Initiatives Towards Massive Deployment of Low Cost, Renewable Electricity

Transcription

1 Ministry of Economy, Trade and Industry Initiatives Towards Massive Deployment of Low Cost, Renewable Electricity March 7, 2018 Jun Takashina Director-General Energy Efficiency and Renewable Energy Department Agency for Natural Resources and Energy Ministry of Economy, Trade and Industry, Japan

2 Share of in Power Generation in Selected Countries (% in power generation) 100% 90% 80% 70% 60% 50% 40% 30% 20% Hydro, 3.0 (exc. Hydro), % 0% Nuclear, 14.3 Natural gas, 9.8 Oil, etc., 1.0 Coal, % Nuclear, 20.6 Nuclear, 20.9 Natural gas, 18.9 Oil, etc., 6.2 Coal, % Hydro, 10.1 (exc. Hydro), 25.2 Natural gas, 29.7 Oil, etc., 0.6 Coal, 22.8 Nuclear, % Hydro, % Natural gas, 3.5 Oil, etc., 0.4 Coal, 2.2 (exc. Hydro), 24.0 Hydro, 9.7 (exc. Hydro), 23.6 Hydro, 5.8 (exc. Hydro), 6.7 Natural gas, 39.4 Oil, etc., 4.8 Coal, % Hydro, 16.2 Nuclear, 19.3 Natural gas, 31.9 Oil, etc., 0.9 Coal, % Nuclear, 15.1 Natural gas, 10.0 Oil, etc., 1.2 Coal, % Hydro, 56.7 Nuclear, 2.9 Nuclear, 1.7 Natural gas, 40.4 Oil, etc., 0.2 Coal, % Hydro, 19.1 Natural gas, 40.4 Oil, etc., 9.3 Coal, % Hydro, 7.5 (exc. Hydro), 7.8 (exc. Hydro), 7.1 (exc. Hydro), 7.8 (exc. Hydro), 5.0 Germany (2015) Spain (2015) UK (2015) France (2015) Italy (2015) US (2015) Canada (2015) China (2015) Japan (2016*) *Preliminary figure Primary renewable * Excluding hydro Wind 12.3% Wind 17.7% Wind 12.0% Wind 3.8% Solar 8.1% Wind 4.5% Wind 3.9% Wind 3.2% Solar 4.8%* Target year (i) 2025 (ii) (No national target) Target % of renewables (i) 40-45% (ii) 55-60% In total electricity 40% In total electricity 80% 44%** 40% 35-38% % of clean energy - 15% 22-24% In total electricity In total electricity In total electricity (including nuclear) (No national target) % of non-fossil in in total electricity primary energy In total electricity ** One of several scenarios Source: Agency for Natural Resources and Energy 1

3 Energy Mix and the Financial Burden on the Public 2 Achieving the planned energy mix entails a pressing challenge of how to curbing the financial burden on the public. A financial burden directly borne by the public totaling approx. 2 trillion yen/year (total surcharges) has made it possible to increase the share of renewables by 5 percentage points (from 10% to 15%). Going forward, it will be necessary to increase the share by an additional 7-9 percentage points (from 15% to 22-24%) with an additional public burden of approx. 1 trillion yen/year. <FIT Cost> 10% <Power Source Mix> 15% Nuclear 2% approx % Geothermal approx % Share of renewables 24% Total FIT cost 4.0 trillion Total surcharges 3.1 trillion Nuclear 26% Nuclear approx % Biomass approx % Wind approx. 1.7% Solar approx. 7.0% Share of renewables 15% Total FIT cost 2.3 trillion Total surcharges 1.8 trillion Thermal in total: 64% LNG 28% Oil 9% Coal 27% Thermal in total: 83% LNG 40% Oil 9% Coal 33% Thermal in total: approx. 56% LNG approx. 27% Oil approx. 3% Coal approx. 26% Hydro approx % Share of renewables 10% Share of renewables +9% FIT cost 19/kWh Surcharge 1.2/kWh Share of renewables +5% FIT cost 36/kWh Surcharge 2.25/kWh Base load share: approx. 56% FY2010 FY2016 FY2030 1,065 TWh (Power demand + T&D losses, etc.) FY2010 FY2016 FY2030 Note: The total FIT cost/ and total surcharges for FY2016 are estimates. Total surcharges for FY2030 are calculated on the assumption that the ratio of total FIT cost to total surcharges for FY2030 is the same for FY2016. The total amount of the FIT cost and total surcharges per kwh is calculated as follows: (1) The amount for FY2016 is calculated based on the actual FIT cost and total surcharges. (2) Increments up to FY2030 are mechanically calculated on the assumption that additional power generation from renewables is all subject to FIT, where (i) the FIT cost represents the total FIT cost divided by total electricity generated from renewables; and (ii) the amount of surcharges represents total surcharges divided by total amount of electricity. 2

4 Challenges with, and Directions in Studying, Massive Renewable Deployment and the Next-Generation Electric Power Network (The Strategic Policy Committee of the Advisory Committee for Natural Resources and Energy on 11/28/2017) (i) Generation cost Challenges for Japan Global Trends Initiatives Towards 2030 (Solar) Germany Twice the cost in Europe A public burden of 2 trillion yen has pushed up the renewable share by 5% points (from 10% to 15%). The share need to grow further by 9% points (from 15% to 24%) with an additional burden of 1 trillion. FIT introduced in 2000 FIP introduced in 2015 Utilizing the auction system to reduce prices to international levels. (ii) Grid constraints (iii) Coordination Capacity Mismatch between existing grids and siting potential for renewables Time and cost needed for reinforcement grow under existing grid operations. Introducing more VRE Balancing with thermal for now Achieving carbon freedom with electricity storage in the future (Share of renewables) Ireland (island country) 5% 24% Connect & manage introduced in 2001 *Germany (connecting with 7 countries) Preferential connection for renewables + renewables reduced burden on main grids Growing wheeling cost. A dearth in the domestic northsouth grid in resulting in electricity following to surrounding countries. (Share of renewables) UK 15% 25% Capacity market introduced in 2014 (Share of renewables) Spain 15% 39% 2006 Mechanism where renewables secure balancing capacity Practice flexibility that makes the best of unused capacities of the existing grids (Japanese connect & manage ) Rethinking the way the grid cost is borne for further utilization Reconstructing the Next-Generation Electric Power Network for 2030 and beyond [Thermal] Securing balancing capacity with a capacity market and balancing market [] Building a mechanism for allowing VRE to secure balancing capacity [Carbon-freedom] Developing competitive storage batteries and utilizing hydrogen towards 2050 (iv) Business Climate Immature climate for long-term stable generation Siting constraints for offshore wind power, etc. Germany 1997: Safety regulations and zoning 2015: Central system for offshore wind power Rebalancing regulations (e.g. the securement of land and equipment, the deadline for starting operations, measures for disposal, rules for using sea areas) Player Lack of globally competitive entities Global firms such as Vestas (renewables manufacturer) and Iberdrola (power producer) Nurturing globally competitive entities (renewables manufacturers, power producers, grid operations, balancing capacity ) 3

5 Wind Solar Challenge I. Generation Cost Reduction (1): Increasing the Cost Competitiveness of Globally, renewables are increasing their cost competitiveness in relation to other power sources as their power generation cost is falling amid their growing deployment. This is creating a vicious circle of further deployment. In Japan, their generation cost remains high compared with international standards, although renewable deployment has been surging since the Feed-in Tariff (FIT) system was introduced in July This highlights the need to render renewables more cost competitive as power sources through significant cost reduction. Global trend of falling costs ( /kwh) * Conversion rates: 120 to the euro; 150 to the pound UK Netherlands Spain Germany France Italy Japan ドイツ Germany イタリア Italy 日本 Japan スペイン Spain フランス France Efforts to make renewables cost competitiveness (Utilization of the FIT system) Initiatives to Date Forward-looking price setting (Setting mid- to long-term price targets) Introducing FIP * Examples in other countries - Setting declining prices (e.g. Germany) - Setting prices according to installed capacity (e.g. Germany, Spain, France) Source: Compiled from the summary paper complied by the Study Group for Policy Issues in the Era of Large-volume Introduction of Renewable Energy Source: Complied by the Agency for Natural Resources and EnergyNote: The initial-year price (2 MW for solar power; 20 MW for wind power) 4

6 Challenge I. Generation Cost Reduction (2): Procurement Prices Compiled by the Procurement Price Calculation Committee in This Fiscal Year Solar (commercial) (10 kw or more) Solar (residential) (Under 10 kw) Wind FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 Price targets for (20 kw or more) 27 * ** * From July 1 (after profit consideration period) ** Subject to the installation of a power conditioner capable of output control 55 (under 20 kw) (offshore wind) ** Shift to the auction system (2 MW or more) 21 (10 kw or but under 2 MW) **** ** 21 **** (20 kw or more) *** 18 (10 kw or more but under 2 MW) 26 28** 26 ** **** **** 36(fixed) 36(floating) ***** (floating (floating) 7 Market price (Target for 2020 and beyond Geothermal 26 (1.5 GW or more) 40 (under 15 MW) **** **** Hydro (1 MW or more but under 30 MW) 32 (wood biomass derived from thinned wood) 29 (200 kw or more but 1 MW) 34 (under 200 kw) 39 (fermented methane gas) 40 (under 2 MW) 32 (2 MW or more) 20 (5 MW or more but under 30 MW) **** 27 (1 MW or more but under 5 MW) **** **** **** Aiming for independence from the FIT system over a mid- to long term Biomass (general wood biomass) (biomass liquid fuel) 13 (building material waste) 21 (20 MW or more) (Under 20 MW) 21 (20 MW or more) (Under 20 MW) Shit to FIP (10 MW or more) (Under 10 MW) Shit to FIP (municipal waste; other biomass) *** A transitional measure is applied only to wind power projects that are truly being developed. **** Replaced equipment for wind, geothermal and hydro power generation are subject to a tariff lower than that for newly-approved equipment. ***** The conditions for applying the rules on the use of general sea areas are will be to the auction system when the rules come in force

7 General Approaches to Overcoming Grid Constraints <What Power Producers Have to Say> Challenge II. Overcoming Grid Constraints: (1) Approaches Can t Connect (Unable to connect even when the average utilization rate of the transmission line is below 10%.) <In reality> Unused transmission capacities may be an incorrect statement. Certain vacancies are needed to avoid outages. 50% = Upper limit (simple 2 circuits) Evaluation should be based on the peaktime volume, not the average. Expensive (Connection is too much of a financial burden.) The costs are partly borne with the specific costbearing system (borne by power producers) in many European countries as in Japan. Most countries adopt a hybrid of general cost bearing and specific cost bearing to avoid moral hazard. Too slow (Have to wait too long for connection.) Line enhancing requires a certain amount of time in any countries. The north-south transmission line experienced capacity shortages due to a delay in engineering work in Germany. Setting new grid usage rules to cope with the massive deployment renewables Coping with transmission and distribution utilities on a case-by-case basis Opening the grid based on rules Taking in best practices abroad <Approaches: Five Pillars> [1]Making better use of unused gaps in transmission quotas (Japanese connect & manage ) [2]Rethinking cost-bearing, possibly introducing an installment plan [3]Thoroughly cutting costs (scrutinizing connection costs, reforming the wheeling system) [4] Streamlining procedures (esp. standard processing time) [5] Ensuring through information disclosure (improving business predictability) (i) Rule-setting at each institution; (ii) compiling a collection of cases and guidelines; (iii) building a dispute settlement system Agency for Natural Resources and Energy Electricity and Gas Market Surveillance Commission Organization for Cross-regional Coordination of Transmission Operators 6

8 Challenge II. Overcoming Grid Constraints: (2) Making the Most of the Existing Grids (Japanese Connect & Manage ) 7 Rethinking traditional practices to make the most of the existing grids and utilizing domains (i) - (iii) Reviewing the detailed rules and reflect the results in the current practices. Traditional practices Proposed Practices (i) Calculating unused capacities Assuming the full operation of generation facilities of all power sources Assuming conditions close to the reality (Merit order for thermal; the amount equivalent to the actual maximum figure for renewables) (ii) Quota for emergency Securing a half Opening the quota with equipment that immediately shuts the lines when an accident happens. (iii) Connection assuming output control Normally making no such an assumption Allowing new connections that assume output control at the time of congestion Installed capacity Traditional Practices [Securing for emergencies] Proposed Practices [Securing for emergencies] Operational capacity Solar Wind Thermal (ii) (i) Solar Wind Thermal (iii) 7

9 Wind turbine output (%) Challenge III. Balancing Capacity: (1) Developing the Grid Code (Technical Requirements for Grid Connection) Thermal Power, etc. The priority supply rule dictates that thermal power plants be made subject to output control before renewables when power generation in an area exceeds demand. Wind Power Windmills in Europe have balancing capabilities, including those for curtailing output and limiting the output change rate as standard equipment. Germany: Frequency Active Power (output) Property (example) Output control In case of frequency increase Rated frequency 100% Renovation, etc % Rated output Thermal (normal) Thermal, etc. (timeworn) Frequency (Hz) Steps to be taken Steps to be taken Requiring new thermal plants planning grid connect to achieve a minimum output (less than 50% of rated output) and a certain rate of change in order to avoid output control for renewables as much as possible, while ensuring effectiveness as well as fairness among power producers Requesting existing thermal plants to meet similar requirements Setting numerical targets after assessing the actual state of affairs Working with the Japan Wind Power Association (JWPA) and general transmission and distribution utilities to establish rules on what capabilities windmills should be equipped with; ensuring that wind power generation utilities equip their windmills with such capabilities. Aiming to establish rules on requirements applicable to the entire country and put them in force soon (in 1-2 years) Seeking to do so in Hokkaido and Tohoku in advance of other regions 8

10 Challenge III. Balancing Capacity (2): VPP--a New Supply/Demand Balancing Mechanism A virtual power plant (VPP) is a virtual set of power generation and balancing capabilities made possible by remotely controlling energy resources that are distributed along the grid. Such sources include (i) solar PV and other renewable power generation facilities; (ii) storage batteries, EcoCute, and other energy equipment; (iii) demand response (DR) and other efforts by consumers. Conceptual Rendering of VPP Nuclear power plant Thermal plant Factories Stores Hydropower plant Power System VPP Mega solar Micro CHP Wind farm Major Challenges for Allowing VPPs to Acquire Balancing Capacity DR has demonstrated that transmission and distribution utilities can procure power with their balancing capacity (a response within 3 hours). A more quick response (within 15 minutes, 5 minutes, etc.) to procuring power with balancing capacity requires overcoming, among other things, the following challenges: (1) Verifying that energy resources can surely provide balancing capacity within the response time (developing a system for keep abreast of the controllability of energy resources and appropriately controlling them) (2) Establishing cyber security measures for VPPs EV Storage batteries EcoCute These are being addressed in the VPP establishment demonstration project for the five-year period ( ). 9

11 Challenge IV. Improving the Business Climate (1): Promoting Balanced Deployment of The launch of FIT in July 2012 has resulted in the growing deployment of renewables, with solar power paying the leading role. Biomass has also fared well, with its approved capacity surging revolving around general wood biomass. By contrast, power sources with severe siting constraints such as wind (exp. offshore), hydro, and geothermal power are limited in new deployment. It is necessary to strike a balance between these two contrasting group of power sources--while redressing the disproportionate share of solar power and encouraging coexistence with local communities--by, for example, promoting the deployment of offshore wind power with clearer rules on the use of sea areas. (MW) Deployment level (March 2017) [Pre-FIT installed capacity] FIT-approved capacity (March 2017) Planned energy mix (FY2030) Progress rate visa-vis planned mix (approx.) Major challenges Solar 39,100 [5,600] 84,540 64,000 61% The approved capacity for commercial use is surging but the installed capacity represents 40%. Another challenge is coexistence with local communities. Wind 3,390 [2,600] 6,970 10,000 (of which offshore: 820) 34% Siting constraints involving coordination with local communities, EIA, rules on the use of sea areas constitute a challenge, although the sum of pre-fit installed capacity and the FIT-approved capacity is almost equal to the level defined in the energy mix plan. Geothermal 530 [520] 90 1,400-1,550 33% Although Japan is richly endowed geothermal resources, the installed capacity for this base-load power source after the launch of FIT is extremely small (approx. 10 MW). Fundamental measures need to be taken to reduce the associated business risks and make the most of this endowment. Hydro 48,120 [48,000] 1,120 48,470-49,310 98% Small and medium-scale hydropower generation is the main untapped domain. Developing projects in this domain poses a challenge. Biomass 3,150 [2,300] 12,420 6,020-7,280 43% The surge in the number of large cases where general wood biomass is approved has made the approved capacity of biomass far exceed the level envisaged in the energy mix plan. 10

12 Challenge IV. Improving the Business Climate (2): Establishing a Non-fossil Value Trading Market Under the Act on the Promotion of Use of Non-fossil Energy Sources and Effective Use of Fossil Energy Materials by Energy Suppliers, electricity retailers need to procure non-fossil power sources (renewables and nuclear) in a prescribed proportion to total procurements (44% or more by FY2030). But new entrants have only limited means to procure such sources. The achievement of this goal may be difficult without institutional development. After transmission and distribution utilities begin to purchase power sources under the FIT system, a part of such purchase is made through power exchanges. The non-fossil value might be sunk within the existing framework. It is thus necessary to make the non-fossil value manifest for trading, thereby supporting electricity retailers in meeting the requirement to procure non-fossil power sources. To this end, a new market (non-fossil value trading market) will be established in order to help reduce the financial burden on the public associated with the FIT system. The trading of nonfossil certificates for power sources subject to FIT energy source will be launched in May Thermal power producers (iii) Needs of consumers The new market will allow consumers to use power with a non-fossil value (chiefly renewables). Non-fossil power producers Power exchange Electricity retailer No non-fossil (zero emission) value Consumer A Become separated New market Electricity retailer Non-fossil (zero emission) value Consumer B (ii) Reduced financial burden on the public associated with FIT Sales of the non-fossil value of FIT power sources will not go to the hands of power producers as additional profit but will be used to reduce the financial burden on the public (FIT surcharge). (i) Means to procure the non-fossil value The new market will allow electricity retailers to procure the nonfossil value, which might be unprocurable at power exchanges (where the type of power source is not designated). Legends: Electricity (no environmental value) Separated environmental value 11