval.

This time, TEPCO signalled well in advance that it would NOT apply for a restart of the reactors before "gaining the understanding" of Niigata Prefecture.  Also, a flurry of press stories has reported in recent days on TEPCO's dismal finances, the pressure from its banks and bondholders, and the importance of a reactor restart as part of its financial rehabilitation plan.

Instead of a shouting match, the Governor asked why Niigata should trust TEPCO to do things any differently than in the past.  TEPCO President Hirose mumbled something about TEPCO being "reborn" ("Shinsei TEPCO") and having taken the Government's money, ... then pointed out that TEPCO is now planning to install extremely expensive filtered vents that would allow venting of the reactor buildings without release of significant radioactive materials.  Had these vents been in place at Fukushima Dai-ichi, TEPCO would have vented the buildings and avoided the hydrogen buildup which contributed to the problems there -- at least the most visible sign of catastrophe, with hydrogen explosions sending radioactive material high into the atmosphere.

(The K-K 6 and 7 reactors are relatively new, commissioned in 1996 and 1997, respectively, and are "advanced boiling water reactors."  The other reactors at K-K were commissioned between 1985 and 1994 -- also nowhere near as old as Fukushima Dai-ichi 1 and 2, but there are concerns about potential earthquake faults on site that run directly under or very near reactors 1-5 and their turbine buildings.  The K-K complex suffered various types of damage in a 2007 earthquake and the first of its reactors did not reopen until 2 years later.  Also, estimates of earthquake intensity from nearby faults has been increased significantly in the post-2011 reassessment, so it is not clear that the current designs would be sufficient, even absent the on-site faults.)

NHK followed this theme (based on talking points from the central government and TEPCO?) and indicated that reopening the K-K 6 and 7 reactors could add billions to TEPCO's bottom line annually (the NHK report said 240 to 350 billion yen -- 2.4 to 3.5 billion dollars -- annually), helping to avoid another rate increase, more government bailout money, etc.

A story in this morning (Thursday's) Nikkei reports that TEPCO has a refinancing of some debt approaching this autumn, and the financial institutions are indicating that in order to participate they will significantly increase the interest rate charged unless either (1) TEPCO has applied for a restart of K-K 6&7 reactors, or (2) TEPCO has further increased its electricity rate.  The TEPCO management is bending over backwards to try to avoid another rate increase so quickly after its 2012 increase, and so has everything riding on a restart of the reactors.

To put this in perspective, the K-K reactors 6 and 7 each have maximum power output of 1315MW.   Even if they do restart in the next year or two, after very expensive upgrades, TEPCO is very unlikely to achieve a restart of any of the rest of its reactors over that time-frame.  TEPCO's pre-March 2011 nuclear reactors consisted of:

1.  2812MW -- Reactors 1 to 4 at Fukushima Dai-ichi.  These were catastrophically damaged and will be a burden for many decades and, of course, never restart.

2.  1884MW -- Reactors 5 and 6 at Fukushima Dai-ichi.  These were not damaged, but are on the same site and will be decommissioned.  Prime Minister Abe officially requested earlier this month that TEPCO decommission these.

3.  4400MW -- Fukushima Dai-Ni reactors 1 to 4.  This facility is down the coast 20-25 kms from Fukushima Dai-Ichi.  It is highly likely these will never be restarted.

4.  8212MW -- Kashiwazaki-Kariwa (or Kariba) reactors 1 to 7.  Again, the restart of reactors 6 and 7 remains very uncertain and very expensive, while reactors 1 to 5 have additional problems and earthquake concerns that will make them more difficult, if not impossible, to restart.

So out of the total nameplate capacity of 17.3GW of nuclear generation, TEPCO is working toward a possible restart of 2.63GW -- just 15% of the total.

The TEPCO restructuring problem was the subject of an analysis piece in Nikkei Wednesday morning as well, by Chuo University law professor Junji Annen.   Prof. Annen notes that TEPCO has ultimate compensation obligations from the Fukushima Dai-ichi accident of between 5 and 10 trillion yen, that the nuclear compensation body has provided 4 trillion yen (40 billion dollars) of funding (3 trillion of grants/subsidies and 1 trillion yen of capital); that TEPCO raised rates significantly; and yet TEPCO still had an aggregate loss of 700 billion yen (>$7 billion) for the two years ended March 31, 2013.  The loss was recorded despite TEPCO's ability to book the 3 trillion yen (>$30 billion) of the government subsidies as extraordinary income, so the actual situation is far, far worse.  Prof. Annen notes that both a cap on TEPCO compensation obligations (as opposed to government clean-up efforts) AND a reactor restart at K-K are essential for TEPCO's near-term survival, while the longer-term solution will involve some kind of restructuring that divides TEPCO into a "good" and "bad" company.  The "good" company will be freed of impossible burdens, but would pay a share of its profit to fund the "bad" company and meet a portion of such obligations.

UPDATE:  One day after this post, the Niigata government has given TEPCO its "conditional" support for TEPCO to at least proceed with filing its application with respect to K-K reactors 6 and 7.  The prefecture has apparently taken the view that this is not a "final" approval, which will be subject to satisfaction on various safety issues, but only a nod to allow TEPCO to make its filing.

By Friday, the group of all major (and some minor) Japanese banks that faced an upcoming TEPCO refinancing had indicated that, given the restart application for K-K reactors 6 & 7, they would NOT require TEPCO to file for a rate increase and, at least tentatively, that they plan to participate in the refinancing.

On Saturday, the 28th, TEPCO's President was interviewed by Nikkei Shimbun and stated that, in light of the prospect that these reactors might be operating in 2014, TEPCO plans to announce a restructuring plan later this year that would not include further rate increases, and hopes to avoid a loss for the fiscal year that ends March 31, 2014.

A look at TEPCO's implementation of its current restructuring plan does not offer high hopes.

The current plan had proposed restarting K-K reactors 6 & 7 by April, 2013, six months ago.  It also contemplated decommissioning only Fukushima Dai-ichi Reactors 1 through 4, whereas now 5 and 6 also must be decommissioned.  Now, TEPCO hopes to squeeze out additional 10-year cost reductions of 140 billion yen, following its current plan of 336 billion yen in reductions.  And TEPCO also plans to establish an arm to participate in deregulated portions of the electricity market, as Chubu Electric and Kansai Electric also have announced.  Maybe TEPCO will be able to reduce customer outflow if it "counterattacks" in the home regions of other utilities?

We should know before too long if the hope for a profit in the current TEPCO fiscal year is more "happy talk" to support Abenomics and improve the economic mood--a thank you present for well-orchestrated government support to bring Niigata's governor and the financial institutions into line for the time being--or if it can actually be achieved (and, if so, whether it involves the same kind of accounting magic that limited the last two years' losses to 700 billion yen).

UPDATE:  Reuters had a good article today (October 7, 2013) on the TEPCO turnaround effort -- the public relations and the reality.  As one analyst indicates, "it's all kabuki ... It's very much an orchestrated presentation".  I hope my blog post gives some sense of the way these things are done in Japan, at least at the public level.

Also the Yomiuri mentions that the LDP is now seriously considering a "good bank bad bank" approach to TEPCO, hiving off the legacy problem of decommissioning its reactors and dealing with the Fukushima mess.  Since TEPCO does not have the resources to deal with its legacy issues, this is perhaps inevitable.  But if and only if it is done in a manner that ensures the "good TEPCO" will move forward faithfully to implement a competitive market in electricity, including separation of generation, transmission and distribution.