Coal Demand/Supply Trend & Coal Policy in Japan

Coal Demand/Supply Trend & Coal Policy in Japan October 12, 2009 Yoshitaka WATABE, Director for Coal Policy Agency for Natural Resources and Energy Ministry of Economy, Trade and Industry Japan

1. Decrease in domestic production & increase in import The volume of domestic coal production was approximately 50 million tons per year in 1960s, which amounts to 75% of total coal consumption. However, at present it is around 1.3 million tons per year, which amounts to only 0.7%. Japan heavily relies on import for coal. Source: Energy White Paper 2008 Ministry of Economy, Trade and Industry, JAPAN 1

2. World Coal Trade Japan is the world s largest coal importing country, with imports amounting to nearly180mt of coal, equal to one-forth of world s hard coal trade. Main coal importers Rank Country Imports (m tons) Share (%) 1st Japan 182 20 2nd Korea 88 10 3rd Taiwan 69 8 4th India 54 6 5th U.K. 50 6 Total World 892 100 Top 10 coal exporters Others Kazakhstan カザフスタンその他ベトナム百万トン 48m 48 百万トン tons Vietnam23m tons 30 百万トン (2.5%) (5.2%) (5.2%) 30m (3.2%) tons (2.5%) カナダ Canada (3.2%) 30 百万トン 30m (3.3%) tons 米 (3.3%) 国 U.S. Australia 豪州 53 万トン百万トン 53m tons 244m tons (5.8%) (26.6%) (5.8%) (26.6%) China 中国 54m 百万トン tons Total 石炭輸出量 coal (5.9%) (5.9%) exports 南アフリカ South 9 億 1,730 万トン Africa 67 百万トン 67m 917.30m tons tons (7.3%) (7.3%) Indonesia インドネシア Colombia コロンビア百万トン百万トン 202m tons 67m tons Russia ロシア (22.0%) (7.3%) 100 百万トン (22.0%) (7.3%) 100m tons (10.9%) (10.9%) Main flows in global trade in coal (2007 estimates) Other Europe 37.7Mt 11.8Mt Poland 18.8Mt 11.8Mt Russia 11. 100.2Mt2M 11.3Mt OECD Europe 62.7Mt t 257.9Mt China 53.7.Mt13.0M Japan 8.2Mt 182.3Mt t 16.4Mt 35.9Mt 30.5Mt 3.3Mt Other Asia 29.7Mt 114.8Mt 270.1Mt 4.7Mt Africa & Mid. East 21.5Mt 136.6Mt 5.7Mt 77.6Mt 9.8Mt 51.6Mt South Africa 66.7Mt 22.6Mt Kazakhstan 22.6Mt 9.4Mt Indonesia 202.2Mt Australia 243.6Mt Other Europe 37.7M Canad t a 30.4 3.2Mt Mt 7.6Mt 8.8Mt N. America OECD Europe 48.7Mt United States 257.9Mt 53.4Mt19.0Mt 25.5Mt Latin America 23.3Mt Note 1: Volume of trade based on estimates for 2007. Note 2: Exporting countries exports do not match total exports by destination due to statistical error. Note 3: Quantities of less than 3 million tons are not shown. Source: IEA, Coal Information 2008 4.9Mt 29.5Mt 5.7Mt Colombia 67.2Mt 6.7Mt

3. Coal Import in Japan The imported coal was used mainly for coking until 1970s. Afterthe oil crisis, Japan started importing coal for power generation. The volume of imported coal for power generation has been increasing in the long term, while coal for coking unchanged. (Million ( 百万トン ton) ) 120 100 80 60 40 20 Steam Coal 国別一般炭輸入量の推移 (Million ton) ( 百万トン ) 120 100 その他 80 イント ネシア ロシア 60 南アフリカ中国 40 カナダ豪州 20 米国 Coking Coal 国別原料炭輸入量の推移 その他 Others イント ネシア Indonesia ロシア Russia 南アフリカ South Africa 中国 China カナダ Canada 豪州 Australia 米国 U.S. 0 '75 '80 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 0 '75 '80 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 Source: Trade Statistics Ministry of Finance, JAPAN. Notice: The import volume of coking coal contains another usage besides the steel manufacturing usage. Annual Report of Energy Production and Demand Statistics Ministry of Economy, Trade and Industry, JAPAN 3

4. Coal consumption in Japan There was a shift of main fuel for electric power generation away from coal and towards oil in 1960-70s. However, after the oil crisis, coal consumption for power generation has been continuously increasing. Source: Annual Report of Energy Production and Demand Statistics until 2000 Yearbook of the Current Survey of Energy Consumption, Annual report on electric power statistics and Handbook of Energy & Economic Statistics in Japan 2008 4

5. Development of Environment Friendly Coal Utilization Technology in Japan Japan, which depends for nearly 100% of its coal supply on imports, has been making a continuous effort to develop and implement high efficiency coal-fired power generation technology. Designed Thermal Efficiency (Gross, HHV) 44% 42% Development of High Efficiency Coal-fired Thermal Power Plants ~ World s Advanced Application of High Efficiency Plants ~ Adoption of Latest Technology from Europe and the United States (reheating cycle) Yokosuka Thermal Power Plant, Tokyo Electric Power Co., Inc. (265MW) 16.6MPa, 566/566?C First use of Supercritical Steam Condition on coal-fired thermal power plant Matsushima Power Station, J-POWER (500MW) 24.1MPa, 538/538?C Higher Efficiency Misumi Power Station, Chugoku Electric Power Co., Inc. (1000MW) 24.5MPa, 600/600?C *IGCC Technology Development 40% 38% 36% Karita Thermal Power Station, Kyushu Electric Power Co., Inc. (75MW) 10MPa, 538/538?C Use of Ultra-Supercritical Steam Condition Hekinan Thermal Power Station, Chubu Electric Power Co., Inc. (700MW) 24.1MPa, 538/593?C 1950 1960 1970 1980 1990 2000 (Complied based on The Thermal and Nuclear Power of October 2006) 5

6. Comparison of clean coal technology between Japan and other countries Japan has been achieving the world s highest thermal efficiency (41.6%) of coalfired power generation. The amounts of SOx and NOx emissions are the world s lowest level. Comparison of the thermal efficiency of coal-fired thermal power plant by country Thermal 熱効率 Efficiency ( 発電端 (Gross, LHV) LHV) (%) 43 41 39 37 Japan Germany US Comparison of the amounts of SOx and NOx emissions in power generation by country g/kwh 5.0 4.0 3.7 3.9 SOx NOx 4.9 4.0 35 33 31 29 27 25 Japan Germany US Australia China India Australia China India 19901991199219931994199519961997 1998 199920002001 2002200320042005(Year) 3.0 2.0 1.0 0.0 U.S. (2002) 2.6 2.0 1.7 1.9 2.0 1.5 1.7 0.7 0.6 0.7 Canada (2003) United Kingdom (2002) France (2002) Germany (2002) Italy (2002) China (2000) 0.2 0.3 Japan (2005) Source: ECOFYS, INTERNATIONAL COMPARISON OF FOSSIL POWER GENERATION EFFICIENCY (2008) 2006 results: 41.6% in Japan, 40.0 % in Germany, 36.7% in the United States, 35.9% in Australia, 32.1% in China, and 31.8% in India Source :OECD Environmental Data Compendium 2004,Energy Balances of OECD Countries 2002-2003 The Federation of Electric Power Companies of Japan (For data of Japan only) 6

7. Coal Use and Achievement of 3Es in Japan (Advantage of Coal) Coal accounts for 20% of Total Primary Energy Supply in Japan, and is expected to maintain a significant role. Fiscal Year Long-term Outlook for Energy Supply and Demand (Advisory Committee on Energy and Natural Resources in May, 2008) 1990 Results 2005 Results Ongoing Effort Lower Case Ongoing Effort Upper Case 2010 2020 Additional Countermeasure Lower Case Additional Countermeasure Upper Case Current State Case Continuing Efforts Case (unit: Kiloliter of Crude Oil Equivalent) Maximum Introductio n Case Current State Case Continuing Efforts Case Maximum Introductio n Case Oil 265 255 232 227 223 218 248 232 209 245 220 183 52% 43% 40% 39% 39% 38% 38% 39% 37% 36% 37% 35% LPG 19 18 18 19 18 19 19 18 18 19 19 18 4% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% Coal 85 123 117 117 114 113 136 121 110 146 123 95 17% 21% 20% 20% 20% 21% 21% 20% 20% 21% 20% 18% Natural Gas 54 88 95 94 89 89 107 87 79 129 94 73 11% 15% 16% 16% 16% 16% 16% 14% 14% 19% 16% 14% Nuclear Power 49 69 83 83 83 83 99 99 99 99 99 99 10% 12% 14% 14% 15% 15% 15% 16% 18% 14% 16% 19% Hydraulic Power 22 17 19 19 19 19 19 19 19 19 19 19 4% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 4% Geothermal Power 0 1 1 1 1 1 1 1 1 1 1 1 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% New Energy, etc. 13 16 20 24 20 24 22 22 26 26 26 38 3% 3% 3% 4% 4% 3% 3% 4% 5% 4% 4% 7% Total 508 587 584 583 568 566 651 601 561 685 601 526 2030

8. Increase of the Coal Use for Economic Growth in the World (Primary Energy) The world s Total Primary Energy Supply (TPES) is expected to increase by approximately 45% 2006-2030, out of which coal consumption is expected to increase by approximately 60%, and its share within TPES will increase from 26% to 29%. In particular, coal consumption is expected to double in China, increase 2.5 times in India and increase by 15% in the United States. The main factor for such increases is growing demand for fuel for coal-fired power generation. Outlook of TPES 世界の一次エネルギー需要見通し Outlook of Global Demand for Primary (Mtoe) Energy Annual average increase rate 年平均増加率 1980 2000 2006 2015 2030 2006-30 2006-30 石炭 Coal 1788 2295 3053 4023 4908 2.0% ((US) 米国 ) 551 580 633 0.6% ((China) 中国 ) 1214 1898 2441 4.0% (India) ( インド ) 223 315 579 6.0% 石油 Petroleum Oil 3107 3649 4029 4525 5109 1.0% ガス Gas 1235 2088 2407 2903 3670 1.8% 原子力 Nuclear Power 186 675 728 817 901 0.9% 水力 Hydraulic Power 148 225 261 321 414 1.9% バイオマス Biomass 748 1045 1186 1375 1662 1.4% 他の再生可能エネルギー Other Renewables 12 55 66 158 350 7.2% 合計 Total 7223 10034 11730 14121 17014 1.6% Approx. 約 45% 45% 増加 increase The world s largest coal consumer is China (2.3 billion tons), followed by the United States (1 billion tons) and India (0.5 billion tons). In particular, China currently accounts for 38% of global coal consumption, and is expected to increase to 50% by 2030. Total amount of CO2 emissions of the three countries are 12.6 billion tons, which accounts for 45% of the global CO2 emission amount of 28 billion tons (2006). Three countries - U.S., China, and India - account for 75% in 2030 Source: IEA, World Energy Outlook 2008 8

9.Increase of Coal consumption for Economic Growth in the World (Power Sector) The share of coal consumption for power generation will increase from 41% to 44% towards 2030. Coal is expected to be a major energy source for power generation as it is today. Outlook of Global Power Generation Source: IEA, World Energy Outlook 2008 9

10. New Development in the Clean Coal Policy of Japan 2009: Major Points of the Report by the Clean Coal Working Group 12.0 10.0 8.0 6.0 4.0 2.0 Aggressively promote technology development for the clean use of coal, which is experiencing global demand growth ( CoolGen Initiative). Contribute to alleviating global warming by applying Japan s advanced coal utilization technology to the world ( Clean Coal for the Earth Initiative). < 我が国の石炭利用と3E 達成 > Increase in Coal Use for Economic Growth in the World Global coal consumption is projected to increase by approximately 60% 2006-2030. Coal consumption in China: 2X; India: 2.5X; the U.S.: a 15% increase. Coal-fired thermal power plants are to increase as a major source of power. Crude oil 0.0 1990.1 1992.1 1994.1 1996 1998.1 2000.1 2002.1 2004.1 2006.1 2008.1 原油 LNG LNG 石炭 Coal Coal prices are stable in the low range. Reserve-production ratio of coal is long and reserves remain abundant. Producing regions are dispersed and a stable supply may be expected. China 中国 インド India 米国 US Japan 日本 EU Germany ドイツ イギリス UK Global 世界計 Japan has the most Environmentally Conscious Coal Utilization Technology Essential to continue the clean utilization of coal, which is economically efficient and stable in supply. Many low-efficiency coal-fired thermal power plants exist in the world. Measures by Japan for further high efficiency utilization of coal are the best in the world. The share of coal in power generation in United States, Germany and other advanced countries is higher than in Japan. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 27% 31% 38% 41% 50% 47% 68% 11% 4% 1.3% 80% 21% 1.5% 6% 2% 23% 12% 35% 20% 1.8% 2% 15% 0.9% 0% 4% 8% 3% 15% 0% 1.1% 20% 19% 7% 2% 0.6% 28% 8% 2% 0.2% 30% 9% 2% 3% 26% 15% 4% 5% 3% 0.3% 19% 2% 3% 1.1% 16% 2% 0.7% 石炭 Coal 石油 Natural 天然ガス Gas Nuclear 原子力 Power Hydraulic 水力 Power 風力 Wind 太陽光 Power Solar その他再生可能エネルギー Light Other Renewables Many countries are planning to develop a number of new coal-fired thermal power plants. China United States 955 plants (by 2020; estimated from the outlook of installed capacity, etc.) 110 plants Germany 26 plants (by 2018) United Kingdom 11 plants (by 2020) Japan 5 plants (by 2020) Japan s coal-fired power generation has achieved the world s highest efficiency. Thermal 熱効率 ( 発電端 Efficiency LHV) (Power Generation, LHV) (%) 43 41 39 37 35 33 31 29 27 25 日本 Japan ドイツ米国 US 豪州 中国 China インド India Germany Australia Japan 日本 Germany ドイツ US 米国 豪州 Au stralia China 中国 India インド 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 ( 年 ) Implementation of the CoolGen Initiative Practical applications of high efficiency coal-fired power generation technology upon replacement in the future, thus realizing low carbon emissions for coal-fired thermal power plants. Furthermore, promote demonstrative research (the CoolGen Initiative) for the realization of Zero-Emissions Coal-fired Thermal Power Plants by combining IGFC with CCS, which aim to achieve ultimate power generation efficiency. Continuous effort for efficiency improvement is necessary to achieve the goal of reducing CO 2 emissions by half by 2050. Enhancing the Multilayered Relations with Coal Producers Enrich government-level policy dialogues with major coal producers. Construct multilayered cooperative relations with major coal producers. Implementation of the Clean Coal for the Earth Initiative Positioning Japan as a place to demonstrate environmentally friendly coal-fired thermal power plants as Japan possesses the world s highest efficiency coal-fired thermal power plants, and contributes to alleviate global warming issues through disseminating this technology not only to Asia but also to the entire world. Simultaneous achievement of the 3 Es related to global coal use can be achieved by transferring the coal-fired thermal power technology to other countries. Information Dissemination/Human Resources Development Regarding Coal Utilization Enhance information dissemination on the economic efficiency of coal, advanced utilization technology, etc. Human resources development of those who shall acquire the skills for coal and other resources development, and innovative coal use technology.

11. Implementation of the CoolGen Initiative ~Realization of Zero-Emissions Coal-fired Thermal Power Plants with IGCC and CCS~ While maintaining the domestic infrastructure of coal-fired power plants, promote the mixed combustion of coal and biomass for the time being, practical application of high-efficiency coal-fired power generation technology upon replacement in the future to realizing low carbon emissions of coal-fired thermal power plants. Continuous effort for efficiency improvement is necessary to achieve the goal of reducing CO 2 emissions by half by 2050. Efficiency Improvement of Coal-fired Thermal Power Plants Integrated Coal Gasification Fuel Cell Combined Cycle (IGFC) Net (HHV) Ultra Supercritical Coal-fired Thermal Power Generation (USC) 600 Level 42% Integrated Coal Gasification 1700 Level GT Combined Cycle (IGCC) 50% 1500 Level GT 46 ~ 48% 750 Level Advanced Ultra Supercritical 48% Coal-fired Thermal 700 Level Power Generation (A-USC) 46% Year Source: Cool Earth 50 Energy Innovative Technology Plan 11

12. Implementation of the Clean Coal for the Earth Initiative ~From Japan to the World: Dissemination of Clean Coal Utilization Technology~ Simultaneous achievement of 3 Es (Economy, Energy Security & Environment) related to global coal use will be achieved through transferring and promoting the application of the world s highest efficient coal-fired power generation technology of Japan to other countries. Highly efficient use of coal contributes to reduce the coal consumption and curbs the decline of world s coal resources. Mt-CO 2 2,500 2,000 1,500 1,000 500 0 CO2 Emissions of Coal-fired Thermal Power Plants (2004) 269 246 Exsisting ( 23) Cutting-edge Application Case 1,949 Exsisting ( 387) 1,562 Cutting-edge Application Case 2,269 Exsisting ( 776) 1,493 Cutting-edge Application Case 387 (mil. tons) + 776 (mil. tons) + 184 (mil. tons) 1.3 bil. tons 572 Exsisting Japan US China India ( 184) 388 Cutting-edge Application Case By applying the best practices of coal-fired power plants in Japan (highest efficiency among commercially operated plants) to that of the U.S., China and India, reductions estimated at 1.3 billon tons of CO 2 can be achieved which is equivalent to Japan s total CO 2 emissions. Note: In the case of applying the best practice (highest efficiency level of commercial power plants) of Japan to the existing plants of each country. Source: The Institute of Energy Economics, Japan (IEE JAPAN), Achievement data: World Energy Outlook 2006 (IEA) 12

13. Implementation of the Clean Coal for the Earth Initiative ~From Japan to the World: Dissemination of Clean Coal Utilization Technology~ China, the U.S., India, and EU countries including Germany and the United Kingdom are gearing toward expanding their domestic coal use for power generation for energy security and economic reasons. Therefore, it seems difficult to suppress their coal consumption. Positioning Japan as a place to demonstrate environmentally friendly coal-fired thermal power as it posses the world s highest efficiency coal-fired thermal power, and contributes to the alleviation of global warming through applying this technology not only to Asia but to the entire world. Diagram on Coal-fired Thermal Power Plant Efficiency in Japan and Technology Transfer Japan China India ~1970s Subcritical Steam Condition 36% - Generally subcritical steam condition common in small-scale plants - Generally subcritical steam condition common in small-scale plants 1980s 1990s 2000s 2010s 2020s Supercritical Steam Condition (SC) 38% Ultra Supercritical Steam Condition (USC) 40~42% Practical Application of IGCC 43% - Average efficiency approximately 30% - Operation of 600MWSC plants started around 2000 - Technology transfer from Japanese manufacturers to local companies - Operation of 1000MWUSC plants started in recent years - Cooperation from the Japanese electric power companies - Strong interest in IGCC - Average efficiency approximately 30% - Promote the Ultra Mega Power Project (Construction plan for large-scale SC Plants) - Japanese manufacturers engaging in joint ventures with local companies - No USC plants, not yet Practical Application of IGFC 55%~ 13

14. International Cooperation for the Promotion of Clean Coal Technology(CCT) Japan has been carrying out - International development & deployment of CCT - Policy dialogues & seminars Main Recent Events Bilateral (1) China Diagnosis of facilities, re-modeling & staff training Cooperation on CCS-EOR (Carbon dioxide Capture and Storage and Enhanced Oil Recovery) Model projects of utilizing coal mine methane gas (2) India Model projects for coal preparation systems (3) Indonesia Coal policy dialogue & seminar (4) EU, Poland Japan-EU CCS Workshop (Planned) Japan-Poland policy dialogue & seminar (Planned) Multilateral (1) APEC (Expert Group on Clean Fossil Energy Meeting) Seminars & information exchange on CCT (2) ERIA (Economic Research Institute for ASEAN and East Asia) Research on CCT (3)APP(Asia-Pacific Partnership on Clean Development & Climate: Power Generation & Transmission Task Force) Peer review activities on the efficiency of aged coalfired power plants (4)MEF( Major Economies Forum on Energy &Climate) Drafting the Technology Action Plan of the High Efficiency and Low Emissions Coal Technology 14

Thank you! 15