METI JAPAN S ENERGY OUTLOOK AND NEW CHALLENGES (IEA ESAP SESSION 1) June 2016 Takehiko Matsuo Secretary General, Electricity and Gas Market Surveillance Commission, Japan
Roadmap for Energy Market Reform Electricity retail market has been fully liberalized from this April and legal unbundling is scheduled in 2020. OCCTO and EGC was established to advance the energy system reform. 2015 2016 2017 2018 2019 2020 2021 2022 Transitional Period of Regulated Retail Tariff Electricity Apr. Establishment of OCCTO Sep. Establishment of EGC Apr. Full Liberalization of Electricity Retail Market Apr. Legal Unbundling OCCTO s main functions (The Organization for Cross-regional Coordination of Transmission Operators) - prescribing utilities to increase power generation and interchange when needed. - reviewing utilities power supply and demand plans. - constructing transmission lines between regions in response to an increase in demand. Gas Transitional Period of Regulated Retail Tariff Apr. Full Liberalization of Gas Retail Market Apr. Legal Unbundling 2
About EGC Mission The Commission is aimed to urge sound competition in the electricity and gas market. Besides strictly monitoring transactions in the market, EGC makes policy recommendations on necessary rule-makings to the Minister. METI Role 2Policy Recommendation Rule-makings from the viewpoint of competition as well as consumer protection EGC 1Monitoring/Inspection Consumer protection ex. Demanding extremely high cancellation fee Exercising the market power ex. Setting extremely low retail price to block new entrants Neutrality of transmission operators ex. Leaking the information of other generators/retailers obtained through the transmission operation to the generation/retail sections in the company/group Electricity /Gas Market 3
36.5 4.8 6.6 42.3 8.6 1.2 Source:ANRE Total 1006.4TWh (248.87GW) Hokkaido Company 37.3TWh (8.26GW) Hokuriku 40.3GWh (9.18GW) Kansai 163.3GWh (40.77GW) Chugoku 68.7TWh (15.72GW) Shikoku 38.1TWh (8.45GW) Kyusyu 96.6TWh (23.24GW) Okinawa 8.7TWh (2.23GW) 25.0 29.3 7.5 28.6 8.5 1.1 31.4 7.6 43.6 15.2 2.1 38.9 20.2 3.0 22.9 12.6 2.3 20.1 20.7 4.8 43.2 10.3 0.8 58.0 17.6 14.0 3.3 6.2 0.9 26.4 18.9 7.1 38.7 5.9 3.0 77.4 21.0 0.4 1.2 9.9 44.8 10.9 28.2 5.5 0.6 (Hydro) (RE) 25.7 47.8 3.7 13.4 8.7 0.7 38.6 2.8 37.8 20.0 0.8 Generation by energy source by company(2010) 4 LNG Oil etc. Nuclear Hydro Renewables Coal Tokyo 317.4GWh (78.10GW) Tohoku 96.5TWh (21.91GW) Chubu 139.6GWh (36GW)
31.0 46.1 10.6 9.0 3.2 16.5 66.3 9.2 5.8 2.2 24.7 62.6 1.6 8.4 2.7 50.6 0.6 28.8 14.8 5.2 64.8 8.5 24.5 1.5 24.9 47.1 15.2 10.6 2.1 55.2 22.9 11.8 6.7 3.5 31.8 38.1 15.7 6.9 7.5 65.1 18.6 12.8 3.5 44.9 31.3 6.8 12.9 4.1 Generation by energy source by company(2014) LNG Oil etc. Nuclear Hydro Renewables Source:ANRE 5 Coal Total 910.1TWh (252GW) Kansai 143TWh (43.32GW) Hokuriku 3.3TWh (9.24GW) Hokkaido 3.3TWh (8.55GW) Tohoku 92.7TWh (22.38GW) Tokyo 277.1TWh (80,7GW) Chubu 141.1TWh (37.8GW) Shikoku 30.5TWh (8.57GW) Okinawa 8.6TWh (2.56GW) Kyusyu 85.3TWh (23.06GW) Chugoku 65.9TWh (15.75GW) 56.7 7.9 18.7 11.5 4.9
Expansion of renewable energy facilities (MW) 4500 4000 3500 3000 2500 2000 Solar Wind 太陽光風力 power power Geo バイオマス Biomass 地熱 thermal Small and 中小水力 medium 1 hydropower Annual average growth rate 5 Annual average growth rate 9 Annual average growth rate 33 1500 1000 500 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Surplus power buyback program FIT RPS note1. except large-scale hydro power Source: ANRE calculation based on several statistics such as JPEA,NEDO etc. 6
Electricity Supply and Demand Outlook for 2030 Power demand Generation by energy source Thorough energy efficiency and conservation 196.1 billion kwh (17 lower than before the implementation of the energy conservation measures) Electric power 966.6 TWh Economic growth 1.7/year Electric power 980.8 TWh 966.6 TWh Renewable energy 12 LNG 40 (Total generated energy) 1,065 TWh Renewable energy 22 to 24 Nuclear power 20 to 22 LNG 27 Geothermal 1.0 to 1.1 Biomass 3.7 to 4.6 Wind power 1.7 Solar power 7.0 Hydroelectric 8.8 to 9.2 2013 (Actual result) 2030 Source: ANRE calculation based on several statistics such as JPEA,NEDO etc. Coal 31 Petroleum 13 2013 Coal 26 Petroleum 3 2030 * Values are approximate. Base load ratio: 56 7
8 Three challenges to further introduction of REs Challenge1: fixed of conventional power plants As more renewable electricity, whose variable is almost zero, come into the market, how can the fixed of conventional power plants, which are essential for ancillary service, be secured? Challenge2: interregional transmission lines How can new inter-regional lines, which is necessary for REs further instruction, be smoothly constructed? How can utilization of existing lines be expanded? Challenge3: transmission tariff system While electricity demand is not expected to grow, how should transmission tariff system be reformed, in order to make the grid-related investment, required by newly introduced renewables, efficient and appropriate?
Overview of transmission tariff system in Japan 物理的送電権は Japan adopts the xx full であるのに対し 金融的送電権は pricing system. xx Transmission tariffs consist of capacity charge(kw) and energy charge (kwh), and are charged 100 to loads on the premise that electricity flows from upper to lower grid. Current system In Japan Calculation of full pricing/ First connection charge Full pricing system Shallow 1) Allocation of generation-tariff/ Load-tariff Transmission tariff is 100 charged to loads Allocation by voltage Based on the premise that electricity flows from upper to lower Transmission tariff planning by service categories Combination of capacity and energy charges, but 53 of the total is collected through energy charge, while being fixed Overview Except the First Connection charge Transformation Transmission Distribution General Administration NW Overall Generation Tariff Load Tariff SHV(220-500kV), HV(154-220kV), and LV(6.6-154kV) Ancillary service Transmission etc. HV and LV Transformation for distribution Distribution for HV LV Distribution for LV Variable 20 Fixed 80 Composition rate of full Energy charge (kwh) 73 Capacity charge (kw) 27 note1. Grid users pay for the infrastructure connecting its installation to the transmission grid (line/cable and other necessary equipment) Composition rate of transmission charge 9
Challenge1:Charge to generators 物理的送電権は Charging 100 xx to load であるのに対し 金融的送電権は would diminish generators' xx incentive to construct and operate grid system more efficiently. Efficient development and maintenance of grid Depending on the locations of RE, the of grid might be extremely high. However, generators don t need to consider the additional for the grid because load pays 100 of the. Additional Internal grid Interconnection between regions/ Internal main transmission lines etc. Hokkaido Tohoku Total 2.7GW (4.7TWh/ year) 1.47 billion Euro 5.01 billion Euro 3.2GW (5.6TWh/ year) 0.5 billion Euro 1.61 billion Euro 5.9TkW (10.3TWh/ year) 1.99 billion Euro 6.63 billion Euro Efficient use of grid It is necessary to consider the maximum flow from the generation facilities when transmission facilities are developed. If the generation capacity is the same, the necessary is also the same regardless of the utilization rate of the facilities. Ex): Utilization rate of the facilities Thermal power plant:80 Wind power plant: 20 Areas in the left side chart Hokkaido Total construction Source:ANRE 6.48 billion Euro(11.1 cent/kwh) 2.14 billion Euro(2.95 cent/kwh) 8.61 billion Euro (6.63 cent/kwh) Tokyo Tohoku 10
Challenge2:Charge to consumers The fairness of the burdens of fixed and the risk of being unable to recover fixed could become more serious problems in the future depending on the extent of expansion of RE. Increasing off-grid power system Increase in the number of consumers with off-grid power system accelerates free-rider problem regarding the payment of fixed. In Japan, this problem gets more serious because roof-top PV and micro-cogeneration are often installed together. Problem of the fairness of the burdens Since fixed is recovered by energy charge, the users of off-grid power system don t pay sufficient fixed in transmission tariff. Preliminary calculation roof-top PV <Premise> Contracted capacity :50A,6,000kWh/year Utilization of facility:14, self consumption:30 9GW of roof-top PV for residence and 5.3 million micro-cogeneration(around 10 of all households) are expected to be installed in 2030. (Million Euro) 3.0 2.0 1.0 5 4 3 2 1 (GW) (amount) 200,000 150,000 100,000 50,000 unit: euro/year Capacity Charge (kw) Energy Charge (kwh) w Roof top PV Around 243 (fixed : around 161) w/o Roof top PV Around 18 Around 18 Around 338 (fixed : around 235) 0.0 Source:ANRE 93 95 97 99 01 03 05 07 09 11 system price per kw introduction amount(roof top) introduction amount(all PV) 0 0 09 10 11 12 13 14 15 micro co-generation 1/3 of fixed (74euro) which originally should be paid decreases. *Toward 2030, this difference will be expanded. 11
Challenge3:Value of the grid 物理的送電権は xx であるのに対し 金融的送電権は xx Given the increase in the number of off-grid generation users and the increase in reverse flow from lower to upper grid system in the future, how should we evaluate the value of the grid? In the future In the low voltage area, new services like VPPs including DR are emerging together with introduction of roof top PV and microcogeneration. Change of the electricity flow Existing flow Possible flow in the future Reverse flow from the lower gird system Generators (RE) Retailers/TSO User (Energy saving) aggregator Special high Voltage(SVH) user High voltage (HV) Smart meters will be fully deployed by early 2020s. For high voltage users (ex. factories), smart meters will be installed by 2016. For low voltage users (ex. residences etc.), smart meters will be installed by 2020 in Tokyo area and by 2024 in all the areas in Japan. Low voltage(lv) Utilization of off-grid power system Source:ANRE 12
13 Measures to be considered Challenges Measures to be considered Generation Generators might locate power plants without taking into account the transmission and distribution since the is 100 charged to loads. The utilization rate of network facilities might be low because they are constructed based on the maximum flow. Introduction of network charge to generators Locational transmission tariff system Rebalance of fixed Transmission charge depending on the capacity (kw charging) Load Due to the imbalance between the ratio of fixed and ratio of capacity charge, heavy power users bear more burden. Acceleration of distributed power systems makes the problem more serious, further damaging the fairness of burdens. Locational transmission tariff system (Demand side) New transmission tariff system considering the flow within the lower gird Reviewing capacity charge Charging the fixed to the users of off-grid power system Others How should we evaluate the value of the grid in case reverse flow to the upper grid occurs due to the introduction of roof-top PV and micro co-generation? Further discussion is needed considering that electricity flow has been changing. Charges for ancillary service and transport service should be considered differently?