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.