Another Non-Nuclear Summer ... and Autumn ... and Winter

As previously reported, the Nuclear Regulatory Agency (NRA) is checking whether 19 reactors (out of the 55 reactor pre-Fukushima nationwide reactor fleet) at 12 facilities meet its new safety standards.   Kyushu Electric's Sendai reactors 1 and 2 in Kagoshima Prefecture are the first in line for review.

It has been widely reported that these are "good" reactors which are well-positioned to satisfy the NRA standards -- these are the MOST likely reactors in Japan to satisfy the NRA.  No reports of suspicious earthquake faults under or near them.  They are relatively new -- having started operations in 1984/1985.  No record of major problems in operations.  And they are pressurized water reactors, which have the iconic large concrete containment structures covering the entire reactor building -- different from Fukushima.  Under the NRA new standards, PWRs did not need to do as much retrofitting as the boiling water reactors (BWRs) such as were at Fukushima Dai-ichi.

Yesterday, there was an update from Kyushu Electric (Kyuden) on the review status.  Apparently, the earliest a restart could be expected is this autumn.  According to Kyuden, the NRA has given them comments on their filing and identified a number of "misses".  (In this case a "miss" could be a serious issue, a simple typo, or a location where the NRA wants something to be rephrased or further developed.  Pesky paperwork!) 

Kyuden had hoped to get comments and respond by the end of May, but it has now just resubmitted one of three required documents and does not expect to have them all filed until mid July.  The total length of the filings will expand from 7200 pages to 8600 pages, according to Kyuden.

The NRA will take at least a month to respond, and the earliest for restart permission would be September, possibly October.  It seems likely the restart will come until after the three and a half year anniversary of the March 11, 2011 disasters.

So it will be another hot summer in west Japan, with maximum efforts at conservation and supply limited.  We may get a chance to see if the solar PV implemented over the past two years makes a discernable difference.

UPDATE (July 5):  Nikkei reports this morning that the Sendai 1 & 2 reactors are now on track to clear the NRA procedures bySeptember.  The NRA is reported to plan to propose the re-open in late July, with a period for public comment over the month of August, then a final decision.

UPDATE (August 6):  NOT SO FAST!  Nikkei now reprints a Kyodo wire service report that the Sendai nuclear plant will not be open until "winter or later".  Apparently the utility and regulator need more time to prepare and have checked the construction plan (工事計画) for the work that permits reopening, as well as new safety rules (保安規定).   Kyushu Electric initially had hoped to file at end of May, but the filings will not be made until September at best, and could slip more.

UPDATE (November 10):  Things have gone relatively smoothly with the Sendai plant restart process, to the point that last week the governor of Kagoshima Prefecture signed off on the restart, even though a number of communities within the plant's evacuation zone had not given a green light. ... but the plant will still not be up and running for several months, until after the winter electricity usage peak.  Absent surprises, it should be available for the summer 2015 peak.  The utilities and regulator will now push to accelerate the process for the rest of the reactors in the "first wave" of restart applications -- those facing the fewest apparent technical and regulatory issues.

Ready for Fuel Cell Automobiles - Toyota to roll out model in current FY

Toyota and Honda have both announced plans to introduce hydrogen fuel-cell powered electric vehicles (FCVs).

The government wants them introduced by next year.  Toyota has said it will do so with the current year.  For more details, Toyota is scheduled to provide to update its plans at 2PM Wednesday this week.

In the meantime, the government is moving to get the regulatory environment in shape.

1.  Current regulations would prevent fuel cell electric vehicles from supplying electricity to the home.  METI has proposed a modification to permit such power supply.

2.  Nikkei reported last week that the government (METI)  is planning to support sales of the vehicles with subsidies of between 2 and 3 million per vehicle.  Without subsidies the cost would be as much as 10 million yen per vehicle.

According to Nikkei, the government hopes to bring the cost of fuel cell powered cars down to that of gas-electric hybrids over the next ... 20 years.

20 years?  It would not be surprising if the private sector auto industry has a faster long-term goal, just as it has a faster short-term goal.

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UPDATE:  Toyota held its press announcement on June 25.  Yes, the model will come out this fiscal year.  The price?  Expected to be around $70,000 (or JPY 7 million) per vehicle.  Toyota is trying to persuade the government to offer a $20,000 (JPY 2 million) subsidy to bring the net consumer price down to JPY 5 million.  That would be at least 40% less than the net JPY 7-8 million Nikkei was reporting.

That seems low enough to drive real consumer interest, to present a real challenge to the others planning models in coming years (Honda and Nissan).  And it perhaps vindicates Toyota's decision not to put a huge degree of effort into plug-in hybrids.

While Toyota seems ahead in the FCV race, US, European and other (Hyundai) manufacturers are moving forward as well.  See these articles:

http://www.technologyreview.com/news/516711/why-toyota-and-gm-are-pushing-fuel-cell-cars-to-market/

http://www.technologyreview.com/view/510416/ford-daimler-and-nissan-commit-to-fuel-cells/

FURTHER UPDATE:  On July 16, 2014, Nikkei lead story is that JX (oil company; operator of Eneos and other gasoline stands) plans 100 hydrogen fueling stations by 2018.  The locations of 41 stations have been set and others continue to be added.  Each will cost between 300 and 500 million yen, but the government plans to make available subsidies of up to 280 million yen per station, easing the cost dramatically.

Global Coal Use at Record High in 2013

This story reports a disappointing statistic.  Coal use globally continues to soar, reaching a record high last year (again).

The source is BP's June 2014 Statistical Review of Global Energy, downloadable here.

70% of global coal consumption is in the Asia/Pacific -- 50% in China and the remaining 20% spread around -- India, Japan, South Korea, Indonesia etc.  And all the growth is in the Asia-Pacific region. So as goes China CO2 so goes the globe.

On the other hand, renewables are booming.  Global wind power generation grew 21% in 2013, and solar grew 33%, from a smaller base.  Renewables in 2013 provided 5.3% of global power generation needs -- starting to make a real difference not just in places like Denmark, but globally.   Here is a chart from the BP report showing renewables growth -- though I highly recommend you click on the link above and download the entire report:

The report has a lot of useful information.  Want to see where Japan gets its LNG, and what percent of global LNG imports go to Japan, South Korea, China, or elsewhere?  Just see P 31 of 48 -- major trade movements in natural gas.

Gas prices in 2013?  Japan LNG CIF price -- $16.17.  German imports and UK prices -- around $10.70.  US Henry Hub -- $3.71.  P 29 of 48.

And there is a great index for conversion among equivalents, a definition section, and links to other resources.

(BP kindly notes that publishers are welcome to quote from the review provided that they attribute the source to BP Statistical Review of World Energy 2014. However, where extensive reproduction of tables and/or charts is planned, permission must first be obtained first from the editor.  Let us hope that ONE chart is not "extensive".)

Solar to be Cheaper than Coal in 3-4 years?

Japan's new "strategic energy plan" adopted in April 2014 is notable for its relative lack of discussion of the role for large-scale solar power.  

According to METI Japan implemented over 7GW of new solar power generation during the fiscal year from April 2013 to March 2014 -- with 5.73GW of large scale and over 1.35GW of residential installations.  This is a massive boost from 1.66GW total installations the first 9 months of the feed-in tariff during the prior year, and a demonstration of the success of the feed-in tariff regime at transforming Japan's solar market.  

This is a huge success story.

But instead of trumpeting the success, the government seems almost embarrassed.  METI worries that this "high cost", "intermittent" energy source will saddle Japan's consumers with high electricity rates in future years.  

They look at Germany where a massive installation of solar and wind (at this point well over 30GWp each of solar and wind), most of it at high feed-in tariff rates based upon much higher historical equipment costs, and a lack of grid capacity and storage, have resulted in too much capacity during sunny or windy days.  And instead of shutting down the older, dirtier coal plants, utilities have shut down higher cost, but lower CO2 producing gas fired generation.

The strategic energy plan notes that additional measures are needed for wind and geothermal.  Solar is mentioned only in the section on distributed generation, noting that PV can be useful for medium/small scale distributed installations, "of small burden on grids and of capability for usage as emergency power source.  The popularization of photovltaic generation proceeds in regions as such as idle lands, roofs of schools and factories, and the government continues to support such measures."

So in Japan solar will be supported, but it is not a focus of the national strategy.

Contrast this with the policies in the U.S. and China.  To quote an article in a trade press online publication, oilprice.com, 

"Both the U.S. and China have a stated goal of reducing the cost of solar generated electricity to [the level of coal-generated electricity], and quickly."

The U.S. has its DOE "sunshot" R&D initiative, with an express goal of "grid parity" for solar this decade in large parts of the USA.

In contrast, and given its different economic structure and vestiges of central planning, and its more urgent energy and environmental needs, China has thrown massive amounts of funds at the solar industry to double capacity again and again, and has driven down the price of equipment as a result -- a semi-conductor industry-like cost curve that any MBA student should recognize.  Double production and cost goes down 20%.  Do it again, and again.  And by 2016-17, solar is predicted to be as cheap as coal generation!   The result has been massive trade friction and Chinese dominance of the solar panel industry.  But also an incredible "gift" to the world in terms of lower cost renewables on the horizon.

In both cases, however, there is a clear national policy to reach grid parity, and a path to do so.  

In Japan, what is the predicted cost of solar PV in 5 years?  In 10 years?  Is there an expectation for future cost decreases?  And how would this lower cost compete with nuclear?  With coal?  With imported LNG (which also could come WAY down in price if Japan plays its cards right over the next decade)?

Of course, all the cheaper Chinese and other US (First Solar) and Asian (Sunpower, REC, LG, even Panasonic Malaysia and Sharp OEM etc.) modules and other equipment need to go somewhere, and Japan's FIT (and massive solar installations in the U.S.) has allowed it to join China and the U.S. as one the top 3 solar PV markets in the world.

 If equipment prices continue to come down over the next 5 years, we could be entering a golden age of solar PV and clean energy generally.   Let us hope that Japan leads this wave, rather than being dragged along kicking and screaming, a captive of legacy investment and interests.

Bloom Boxes Seen at Keio University Shonan Fujisawa Campus

I currently am a guest professor at Keio University Shonan Fujisawa Campus' faculty of Public Policy Management, and teach a course there every Wednesday afternoon.  I was delighted when my teaching assistant yesterday mentioned to me that Keio SFC's new Bloom Energy fuel cell generator is now finished and in operation!

Indeed, the new installation was announced this week by Keio and Bloom Energy Japan (a 50/50 JV between Bloom and Masayoshi Son's Softbank).  The English press release is available here.

Bloom boxes are a solid oxide fuel cell powered by natural gas, with over 60% efficiency (better than a gas turbine, even with co-gen).  Not a completely "green" or "low carbon" technology, but one form of distributed generation.

With high electricity prices, and deregulation/liberalization of natural gas markets, this kind of installation should grow in popularity in Japan in coming years.  Does the greater efficiency over traditional gas generation justify a higher cost?  Were there subsidies?  I do not know.

The installation generates 200kW and will provide almost all the electricity for the "Delta" building at Keio SFC.

Denjiren Personnel Moves and Hope Still for Deregulation

Denjiren, the "Federation of Electric Power Companies of Japan" or in Japanese the 電力事業連合会, is the organization through which the incumbent electric power regional monopolies cooperate on numerous fronts, including regulatory matters and lobbying, as well as public relations and education.

The organization traditionally included strong representation from Tokyo Electric (TEPCO), given TEPCO's status as the largest utility by far.  But in new leadership announced last week, there are NO TEPCO representatives among the board-level or top management, down from 3 previously.

Since TEPCO's quasi-nationalization after the Fukushima accident, TEPCO management has been replaced, and the company has been effectively under METI-led conservatorship.  TEPCO has not been in a position, as a company, to defend the utilities' regional monopolies, or to oppose efforts to infuse the industry with competition and lower costs.  The press has reported previously on Denjiren meetings where the "real" meeting starts after TEPCO leaves the room.  Since TEPCO's bailout, its representatives have been seen as mere proxies for METI.

And on the TEPCO side, the Vice Chair of Denjiren has been Mr. Shigeru Kimura.  He was forced out of his TEPCO position in 2012, but to the surprise of many held on to the position as Vice Chair of Denjiren.

According to Nikkei (June 14), the utilities fiercely fight to maintain their prerogatives.  Indeed, Nikkei indicates that the reason Denjiren has never formed a legal entity is to avoid any governmental leverage from a tax audit.  And Denjiren managed to completely shred METI's effort at electric industry reform in the 1990s.

Needless to say, the utilities continue to take a cautious (in Japanese "shincho") attitude toward deregulation and structural changes such as the separation of generation and transmission.  For a conservative organization like this to say it is "shincho" about a government initiative is just polite Japanese for "we will fight it to the death"!  And the utilities have significant influence within the LDP, even without TEPCO at the head.

Of course, the utilities also have some very serious needs from the government.  They continue to be in poor financial condition, even if some have moved back into the black temporarily -- beneficiaries of favorable accounting changes so they can continue to include nuclear assets in the rate base, even if the assets are not operating and, under the new standards of the NRA, many of them will never reopen.

One idea that seems to be surfacing -- shift the entire nuclear industry to government ownership.  This would lift a huge burden from the utilities (and onto the taxpayer ... but away from the ratepayers, who are pretty much the same -- everyone in Japan -- but who will bear the costs in very different proportions).

The nuclear restart is still not happening, even though the utilities (of course) and the LDP have been promoting it actively for a year and a half, and the NRA now is considering applications for 19 reactors in 12 facilities.  The utilities at this point might be delighted if the government would take the nuclear "assets" and liabilities off their hands.  It would be a huge bailout -- especially for entities such as Japan Atomic Power Company and its utility shareholders, whose assets are likely worthless under the NRA standards, and for the banks and other financial institution creditors of the industry.  This might be a decent trade for all concerned in exchange for utility (i.e. Denjiren) support of thorough deregulation, including a real, not just cosmetic, separation of generation and transmission assets and a host of other reforms -- not to mention aggressive support for introduction of renewables and other distributed generation.

Mark Ramseyer of Harvard Law School argues that the fact that the cost of accidents are ultimately borne by taxpayers, with a few paying a great deal, whereas the benefits of cheaper, stable electric power supply are shared by many  (voters) explains why public ownership of nuclear power assets does not necessarily improve decision-making about safety.

Prime Minister Abe has taken to saying, at the Davos World Economic Forum in January, among other venues, that no vested interests will be exempt from his deregulatory "drill" over the next two years. The Government of Japan's official public relations materials list the electric utility industry as one area "under the drill".  Time will tell.

Google to provide software tools for the electricity business? Nest thermostats, Demand Response Comes to the Home (in the USA)

Companies such as Apple and Google have demonstrated an ability to kill entire industries.  Well, actually, the industries survive and prosper, just the historical players fade away as a new entrant does something much better, for a tiny fraction of the cost, than had been the case before.

Apple first took over the music distribution business as the iPod and iTunes spread.  And it has wiped out many giants in the mobile phone business such as Nokia and Motorola.  Google dominates "search" and related advertising, maps, and email.  Now it has put the fear of God into the auto industry with its plans for driverless cars (which, as collateral damage, would destroy the auto insurance business over the next 20-30 years).

So some members of the utility business might sit up and pay attention to a Bloomberg story this week that Google is going to enter the business of developing software for the electric power-related business.  According to Bloomberg:

"Google, a big consumer of electricity for the computer servers that power its services, is looking at ways to transform the century-old utility industry, which has been struggling to adapt to changing demands for power management and production. As solar, wind and other renewable energy sources come online, the power grids that transmit electricity will need to be more flexible and efficient."

Of course, if Google does this well and quickly, it will help push forward a revolution in the U.S. electric grid, and if this happens in the U.S., it will shame Japan into action.  The article cites as some evidence:

"Earlier this year, it spent $3.2 billion to acquire Nest Labs, a digital-thermostat company, and is an investor in Atlantic Grid Development LLC, a project designed to help deliver electricity in New Jersey."

Of course, Google is hardly the only company that sees a huge consumer opportunity in managing the "smart grid".  This article, also Bloomberg, from a few weeks ago, discusses other entrants as well.  The common theme -- the existing utilities are unable to take advantage of, or even see, this opportunity, as they view customers as "load", and do not know how to sell.  They are toast.

On the other hand, this month's Wired magazine offers an amusing look at the super connected home of the 2030s, dominated by Microsoft/Samsung (Samsoft) products, the merged entity having beaten out Google/Android and Apple.

Of course, Japan has its own host of "smart city" and "smart grid" initiatives.  But these initiatives seem to be going on in typical Japanese "Galapagos" style, largely apart from the rest of the world.  It seems likely that the Japanese smart city will have its own standards and pecularities, with little likelihood it can be exported (or that foreign-developed software tools can be used in Japan).

Solar and Wind -- $15 billion more of investment coming from Warren Buffett/Berkshire Hathaway

This announcement from the Sage of Omaha got a lot of press today.  If Berkshire Hathaway has $15 billion in solar/wind investments, and plans to double that amount ... at some point this is no longer just a CSR exercise for an operator of coal and gas-fired plants?

Of course, Buffett is campaigning for renewal of U.S. tax incentives for such investments, and he emphasizes the importance of those incentives.  But Berkshire's activities help to explain how the numbers add up to more solar and wind added than any other type of generating capacity in the U.S. last year.

How Expensive IS Electricity in Japan?

As a TEPCO consumer, I get a large bill each month.  It seems very large compared with what I was charged for a larger house in the Washington DC suburbs before I moved here in 2004.  But the fee includes various charges, base connection costs, fuel costs, etc., so it is difficult to discern a straight cost per kWh.

A few weeks back Nikkei reported an IEA study comparing international rates.  This shows that for commercial/industrial customers the average rate in Japan is now 250% that in the U.S., and has increased 25% since the March 2011 disasters.

Nikkei indicates that the electricity cost for industrial/commercial customers in 2013 in Japan was 17 yen per kWh, while that for residential customers was 23.63 yen per kWh.  These are 25% and 16% increases over 2010.  The same article indicates the 2013 U.S. "corporate" (i.e. industrial and commercial) rate was 6.64 yen per kWh.

IEA notes that the U.S. benefits from cheap shale gas, while Japan suffers from long-term high cost contracts for imported LNG (priced off of Middle Eastern crude oil benchmarks).

Also, transmission/distribution fees are extremely high in Japan.  METI indicates (according to Nikkei) that grid repair/maintenance costs in Japan are more than 7 times those in California (and 3 times those in Korea) ... perhaps as a result of the regional utility monopolies?

Interestingly, the article includes a chart showing that during the same period France -- which relies more than any other country on nuclear power -- has also suffered a big pricing increase.  In fact, from 2007 to 2013 French "corporate" electricity prices have increased more than Japan on a percentage basis, though remaining far lower in absolute terms (around 12 yen per kWh).

Of course, if calculated in Japanese yen, another reason Japanese electricity costs are higher now than in 2010 is exchange rates.  All of Japan's oil, coal and gas are imported.  The yen-dollar rate the last weeks of CY 2010 and 2011, respectively, were 81.48 and 77.66.  The last week of 2013 the yen-dollar rate was 104.83.  So even if fuel costs had remained constant in dollar terms, they would be up over 30% in yen terms.  Ouch.

More Strain on the Utilities

TEPCO and a number of the other utilities reported better financial results for the most recent ended fiscal year.  But the pressure is still on, big time.

-Both Kyushu Electric and Hokkaido Electric are in the process of applying for/taking equity from the Development Bank of Japan, in order to avoid risk of technical insolvency as they continue to lose money. The interesting question will be whether this equity comes with significant strings attached, in terms of a commitment to cooperate fully with the government's regulatory/restructuring initiatives.

-Japan is still a zero nuclear country, with many utility applications pending with the Japan NRA for reactor restarts, but none yet approved.  The nation appears headed to a no-nuke summer again.  Supply will be especially tight in western Japan, where Kansai Electric has made it through the last 2 summers with the Oi reactors 3 and 4 operating, and where Kyushu Electric faces an outage at a major J-Power plant in Matsuura, Nagasaki from which it has taken supply in the past.  

-Even worse for the utilities and their business plans, a Fukui-based district court issued an injunction against the restart of Oi Reactors 3 and 4, on May 21.  KEPCO has appealed the decision, but it could take months or years before the upper court hears the appeal and issues a ruling.  The decision gave legal standing to persons without a broad area (250 kms) of a reactor to pursue litigation in court, undercutting government efforts to limit restart consents to communities within the host prefecture.  The nuclear restart is now a critical part of the government's energy policy, and it is far behind schedule.

-There are now something over 200 companies registered to sell electricity to small, retail end-users as the market liberalizes.  We will probably see a slow but continuous chipping away at both the generation and distribution/sales part of the utilities businesses.

A Nikkei opinion piece on June 3, 2014 notes that the historical environment for the electric utilities has collapsed.  No longer can they be assured of recovering costs and earning a profit if they just follow national policy -- which has included the promotion of nuclear power.  The electricity market may become competitive, and in such case the utilities cannot support or promote a risky endeavor such as nuclear power, where reactor closures can push a utility into sustained losses or even insolvency.   In order for the utilities to be reborn as "normal" private sector enterprises, the article suggests a need to transfer the nuclear power assets to a public corporation that can handle the burdens, the risks and rewards.