Policy Change in Japan and...October 5 , 2015 Toshiro Okada Senior Energy Advisor Agency for Natural Resources and Energy Ministry of Economy, Trade and Industry (METI) Japan The nuclear

October 5 , 2015

Toshiro Okada

Senior Energy AdvisorAgency for Natural Resources and Energy 

Ministry of Economy, Trade and Industry (METI) Japan

Policy Change in Japanand

the Asian Energy Trends

The nuclear power ratio in domestic power generation has decreased after the Great East Japan Earthquake due to the long‐term shutdown of nuclear power plants .

On the other hand, the thermal power ratio has increased to 90%. Currently, LNG thermal power alone accounts for nearly 50% of domestic power generation.

High Dependency On Fossil Fuels For Power GenerationHigh Dependency On Fossil Fuels For Power Generation

Oil

LNG

Nuclear

Coal

1

Renewable etc.

Source: Compiled by METI based on “Outline of Electric Power Development in FY 2010” etc.

Trend in Domestic Power Generation Ratio

‐15

‐10

‐5

0

5

10

15

20

25

30

2007 2008 2009 2010 2011 2012 2013 2014

Trade Balance

Current Account Balance

2010 2014 Difference

Trade Balance 6.6 ‐ 12.8 ‐ 19.5

Net Import Costs

LNG 3.5 7.9 +4.4

Crude Oil 9.4 13.9 +4.5

Petroleum Products 2.5 3.1 +0.7

Coal 2.1 2.1 ‐0.0Trade deficit (2014)12.8 Trillion yen

The overall cost of LNG imports to Japan has increased from 3.5 trillion yen (2010) to around 8 trillion yen (2014). 

Japan recorded a trade deficit for the first time in 31 years in 2011. Trade deficit for 2014 was 12.8 trillion yen, which is not a sustainable level for Japan.

Japan Suffers Huge Trade DeficitJapan Suffers Huge Trade Deficit

2

Changes in trade balance and current account balance （trillion yen）

High energy costs in Japan have negative impact on the competitiveness of energy intensive industries. 

Reducing fuel procurement cost is an urgent issueReducing fuel procurement cost is an urgent issue

3×

4×

5×

200320132035

Reductionfrom 2013

United States

2×

Japan EuropeanUnion

China

ElectricityNatural gas

2003

Japan EuropeanUnion

China

Source:  IEA 3

Ratio of industrial energy prices relative to the United States

Principles of Energy Policy and Viewpoints for ReformationDiversification is the key in the Strategic Energy Plan

■Stable Supply (Energy Security)

■Cost Reduction (Economic Efficiency)

■Environment

■Safety

+

Global Viewpoint‐Developing energy policies withinternational movement appropriately‐Internationalizing energy industries byfacilitating business overseas.Economic Growth‐Contribution to reinforce Japan’slocational competitiveness.‐Activating Japan’s energy market throughenergy system reform.

1) Confirmation of basic viewpoint of energy policies (3E + S)

2) Building multilayered and diversified flexible energy demand‐supply structure Establishing resilient, realistic and multi‐layered energy supply structure, where each

energy source can exert its advantage and complement others’ drawbacks. Creating a flexible and efficient supply/demand structure where various players can

participate and various alternatives are prepared by system reforms. Improving self‐sufficiency ratio by developing and introducing domestic resources to

minimize influence from overseas’ situation. 4

（Total Electricity generation ）

（Total Electricity generation ）

1,065TWhEnergy Conservation

＋

Renewable Energy

= about 40%

Energy conservation196 TWh（▲17%）

Electricity Demand981TWh

1,278TWh

2030 20302013(actual results)

GDP growth1.7%/year

Electricity Demand967TWh

Oil 2%

Coal 22%

LNG 22%

Nuclear 18～17%

Renewable Energy19～20%

Energy Conservation17%

（loss form Electricity transmission etc,）

Hydro 8.8～9.2%

Solar PV 7.0%

Wind 1.7%

Bioenergy3.7～4.6%

Geothermal1.0～1.1%

Total base load power ratio

：56%

Renewable Energy22～24%

Nuclear 22～20%

LNG 27%

Coal 26%

Oil 3%

Basic Direction1)  To improve the self‐sufficiency ratio to around 25% surpassing the level before the Earthquake.2)  To reduce the electricity costs lower than today.3)  To set a high‐level GHG reduction goal compared with other developed countries to lead the world.

New Energy Mix

5

Electricity generation mixElectricity Demand

Comparison with 1990

Comparison with 2005

Comparison with 2013

Japan ▲18.0%(2030)

▲25.4%(2030)

▲26.0%(2030)

USA ▲14~16%(2025)

▲26~28%(2025)

▲18~21%(2025)

EU ▲40%(2030)

▲35%(2030)

▲24%(2030)

Comparison of INDCs by major countriesComparison of INDCs by major countries

*INDCs: Intended Nationally Determined Contributions

6

Nuclear Electric Power Plants in Japan

PWRBWR

Tomari Ohma

Onagawa

Fukushima Daini

Hamaoka

Tokai・Tokai Daini

Fukushima Daiichi

Kashiwazaki Kariwa

Sendai Ikata

Genkai

Shimane

ShikaTsuruga

Takahama

Ohi

Mihama

Higashidori(Tokyo)

Higashidori(Tohoku)

ABWR

２９ ２４ ２２ ２０ ２５ １８ １８

２２ ９２８

３８

３６ ３５ ２３ ２２

４０ ３９ ３０ ３０

２６

３４ ２１ １８

２６ ２４ ５

３７ ３３ ２０

２１ １０

３３ ３１ ２７３０

３６

３１ ２０ １３

９

２７

３１ ２９

Reactor-type

Under NRA Review for basic design and concept (Total 25 Units）

Age(Applied Date for NRA Review)

Not Start Operation

→ Permitted in Feb. 2015

→ Permitted in Sep. 2014

→ (Unit 1) Started-up in Aug. 2015

Permanent shutdown decided in April 2015 (Total 5 Units）

→ Permitted in Jul. 2015

7

25 units out of 15 plants  are  under review for restart by the Nuclear Regulation Authority (NRA) in accordance with its new safety regulations. Sendai power plant Unit 1 started up in Aug. 2015.

LNG Imports from the US

○ Sabine Pass（Cheniere Energy）・ Capacity : 18 MTA ・ Start Operation： around 2016・ Export license for Non-FTA: Approved （2011.5.20)・ Sales：The media reports Kansai Electric Power 0.4 MTA×2 years, Chubu Electric Power 0.35 MTA×2 years

○ Cove Point（Dominion）・ Capacity :5.75 MTA・ Start Operation： around 2017・ Export license for Non-FTA:

Approved (2013.9.11)・ Sales：Sumitomo 2.3 MTA

○ Cameron（Sempra Energy）・ Capacity :12 MTA・ Start Operation： around 2018・ Export license for Non-FTA:

Approved (2014.2.11)・ Sales：Mitsubishi Corporation 4 MTA,

Mitsui Co. Ltd 4 MTA

○ Freeport（Freeport）・ Capacity : 8.8 MTA・ Start Operation： around 2018・ Export license for Non-FTA:

Approved （2013.5.17)・ Sales：Osaka Gas 2.2 MTA,

Chubu Electric Power 2.2 MTA

Japan related Major LNG projects in North America

United States

○ Freeport Expansion（Freeport）・ Capacity : 4.4 MTA・ Start Operation： around 2019・ Export license for Non-FTA:

Approved （2013.11.15)・ Sales：Toshiba 2.2 MTA

New LNG export projects under consideration

Canada

8

Japan’s claim from 5 LNG projects. 5 projects involving Japanese firms received export approval and FERC approval.   Exports will start in 2016.

The first comprehensive electricity and gas market reform in 60 years.

Law enacted in June 2014, to be implemented from 2016Electricity

Gas Law enacted in June 2015, to be implemented from 2017

Electricity

Energy Market Reform

9

1) Securing a stable supply of electricity and gas 2) Suppressing electricity and gas rates to the maximum extent possible3) Expanding choices for consumers and business opportunities

3 Objectives

Gas Law enacted in June 2015, to be implemented from 2022

Full liberalization of the retail energy market

Legal unbundling of transmission/ distribution sector,and abolishing retail price regulations

Law enacted in June 2015, to be implemented from 2020

<Deployment of renewable energy (as of the end of March 2015) >Accumulated capacity before FIT started

Capacity of facilities that started operation since FIT start (July 2012 )

Solar power(residential) Approx. 4,700MW 3,097MW

Solar power (non‐residential) Approx. 900MW 15,011MW

Wind Approx. 2,600MW 331MW

Mid‐ to small‐sized hydraulic(Less than 30MW) Approx. 9,600MW 89MW

Biomass Approx. 2,300MW 224MW

Geothermal Approx. 500MW 5MW

Total Approx. 20,600MW 18,757MW

Status after the start of the Feed-in Tariff

Since FIT start (July 2012), 14,931MW of renewable energy capacity has been deployed until the end of March 2015.

88% increase in the total RE capacity.

10

Promoting highly efficient low emission coal power plants Coal‐fired thermal power generation in Japan achieved the highest level of efficiency in 

the world through utilization of efficient technology  (Super Critical / Ultra Super Critical) and operation / management know‐how.  Its efficiency is maintained for long periods after operation. 

If the most advanced technology in operation in Japan is applied to coal‐fired thermal power generation in the US, China and India,  it is estimated that CO2 emission could be reduced by about 1.5 billion tons. 

Source:  IEA World Energy Outlook 2011, Ecofys International Comparison of Fossil Power Efficiency and CO2 Intensity 2012

Change in efficiency across the ages

Gross thermal efficiency (%, HHV)

Efficiency degradation

Coal-fired thermal power generation in Takasago, Japan

Maintenance of efficiency by appropriate operation

Designed thermal efficiency

Coal-fired thermal power generation in developing countries

Years in operation

11Japan US China India

CO2 emission reduction by application of Japan’s best practices

＋▲380 (Mt)＋▲765 (Mt)＋▲311 (Mt)

1.46billion tons

Banning Export Credits Only in OECD Would Make Things Worse Non‐OECD countries would sell less‐

efficient CPPs worldwide. China is already the biggest source of 

export credits. China exports less‐efficient CPPs.

Comparison of public financing for foreign coal power plants between 2007 and 2013 among countries

3Es of Coal Energy Security: global availability, 

geopolitical consideration Environment: Clean Coal Technology  

(NOx, SOx ‐ equivalent to LNG PPs) Economy: affordable prices

World electricity generation by source(New Policies Scenario)

Source：IEA World Energy Outlook 2014

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

China Japan SouthKorea

Germany France US

(USD

 billion)

Promoting highly efficient low emission coal power plants

12Source: Ueno, Yanagi and Nakano (2014): http://www.pp.u‐tokyo.ac.jp/research/dp/index.htm

Source： Estimated by IMF, Deutsche Bank

Change in International Crude Oil Prices

Government balanced budget

Oil‐producing nations

Government balanced budget (dollars per barrel)

Kuwait 47.1Iraq 70.9UAE 73.1

Saudi Arabia 103.0Iran 92.5Libya 215Russia 105.2

Venezuela 117.5

13

Fall in crude oil prices With the sharp fall in crude oil prices from last year, price is now less than 

50‐dollar‐per‐barrel level.

40

50

60

70

80

90

100

110

120

13/8 13/10 13/12 14/2 14/4 14/6 14/8 14/10 14/12 15/2 15/4 15/6 15/8

日経Dubai WTI Brent($/bbl)

Nikkei

The Engine of Energy Demand Growth Moves to South Asia

4%

65%

10%

8%

8%5%

OECD

Non‐OECDAsia

MiddleEast

Africa

Latin America

Eurasia

Share of global growth2012‐2035

480

Brazil 1 540

India

1 000 SoutheastAsia

4 060

China

1 030

Africa

2 240UnitedStates 440

Japan1 710

Europe1 370

Eurasia

1 050MiddleEast

Primary energy demand, 2035 (Mtoe)

China is the main driver of increasing energy demand in the current decade, but India takes over in the 2020s as the principal source of growth

IEA analyzed Southeast Asia on World Energy Outlook 2013.

14

Energy demand in ASEAN region will be increasing in mid‐long term and fossil fuels take a major role in energy mix.

Electricity demand in South‐East Asia will increase to about 140% by 2035 and cumulative investment of 990 Billion dollars will be required.(IEA)

Energy Situation in ASEAN

ASEAN average annual investment in power generation capacity

(source: IEA Southeast Asia Energy Outlook (2013)) 15

The Engine of Energy Demand Growth Moves to South Asia

IEA launched  “The Asian Quest for LNG in a Globalising Market” on 2014.

16