Japan s Renewable Energy Policy Takuya YAMAZAKI Director Renewable Energy Division Agency for Natural Resources and Energy (ANRE) Ministry of Economy, Trade and Industry (METI)
< 1 > Japan s Electricity Market after the Great East Japan Earthquake in 2011
Big Policy Changes after 3.11 : FIT to Renewables FIT was introduced in 2012 and power generated by renewables has rapidly increased. Power generation ratio (%) FIT ( ) Solar Nonresidential Wind > 20kW Geo > 15MW Biomass wood 2012 2016 40 21 22 26 24 100% 80% 60% 40% 20% 10% 10% 15% 2% 2% 18% 29% 9% 7% 42% 42% 29% 25% 28% 32% Renewables Nuclear Oil LNG Coal Source: Agency for Natural Resources and Energy 0% 2010 2012 2016 2
(Regionally-Segmented Market before 3.11) Japan is divided into 10 regions, each of which is operated and controlled by a regional electric power company with little crossregional demand-supply coordination. Frequency in West: 60Hz Frequency in East: 50Hz *The figures below indicates the maximum electricity demand in 2015. *DC: direct current, FC: frequency conversion 5.57GW Kyushu 15 GW Chugoku 11 GW 16.66GW 2.4GW Shikoku 5 GW Kansai 26 GW 5.57GW DC Tie line 1.4GW BTB 5.57GW Hokuriku 5 GW Chubu 25 GW 0.3GW DC Tie line FC 1.2GW Hokkaido 5 GW Tohoku 14 GW Tokyo 50 GW 0.6GW 12.62GW 3
Big Policy Changes after 3.11: Market Reform Established OCCTO* in 2015 to promote cross-regional electricity transmission Hokkaido Power Generation Big EPCOs will be mandated to unbundle T&D sector in 2020 Power Generation Chugoku Kansai Hokuriku Chubu Tohoku Tokyo Transmission & Distribution Transmission & Distribution Okinawa Kyushu Shikoku Retail Retail Retail market was fully deregulated in 2016 *Organization for Cross-regional Coordination of Transmission Operators 4
< 2 > Renewables in Japan
Trend of Renewables since 2003 RES, particularly solar, have rapidly increased since FIT introduction in 2012. Capacity of renewables (GW) 6000 60 5000 50 4000 40 Solar PV Wind power Middle and small hydropower Geothermal Biomass Average annual growth rate 26% 3000 30 20 2000 Average annual growth rate 5% Average annual growth rate 9% 39GW 3.4GW 10 1000 9.9GW 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0.5GW 3.2GW Source: Agency for Natural Resources and Energy 6
New Political Targets on Renewables Japan will aim at increasing power generated by renewables up to 22-24% by 2030 and will make renewables primary generation source. Power generation ratio (%) 100% 10% 80% 26% 15% 1.7% 22-24% Hydro: 8.8-9.2% Solar: 7.0% Wind: 1.7% Biomass: 3.7-4.6% Geothermal: 1-1.1% 60% 20-22% Renewables incl. hydro Nuclear 40% 64% 83.8% 56% Thermal 20% 0% 2010 2016 2030 7
< 3 > Challenges
Challenge #1: High Cost It costs a lot to produce power by renewables in Japan. Cost of solar ( /kwh, 2016) 20 15 10 5 0 10 2 2 6 Euorpe 20 3 5 12 Japan Source: Agency for Natural Resources and Energy s analysis based on data by Bloomberg New Energy Finance Operation & maintenance Few experts and little use of big data lead to high operation and maintenance cost Construction cost Little flat land and insufficient construction industry system make construction cost high. Equipment cost High FIT allows multiple intermediaries to join the market, creating multilayered distribution system. 9
Challenge #2: Grid Constraints While power generated by renewables greatly vary due to geographical and climate reasons, regional monopoly, which prevents national-level demand-supply adjustment, creates overcapacity in some regions. Hokkaido Chugoku Kansai Hokuriku Tohoku 6.45GW 81% of demand Chubu Tokyo Kyushu Shikoku Okinawa Power generated by solar reaches 80% in Kyushu area. 10
Challenge #3: Unbalanced Mix Unbalanced introduction of renewables has proceeded after FIT started in 2012. RES integration after FIT started (%) 2.1% 3% 0.04% Solar Wind Biomass Geothermal 94.1% Source: Agency for Natural Resources and Energy 11
Responses to Challenges High cost Introduce auction system to FIT. Solar : introduced ( 21/kWh 17/kWh) Biomass : planned Grid constraints Promote further cross-regional adjustment through OCCTO Introducing implicit auction for interconnections Started the Connect & Manage scheme Unbalanced mix Set three-year tariffs for geothermal and biomass Promote offshore windmill through providing rights to use sea area to lowest-bidding power generators Submitted the bill to the Diet to be discussed 12
Current Status of Bioenergy Introduce more biomass without subsidies ( combined heat and power (CHP), larger scale development) Ensure stable procurement and sustainability ( stringent verification) Installed Capacity of Biomass (GW) 7 6 5 4 3 2 1 0 2.3 Before FIT (2012) 3.5 1.89 6.0-7.3 1.24 0.37 2.7-4.0 0.48 0.64 0.42 0.24 0.05 0.16 After FIT 2030 (2017) Municipal waste Construction waste General wood Thinned wood Methane gas 13
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