Electricity and Renewable Energy

Transcription

1 Attractive Sectors Electricity and Renewable Energy 1. General overview Boost renewable share to 22-24% of the total by FY2030 The Great East Japan Earthquake in 2011 has brought about various influences on the energy environment in Japan. Japan's energy self-sufficiency has fallen from 58.1% in 1960 to 19.9% in 20, reflecting advanced fuel conversion from coal to petroleum as energy demand grew during the high economic growth period. The Great East Japan Earthquake caused a series of power plants to shut down one after the other, leading to a further decline in energy self-sufficiency, which fell to 6% in Imports of fossil fuels were sharply increased to make up for that shortage. During that time, along with the soaring of crude oil prices internationally up until the summer of 2014, increased imports of fossil fuels also became a factor in the significant deterioration of the balance in trade. That situation lead to a rise in electricity prices and produced a significant impact on industrial sectors, including SMEs and small businesses, as well as households. In addition to that, an increase in thermal power generation brought CO2 emissions to record level, meaning that it could prove difficult to achieve the international commitment to reduce CO2 emissions by 25% from 1990 levels by 2020, which was made during the Hatoyama administration (2009). Given these circumstances, the Agency for Natural Resources and Energy, METI, compiled a "Long-term Energy Supply and Demand Outlook (Energy Mix)" in July 2015 as the new energy policy toward FY2030. According to the energy supply-demand forecast in FY2030, renewable energy power generation will expand to a range of about 22% to 24% of the total. Regarding renewable energies most suitable to the environment (photovoltaic, hydraulic, wind, biomass, and geothermal power generation), the government aims at the maximum introduction of each individual power source. Geothermal, hydraulic, and biomass energy sources in particular are expected to become alternatives to nuclear power, while wind and photovoltaic energy sources are expected to become alternatives to thermal energy. Transition of energy self-sufficiency in Japan (%) Estimated (year) *Source: Agency for Natural Resources and Energy "Energy White Paper 2015" In the future, the progress of energy system reforms in electricity, gas, and other sectors increase customers options. As the global energy supply and demand structure changes due to factors such as the shale gas revolution in North America, the circumstances surrounding energy industry both within and outside of Japan will continue to change dramatically. In light of those changes, the Japanese government has a goal toward 2030 of promoting smart and finely-tuned energy conservation and multilateral energy procurement by reducing dependency on the Middle East for petroleum and so on. For renewable energy, the system shall be reviewed so as to balance the maximum application of each individual power source with reduction in the public burden. 1 July 2016

2 Transition of power source mix to date and goal of power source mix in FY2030 0% 90% 80% 70% 60% 50% 40% 17.23% 1.8% 1.4% 2.6% 2.4% 4.6% 71.3% 12.9% 9.6%.7% 0.9% 27.8% 28.6% 23.1% 29.3% 43.2% 1.2% 1.0% 22-24% 20-22% 27% Renewable energy Other gases Nuclear power LNG 30% 20% % 0%.3% 24.5% 25.0% 6.6% 30.3% 13.7% 26% FY1973 FY1991 FY20 FY2013 FY2030 3% Coal Oil Breakdown of renewable energy configuration ratio in FY2030 Hydraulic About 8.8% Photovoltaic About 7.0% Biomass About 3.7 to 4.6% Wind About 1.7% Geothermal About 1.0 to 1.1% Renewable energy total About 22 to 24% *Source:For FY1973 to 2013, the Agency for Natural Resources and Energy webpage prepared by Yano Research Institute. For FY2030, the Agency for Natural Resources and Energy "Long-term Energy Supply and Demand Outlook" prepared by Yano Research Institute. The point of the energy policy for energy mix is to ensure stable supply ("Energy Security"), realize low-cost energy supply ("Economic Efficiency"), and pursue environmental suitability ("Environment") on the premise of "Safety." According to the framework, in parallel with reducing electricity demand in 2030 through comprehensive promotion ofenergy efficiency and conservation, if the balanced energy mix is adapted on the side of the power supply, it is possible to achieve all three goals at the same time: self-sufficiency improvement, energy cost reduction, and reduction of CO2 emissions. As the Government has already begun its "Energy Mix Plan for 2030" and reviewed its FIT energy policy, it can be considered on track towards focusing on the "Liberalization of Electricity Systems and the Gas Market" in the future. 2 July 2016

3 2. Government Initiatives With review of FIT finished, the Government will shift attention to liberalization of electricity systems and the gas market 1 Review of FIT (feed-in tariff) The FIT (feed-in tariff) scheme started in July 2012 to promote the spread of renewable energy involving higher costs compared to those of nuclear and thermal power generation. In part because new entrants rushed on to photovoltaic power generation which is easy to set up, however, the state of the market is unbalanced, with more than 90% of the renewable energy facilities that started power generation by the end of March 2015 being PV-oriented. To correct this imbalance, purchase prices for photovoltaic power generation are being reduced from year to year. The Agency for Natural Resources and Energy, METI, determined the purchase price for FY2016 in March According to this determination, comparing with the purchase price of FY2015, the photovoltaic power purchase price of kw or more (excluding tax) is reduced from 27 yen/kwh to 24 yen/kwh, the purchase price of less than kw not required to install output control equipment is reduced from 33 yen/kwh to 31 yen/kwh, and the purchase price of less than kw required to install output control equipment is reduced from 35 yen/kwh to 33 yen/kwh. For other renewable energy sources, the purchase price and the purchase period remain the same as those in FY2015. FIT price transition (Procurement cost per kwh) Purchase prices Purchase periods FY2012 FY2013 FY2014 FY2015 FY2016 Photovoltaic power Photovoltaic power Less than kw Surplus purchasing Double generation/ Surplus purchasing Output control equipment Not required to install Output control equipment Required to install Output control equipment Not required to install Output control equipment Required to install 42 yen 38 yen 37 yen 34 yen 31 yen 30 yen kw or more 40 yen + tax 36 yen + tax 32 yen + tax (*1) This category requires access by vessels for both construction and operational maintenance. (*2) This category allows for renewal of electrical installations and penstock utilizing existing headrace channels. *Source: The Agency for Natural Resources and Energy webpage prepared by Yano Research Institute. 33 yen 31 yen years 35 yen 33 yen years 27 yen 25 yen years 29 yen 27 yen years 29 yen + tax (premium purchase period from Apr 1 to Jun 30, 2015) 27 yen + tax (Jul 1, 2015 and later) 24 yen + tax 20 years Wind power 20kW or more 22 yen + tax 22 yen + tax 22 yen + tax 22 yen + tax 22 yen + tax 20 years Less than 20kW 55 yen + tax 55 yen + tax 55 yen + tax 55 yen + tax 55 yen + tax 20 years Offshore wind power (*1) yen + tax 36 yen + tax 36 yen + tax 20 years Geothermal 15,000kW or more 26 yen + tax 26 yen + tax 26 yen + tax 26 yen + tax 26 yen + tax 15 years power Less than 15,000kW 40 yen + tax 40 yen + tax 40 yen + tax 40 yen + tax 40 yen + tax 15 years Hydraulic 1,000kW or more but less than 30,000kW 24 yen + tax 24 yen + tax 24 yen + tax 24 yen + tax 24 yen + tax 20 years 200kW or more but less than 1,000kW 29 yen + tax 29 yen + tax 29 yen + tax 29 yen + tax 29 yen + tax 20 years Less than 200kW 34 yen + tax 34 yen + tax 34 yen + tax 34 yen + tax 34 yen + tax 20 years Small and 1,000kW or more but less than 30,000kW yen + tax 14 yen + tax 14 yen + tax 20 years medium scale 200kW or more but less than 1,000kW yen + tax 21 yen + tax 21 yen + tax 20 years hydraulic Less than 200kW power utilizing existing head yen + tax 25 yen + tax 25 yen + tax 20 years race channels (*2) Biomass Methane fermentation gas (derived from biomass) 39 yen + tax 39 yen + tax 39 yen + tax 39 yen + tax 39 yen + tax 20 years Woody biomass derived Less than 2,000kW 40 yen + tax 40 yen + tax 20 years from thinned wood 32 yen + tax 32 yen + tax 32 yen + tax 2,000kW or more 32 yen + tax 32 yen + tax 20 years Biomass Woody biomass in general and biomass produced as a result of harvesting crops 24 yen + tax 24 yen + tax 24 yen + tax 24 yen + tax 24 yen + tax 20 years Construction waste 13 yen + tax 13 yen + tax 13 yen + tax 13 yen + tax 13 yen + tax 20 years Other biomass, non-industrial waste 17 yen + tax 17 yen + tax 17 yen + tax 17 yen + tax 17 yen + tax 20 years 3 July 2016

4 2 Electricity System Reform (retail liberalization) 4 Approaches toward new energy development To ensure a stable energy supply, reduction of electricity prices to the utmost degree, and expansion of customers' options and business opportunities for business operators, the Cabinet decided on the Policy on Electricity System Reform in April The Electricity System Reform has been implemented in three stages with three key pillars: (1) expanded operation of cross-regional power grids between eastern and western Japan; (2) full liberalization of the retail sector; and, (3) ensuring further neutrality of the power transmission and distribution sectors through legal unbundling. In this regard, Tokyo Electric Power Co. founded a holding company by dividing the generation, retail, and transmission and distribution sectors on April 1, 2016 ahead of other electric power companies. Scheduled electricity system reform Scheduled electricity system reform Schedule First stage Establishment of Organization for Crossregional Coordination of Transmission April, 2015 Operators, JAPAN (OCCTO) Methane hydrate is classified into two types: sand-layer pore filling type methane hydrate, which exists mainly in formations at depths of several hundred meters below the seafloor of the Pacific Ocean, and shallow-type methane hydrate that exists mainly on the seafloor of the Sea of Japan. As for sand-layer pore filling type methane hydrate, the world's first gas production test was conducted in March 2013, and the technical platform is scheduled to be established toward future commercial production by around FY2018. As for shallow-type methane hydrate, surveys started in FY2013 to determine the amount of resources. A survey in 2014 found 746 structures (gas chimney structures) in which shallow-type methane hydrate can exist in the survey areas around the Oki Islands, off Joetsu coast, off Akita/Yamagata coast and off Hidaka coast. For Japan, which is not energy self-sufficient, methane hydrate is a field METI is focusing on because of its potential as an energy resource that can bring about substantial changes in the preconditions of Japan's energy policy. Second stage Full liberalization of electricity retail market April, 2016 Third stage Legal unbundling of power transmission and distribution sectors April, 2020 *Source: Prime Minister of Japan and His Cabinet "ABENOMICS IS PROGRESSING TOWARDS THE REINVIGORATION OF THE JAPANESE ECONOMY May 2016" prepared by Yano Research Institute. 3 Gas System Reform (gas market liberalization) One year behind full liberalization of the electricity retail market, full liberalization of of the gas retail market will start in April Following full liberalization of the retail market, to ensure further neutrality of gas pipeline services, legal unbundling is scheduled in the gas pipeline sector, targeting the three major gas companies (Tokyo Gas, Osaka Gas and Toho Gas) with overall long-distance pipelines and large numbers of customers. A new policy will prohibit operating LNG-based manufacturing, retail and gas pipeline services at the same time (scheduled to take effect in April 2022). 4 July 2016

5 3. Attractive markets 1 This report covers the following three attractive markets. 1 Electricity retail market 2 Renewable energy market 3 Smart meter market Electricity retail market With full liberalization, new electric power suppliers sales are expected to expand Liberalization of the electricity retail sector partially started in March 2000 to cover extra-high voltage customers (at least 2,000kW as a rule). After that, the range of retail liberalization was gradually expanded, and in April 2005, the retail market became liberalized for all high-voltage customers (at least 50kW as a rule). As electricity retail became fully liberalized as of April 1, 2016, it is now possible for new entrants or new electric power suppliers to sign a power contract of 50kW or less for general households and shops formerly provided only by the regional General Electric Utilities (e.g., Tokyo Electric Power Co.). The market is estimated to be about 8 trillion yen. Accordingly, following the full liberalization of the electricity retail sector, the number of pre-registered retail electricity suppliers, or business operators, other than electric power companies allowed to sell electricity to all consumers reached 3 corporations on June 16, Registered retail electricity suppliers comprise a wide variety of business categories, including electric power companies, gas companies, oil companies, trading firms, finance/real estate/developers, telecommunications companies, manufacturers, engineering companies, and energy management companies. Currently the registered operators are mainly Japanese companies, but international companies are expected to enter the market in the future. Regarding the transition of electricity sales by electric power suppliers, the market in 2016 and later is expected to greatly expand because of the additional amount of low voltage electricity newly liberalized this time. Electricity sales by new electric power suppliers (1 billion kwh) 0 90 Extra high voltage High voltage low voltage (projected) (projected) (projected) (projected) (projected) (projected) (Fiscal Year) *Source:Power Survey and Statistics until FY2014 (Agency for Natural Resources and Energy). Forecasts for 2015 and later are by Yano Research Institute. 5 July 2016

6 2 Renewable energy markets Promoting the well-balanced renewable energy sources by shifting from the heavy dependence on PV power source 1 Photovoltaic power generation The photovoltaic system market is roughly divided into residential use and public/industrial use. In FY2014, public/industrial use accounted for 73% of the total. The market scale of photovoltaic systems is considered to have expanded up to 3 trillion yen in FY2014. In 2015 and later, however, the market is predicted to shrink up until 2020 due to a fall in system prices and a decline in demand for power generation such as mega solar, after which a bottoming out will occur and a recovery trend will continue up until FY2025. The PV system for public/industrial use is currently highly dependent on the power generation business, and the market is expected to shrink in the future. On the other hand, the market of the PV system for residential use will remain relatively stable despite a drop in the price. The leading players in the market include Japanese companies such as Panasonic, Sharp, Kyocera, Toshiba, Mitsubishi Electric, and Solar Frontier, as well as foreign companies such as Hanwha Q Sells Japan (Korea), Canadian Solar Japan (Canada), JA Solar Japan (China), Yingli Green Energy Japan (China) and Trina Solar Japan (China). Photovoltaic system market scale (1 billion yen) 3,500 Export 2,999 3,000 2,844 Public and industrial Residential 2,602 2,500 2,413 2 Wind power In the wind power generation system market, focus is placed on offshore wind power generation in addition to the traditional land-based variety. As the FIT program added a new purchase category of offshore wind power in FY2014, offshore wind development in the private sector is showing gradual progress. Nevertheless, offshore wind power generation, which allows for large-scale development under better wind conditions compared to land-based generation, is considered to take some time to start up because it takes considerable time to build consensus with local fishermen and to establish infrastructure such as port facilities. After FY2017, we expect that the market will first materialize in areas with less offshore distance and relatively shallower water depth*, and then, the number of projects will increase from around 2025 as offshore wind firms scale up to production of hundreds of megawatts, on track to creation of a full-scale market of offshore wind power generation. The wind power generation system market is marked by a high share of foreign manufacturers. Major entrants include international companies such as Vestas Wind Technology Japan (Denmark), Japan GE (US), ENERCON Services Japan (Germany), and Japanese companies such as Mitsubishi Heavy Industries, Japan Steel Works, Ltd., and Hitachi, Ltd. * The relevant area is a low business risk area though its wind conditions are not as favorable as those of offshore wind. (1 billion yen) 1,200 1, Wind power generation system market scale Land-based Offshore 1, ,000 1,500 1, , FY FY2014 FY2015 FY2016 (projected) (projected) (projected) 280 FY2020 (projected) FY2030 (projected) 0 FY2013 FY2014 FY2015 (projected) FY2016 (projected) FY2020 FY2025 (projected) (projected) *Source: "Wind Power Generation System Market in Japan: Key Research Findings 2014",Yano Research Institute. *Source: "Solar Photovoltaic System Market in Japan: Key Research Findings 2015," Yano Research Institute 6 July 2016

7 3 Others For biomass power generation, the FIT program established a new purchase category of unused woody biomass power generation less than 2,000kW in FY2015. This is being considered in order to promote the use of woody biomass and give small entities the chance to start woody biomass power generation. For hydraulic power generation, as FIT went into effect, new operation of 130,000kW started in November 2015 and further development is expected in the future. For geothermal power generation, Japan is believed to have the world's third-largest potential for geothermal power resources, which are currently not effectively utilized due to the long lead time it takes to activate power plants. Partly because geothermal power generation is covered by the FIT program that started in July 2012, however, the momentum of geothermal power development is gradually growing, showing an increase in the number of research projects on geothermal resources that are needed in the early stages of development. Number of subsidies granted for geothermal resource research and development project costs FY2013 FY2014 FY projects 23 projects 26 projects *Source: Japan Oil, Gas and Metals National Corporation 3 Smart meter market 12 million units are scheduled to be introduced from FY2016 to FY2018 Electricity, gas and other energy resource distribution networks will spread to wider areas and form huge systems. In order to optimize these systems, energy and IT technologies must be blended, and smart meters are the infrastructure essential in realizing that. The number of smart meters introduced to Japan was 3.66 million units in FY2014 and 7.5 million units in FY2015. In the three years from FY2016, more than 12 million units are planned to be installed each year. According to the METI Smart Meter System Study Group, completion of smart meter installation for high-voltage users such as factories is scheduled for FY2016; for low-voltage users such as households, TEPCO (Tokyo Electric Power Company Holdings, Incorporated) is scheduled to complete smart meter installation for all of its users by FY2020; on the whole, smart meter installation across Japan is scheduled to be completed by FY2024. In addition, electric utilities have announced plans for smooth replacement along with HEMS installation. Following the full liberalization of the electricity retail sector in 2016, gas liberalization is also scheduled for 2017, thus demand for smart meters is also expected. Players in the market include Japanese companies such as Osaki Electric Co., Ltd., Mitsubishi Electric Corp., and Toko Toshiba Meter Systems, and non-japanese companies such as GE Fuji Electric Meter (a joint venture with a Japanese company) and Itron Japan. Smart meter introduction plan by electric power companies (FY/,000 units) Hokkaido Electric Power Co., Inc Tohoku Electric Power Co., Inc Tokyo Electric Power Co., Inc Chubu Electric Power Co., Inc Hokuriku Electric Power Co., Inc Kansai Electric Power Co., Inc Chugoku Electric Power Co., Inc Shikoku Electric Power Co., Inc Kyushu Electric Power Co., Inc Okinawa Electric Power Co., Inc Total ,225 1,226 1, *Note: Kansai Electric Power from FY2018 to FY2022, Kyushu Electric Power from FY2020 to FY2023 Replacement from smart meters to smart meters occurs along with expiration of valid certificate period in addition to the described number of introduced units. *Source: Electricity and Gas Industry Department, ANRE, METI "Smart Meter System Study Group 15th meeting document" 7 July 2016

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