Japan NRG Weekly 20201221

December 21, 2020

JAPAN NRG WEEKLY

DECEMBER 21, 2020

JAPAN NRG WEEKLY

December 21, 2020

JAPAN NRG WEEKLY

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NEWS: OIL & GAS

Toyota head says gasoline ban will destroy auto business

(Mainichi Shimbun, Dec. 17)

• Toyota CEO Toyoda Akio has expressed fears that the government’s plan to phase out gasoline-powered vehicles in the 2030s will destroy the very business model on which the auto industry is based.
• Toyoda said in an online press conference that Japan’s reliance on coal-fired power stations meant that unlike countries, such as France, transitioning to an electric fleet would not reduce Japan’s CO2 emissions.
• Toyoda pointedly suggested that the politicians calling for the abolition of petrol vehicles do not understand the issues.
• SIDE DEVELOPMENT:
  Auto industry in chaos after Tokyo Governor brings forward gasoline ban
  (Kuruma News, Dec. 12)
  • Tokyo Governor Koike Yuriko has unveiled plans to ban gasoline vehicles powered by internal combustion engines by 2030, five years ahead of the central government’s 2035 target. The governor says she is currently finalizing the details of the ban.
  • With zero-emission vehicles currently accounting for only 1.6% of new car sales, the announcement has sent shockwaves through the auto industry.
  • Koike has also said that she will ban conventional gasoline-powered motorcycles completely by 2035.
  • It is unclear whether diesel vehicles will be covered by the ban.

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Petroleum Association chair sees crude at above $50; demand halving by 2040s

(Chemical Daily, Dec. 18)

• Petroleum Association chair Sugimori Tsutomu said in a scheduled press conference on Dec. 17 that he believed the crude price would remain at slightly above $50, and attributed the recent appreciation in the price of crude to the development of the coronavirus vaccine and new economic policies in the US.
• In relation to news reports about a phase-out of gasoline vehicles in the 2030s, Sugimori said he was not surprised because he realized there was a need to transition to an electric fleet in order to become carbon neutral. He predicted that demand for gasoline would halve by the 2040s.

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Saibu Gas exports LNG to China

(Nikkan Kogyo Shimbun, Dec. 16)

• Fukuoka-based Saibu Gas has begun exporting small-volume shipments of LNG to China in conjunction with partner Novatek.
• Buyers and hardware for the inaugural shipment were organized by Novatek, while Saibu handled refueling operations.
• While Novatek has limited experience with LNG transport in Asia, Saibu recently exported a shipment of LNG to the Shanghai factory of Taiwanese electronics manufacturer Hon Hai.

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TOCOM introduces 15-month petroleum futures for simpler hedging

(Nikkei, Dec. 16)

• The Tokyo Commodity Exchange has allowed the trading of 15-month Dubai crude futures in an effort to make it easier for electricity investors to hedge the effects of fuel costs. (Contracts to purchase wholesale electricity up to 15 months in advance are already traded on the exchange.)
• Previously, six months was the maximum length of Dubai crude futures contracts traded.

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Idemitsu makes bid to buy all of Toa Oil Co. unit for ¥15.2 billion ($147 million)

(Nikkan Kogyo Shimbun, Dec. 16)

• Idemitsu Kosan on Dec. 15 announced a takeover bid (TOB) of its subsidiary Toa Oil Co., Ltd., and will buy all shares it doesn’t already own. The TOB period is from Dec. 16 to Feb. 2, 2021, and the purchase price is ¥2,450 per share.
• The total purchase amount is ¥15.2 billion ($147 million).
• Toa Oil is a unit that formerly belonged to Showa Shell Sekiyu, which merged with Idemitsu.

NEWS: POWER & NUCLEAR

Source: Company websites, JANSI and JAIF, as of Dec. 18, 2020

Japan power price jumped to five times 2020 average due to cold snap and nuclear issues

(Japan NRG, Dec. 20)

• JEPX 24-hour spot price rose to ¥24.66 / kWh on Dec. 18. The average for this year to date is ¥5.75 / kWh.
• Factors include a cold snap last week, forecasts for a further drop in temperatures over the next month, delays on a few LNG cargos destined for Japan, and several issues that inhibit the restart of nuclear power plants in the Kansai region.
• See the Data section for details of price averages and YoY comparisons.
• SIDE DEVELOPMENT:
  Consumer price index sees largest fall in 10 years due to plummet in energy prices
  (Jiji.com, Dec. 18)
  • In November the consumer price index recorded its largest fall in over 10 years. The reasons were significant falls in electricity (7.3%) and gas tariffs (7.1%) compared with the previous month.

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Mitsubishi Corp. under pressure from MoE, investors over Vietnam coal-power project

(Nikkei, Dec. 14)

• A consortium of European investors has demanded Mitsubishi Corp. pulls out of a project to build “Vung Ang 2”—a coal-fired power station in Vietnam.
• Part of a bilateral agreement between Japan and Vietnam, the project involves a consortium of 12 enterprises and financial institutions, eight of which are Japanese.
• The Vietnamese government has expressed a strong desire for the project to go ahead, making cancellation unlikely, although there is disunity on the Japanese side, with Environment Minister Koizumi Shinjiro coming out in opposition to the project.
• Nordic Asset Management is among the investors to have protested against the project. While Nordic only holds a small stake in Mitsubishi, it carries much sway in the market, and Mitsubishi shares fell 2% in the wake of the protest.

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Kansai Electric delays restart of nuclear reactor by six weeks

(Jiji Press, Dec. 16)

• CONTEXT: Unit 3 at Kansai Electric’s Takahama Nuclear Power Plant was due to restart around Dec. 22.
• Restart of Unit 3 has been delayed for additional maintenance work. The restart may not occur until at least early February 2021, according to reports on Dec. 15.
• Depending on the severity of the pipe problem, maintenance work may take more than six weeks.
• CONTEXT: Kansai Electric recently had a similar issue with heat transfer pipes at Unit 4. Four pipes connected to the steam generator were found to have cracks. This delayed the restart, initially planned for the end of 2020, until January 2021.

 

TAKEAWAY: Kansai’s continuing problems with nuclear restarts are compounded by issues with LNG supplies. The utility had to cut output at thermal plants last week after two scheduled LNG cargoes were delayed due to poor weather. The utility’s predicament, coupled with a drop in temperatures, helped to send Japan power prices to the highest level since July 2018. Other regional utilities sent electricity to Kansai area to avert brownouts.

The extended closure of Takahama’s Unit 3 now leaves Kansai Electric without any nuclear power generation until Jan. 17, 2021, when it plans to bring back online the Ohi Unit 4. The restart was temporarily thrown into disarray after an Osaka court rescinded the validity of the nuclear regulator’s authority in judging it to be safe. However, since the government has filed an appeal of the ruling last week, the utility is seemingly allowed to operate the reactor until the final ruling is made.

With public confidence in Kansai Electric low after last year’s scandal and the general public remaining largely anti-nuclear, the utility could not have picked a worse time to announce technical problems at several of its reactors. Suddenly, its nuclear restart program for the next six months looks very vulnerable.

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Mutsu mayor refuses to meet power company reps over nuclear waste site usage rules

(Nikkei, Dec. 16)

• On Dec. 15 Mutsu Mayor Miyashita Soichiro refused to meet with a delegation from the Federation of Electric Power Companies of Japan to discuss the nuclear waste storage facility being built in the municipality.
• The municipality has misgivings about a proposal that would allow Federation members to share the storage facility.
• CONTEXT: This situation is all about Kansai Electric. See last week’s Japan NRG for details. In short, Kansai Electric first needs to move its nuclear waste out of Fukui prefecture to go ahead with reactor restarts and possibly new nuclear construction. So far, the new facility in Mutsu is its only hope, but the local govt. does not want to take on the extra problems from Kansai Electric.

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TEPCO aims to reduce net emissions to zero by 2050

(Nikkei, Dec. 15)

• TEPCO Holdings’ new recovery proposal aims to reduce the utility’s net emissions to zero by 2050 by restarting nuclear reactors and boosting renewables.
• TEPCO would not say when it aims to restart the giant Kashiwazaki-Kariwa plant, which has a major impact on the company’s revenue.
• Each year, TEPCO plans to put ¥500 billion towards decommissioning the Fukushima power plant. The Co. is required to foot a total bill of ¥16 trillion for the project. The Co’s target of an annual consolidated net profit of ¥45 billion remains unchanged.

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FEPC plans 12 “Pluthermal” reactors by 2030

(Denki Shimbun, Dec. 18)

• Representatives of the Federation of Electric Power Companies of Japan met with METI minister Kajiyama on Dec. 17 to report on measures to step up the use of reprocessed nuclear fuel.
• Sticking to its future target of 16 to 18 “pluthermal” reactors fueled by plutonium-enriched uranium, the Federation aims to have at least 12 of the reactors operational by 2030/2031.

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Nuclear regulator slams “unacceptable” Ohi reactor court decision

(Sanyo Shimbun, Dec. 18)

• The Nuclear Regulation Authority (NRA) said on Dec. 17 that the govt. appealed an Osaka District Court decision to annul a permit granted by the Authority for the restarting of the number three and four reactors at the Ooi nuclear power plant.
• The NRA said the court’s judgement that there were failings in its vetting process was hard to accept; says its assessment was made after considering a wide range of geological and seismological data.
• The govt’s arguments against the decision will be clear when the grounds for appeal are submitted, said the NRA.

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TEPCO vows to take to social media to dispel tritium fears

(Nikkei, Dec. 20)

• Okura Makoto, who is in charge of TEPCO’s Fukushima rebuild operation, said on Dec. 15 that the Co. would use every means at its disposal, including social media, to dispel fears about the discharge into the sea of radioactive tritium stored at the reactor site.
• “Even if people don’t trust us, we have to be more active than anyone else in getting this message out there”, said Okura.
• Okura also pledged to work to remedy damage to the reputations of local farmers and tourism operators, and to pay compensation where necessary.

 

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Hitachi to sell its stock in Enerchange energy fees comparison site

(Nikkei; Dec. 14, 2020)

• Due to the listing of energy fees comparison site ENECHANGE on the TSE Mothers market on Dec. 23, Hitachi will sell its stock in ENECHANGE.
• SIDE DEVELOPMENT:
  Hitachi ABB tests high voltage system for world’s most powerful network
  (NNA; Dec. 14, 2020)
  • Hitachi ABB Power Grid has started testing an HVDC Light (high-voltage, direct current) system.
  • The testing is part of the NordLink project between Germany and Norway, which will be the biggest, most powerful network in terms of voltage and power capacity.
  • Hitachi ABB Power Grid is in charge of designing, engineering, and supplying two electrical converting stations in southern Norway and northern Germany.

NEWS: RENEWABLES & OTHERS

Environment minister lobbies for renewables to be 40% of energy mix by 2030

(Nikkei, Dec. 16)

• Japan’s environment minister Koizumi proposed increasing renewable power sources to more than 40% of the nation’s energy mix by 2030, which is twice the current level.
• CONTEXT: Renewables now make up about 20% of the energy mix.
• Minister Koizumi is supported by the National Governors Association, which also wants a goal of more than 40% by 2030.
• An official at the powerful METI ministry said such a target is “not impossible, but difficult.”
• SIDE DEVELOPMENT:
  Japan’s government to boost its own use of renewables to 30% next year
  (Asia Nikkei, Dec. 10)
  • Ministries and state-owned facilities plan to use more electricity from renewable energy sources. Next year’s target is to source 30% of power this way.

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Key policy committee gathers forecasts for renewable power development

(Nikkei Shimbun, Dec. 15)

• Subcommittee of the Agency for Natural Resources and Energy (a part of METI) discussed issues and measures for the spread of renewable energy with reports from public and private research institutes. The main idea raised was that Japan’s grid needs to be improved to handle a higher ratio of generation from renewable (and intermittent) sources.
• Four organizations delivered their reports to the Agency: the National Institute for Environmental Studies, the Renewable Energy Institute (REI), the Institute of Energy Economics, Japan, and the Central Research Institute of Electric Power Industry.
• REI set the most ambitious goals, saying Japan could use 100% renewables by 2050 as energy demand will drop by as much as 30% by that time. REI also lobbied for wider land use to install renewable energy, arguing that if Japan’s vacant and abandoned farmland were fitted with solar panels, an additional 100 GW could be generated.
• The National Institute for Environmental Studies emphasized the need to maximize use of electrification and renewable energy in the automobile and industrial sectors. It also noted the need for a mechanism to balance the uneven distribution of resources across Japan.
• The Institute of Energy Economics believes that widespread uptake of renewable energy could reduce power tariffs during daylight hours to the point that investors would be unable to make a return on investment. Japan should be guided by meteorological data for further green energy build-out, it said.
• The Central Research Institute of Electric Power Industry said that a zero emissions goal is not guaranteed under a 100% renewable energy ratio. The institute argued for the combination of nuclear, hydrogen, carbon capture and storage, and other approaches in order also to minimize costs. The instate believes that depending on the region, the ratio of renewables may be 38% to 50% by 2050.

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Government and private sector aim to install 45GW of offshore wind capacity by 2040

(Nikkei, Dec. 16)

• The Ministry of Economy, Trade and Industry (METI) and the Ministry of Land, Infrastructure, Transport and Tourism announced a “wind farm industry vision” calling for the installation of 45 GW of offshore wind capacity by 2040 in collaboration with the private sector.
• The plan calls for 35GW, or 80% of the total, to be constructed in Hokkaido, Tohoku and Kyushu. New solutions will be implemented to efficiently transport the electricity generated to metropolitan areas.

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Toshiba eyes acquisitions in renewables space as part of $9.7 billion M&A spree

(Asia Nikkei, Dec. 17)

• Toshiba said that within the next five years it will spend ¥1 trillion ($9.67 billion) on business expansion, including entry into wind power.
• The engineering firm seeks acquisition targets and partnerships in the wind power sector. Toshiba believes it can catch up in the sector by leveraging past experience from coal and nuclear power generation.
• One option is buying a turbine-parts maker. The profit margins for power plant and infrastructure services are around 9%, which Toshiba finds attractive.
• Rather than one big M&A deal, Toshiba is looking for several smaller deals in the range of several hundred million dollars in order to diversify risks. The company will fund its M&A spree binge through loans and by selling part of its 40% stake in chipmaker Kioxia.
• SIDE DEVELOPMENT:
  Toshiba and Fuji Electric to invest $2bn in EV power chips
  (Asia Nikkei, Dec. 15)
  • Toshiba and Fuji Electric will invest a combined ¥200 billion ($1.9 billion) to ramp up output of power-saving chips for electric vehicles.
  • Toshiba will spend about ¥80 billion through the fiscal year ending March 2024 to boost the capacity for producing wafers. Toshiba is strong in low-voltage products and already supplies power converters for electric grids.
  • Separately, Fuji Electric will invest ¥120 billion through fiscal 2023, both at home and abroad.

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Restrictions on solar farms triple in three years

(NHK, Dec. 12)

• A survey by the Tokyo-based Institute for Sustainable Energy Policies found that the number of local bodies passing bylaws to restrict solar generation has tripled over the last three years to 94, as residents are more concerned about visual pollution from solar panels.
• Some local bodies were prompted to introduce restrictions on panel installations after incidents in which panels suddenly fell to the ground, posing a safety hazard.
• Of the 94 local bodies, 13 hail from Nagano prefecture, where visual pollution and the risk of landslides has galvanized residents against solar farms.
• SIDE DEVELOPMENT:
• Government encourages lower-cost solar installations
• (Nikkei, Dec. 14)
  • The Ministry of the Environment has introduced a new subsidy for rooftop solar panels and other solar installations.
  • For an installation with a capacity of between 50 and 500kW, the total cost of the system needs to be no more than ¥210,000 per kilowatt in order to be eligible for the subsidy.
  • The subsidy covers a third of installation costs.
  • The Ministry has also introduced a subsidy for storage batteries.

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Japan to encourage utilities to switch to hydrogen, sets 2030 target

(Yomiuri Shimbun, Dec. 18)

• The govt. is due to publish a new hydrogen strategy within the year as part of the 2050 net-zero emissions roadmap. This includes strong encouragement towards power utilities to start switching to hydrogen as a fuel.
• Govt. sees hydrogen consumption at 3 million metric tons in 2030, 50% higher than now, and 20 million tons in 2050.
• CONTEXT: The current govt. hydrogen strategy was published in 2017. See the Aug. 24 edition of Japan NRG Weekly for details.

TAKEAWAY: The numbers published by Yomiuri differ from more bullish figures printed in the Nikkei a week earlier. This could be because the Yomiuri numbers refer specifically to consumption targets for electricity utilities. Or, it may be due to the govt’s realization of the difficulty in ramping up hydrogen production quickly. We expect the numbers to continue fluctuating depending on the news report. The key thing is the direction of govt. strategy, which is very bullish towards hydrogen use.

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Uneconomical Fukushima wind farm to be torn down

(Livedoor News, Dec. 12)

• A ¥60 billion wind farm off the coast of Fukushima is to be decommissioned, it was revealed on Dec. 12.
• Constructed as a symbol of Fukushima’s recovery from the 2011 nuclear disaster, the wind farm was intended to be sold to a private operator, but is now seen as uneconomical.
• The METI will spend ¥5 billion on dismantling the three turbines.

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Osaka Gas, Mitsui E&S and Itochu power up 50 MW Ichihara biomass plant

(Chemical Daily, Dec. 18)

• Mitsui E&S, Itochu Corporation and Osaka Gas said on Dec. 17 that their new power station in Ichihara, Chiba had begun commercial operation.
• The 50 MW power station is fueled by palm kernel husks and generates enough to power 120,000 households.
• In an arrangement that draws on the strengths of the respective parties, Mitsui E&S is responsible for the construction, operation, and maintenance of the power plant, while Itochu supplies the biomass, and Osaka Gas provides advice on power plant operation.

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Osaka Gas, DBJ to invest in solar energy

(Denki Shimbun, Dec. 18)

• Osaka Gas and the Development Bank of Japan said on Dec. 17 that they had invested in D&D Solar, a joint venture for the acquisition of solar farms.
• The first facility acquired by D&D Solar was the 12 MW Kuwabarajo solar farm (Kagoshima), formerly owned by BayWa r.e. Solar Projects.

ANALYSIS

ANALYSIS

The 44 Innovation Themes in Solar Panel R&D Backed by NEDO

THEME	COMPANY / ORGANIZATION
A high-quality joining interface structure via dry process of CIS (Copper Indium Selenide) solar cell	Ritsumeikan University
A new buffer-less CIS solar cell by hetero-interface control	Tokyo Institute of Technology
CIS solar cell high efficiency element technology that can be used on various substrates	AIST: National Institute of Advanced Industrial Science and Technology
Lightweight CIS solar cell that can be applied to various substratesDevelopment of manufacturing element technology	Idemitsu Kosan
A high degree of freedom of design for film-type perovskite solar cell module	SHARP
Modularization element technology for a high degree of freedom of design film-type perovskite solar cell module	Enecoat Technologies
Generic technology for a high degree of freedom of design for film-type perovskite solar cell	Kyoto University
Ultra-lightweight module technology	TOSHIBA
High-performance technology and performance evaluation technology by interface control	AIST
Ultra-lightweight thin film (perovskite) solar cellsRoll-to-roll manufacturing technology	Sekisui Chemical
High-efficiency material technology and film-forming technology to create a new market for perovskite solar cells	Tokyo University
Quantum dot solar cells that make effective use of infrared light	Tokyo University
Inverse design and development of transparent quantum dot solar cells using AI prediction optimization	The University of Electro-Communications
Intermediate band solar cells using wet process; Life prolongation of wall-mounted solar cell modules by using multifunctional and high-quality thin films	KaoJAIST: Japan Advanced Institute of Science and Technology
Structural optimization of wall-mounted tandem solar cell modules and development of outdoor performance evaluation technology	Aoyama Gakuin University
Technology for maximizing lifetime power generation of wall-mounted photovoltaicpower generation systems	Niigata University
Perovskite BIPV (Building-integrated photovoltaics) module	Panasonic
BIPV material technology for high performance	Waseda University
High-performance technology for wall-mounted photovoltaic modules	AIST
Improvement of efficiency of wall-mounted photovoltaic power generation systems and development of life prolongation technology	Kaneka
Development of common fundamental technology for expanding the market for wall-mounted photovoltaic power generation systems and formulation of guidelines	PVTEC: Photovoltaic Power Generation Technology Research Association
Demonstration of BIPV systema for new and existing construction that considers design / can be retrofitted	LIXIL
Demonstration of a photovoltaic power generation systems that implement balancing to achieve ZEB (Zero Energy Building)	Kaneka
Ultra-high efficiency multistage joining module	Toyota Technical Skill Academy & Toyota Technological Institute
Ultra-high efficiency low-cost cell module technology	SHARP
Ultra-high efficiency bottom cell (CIS)	Idemitsu Kosan
Low-cost film deposition equipment	Taiyo Nippon Sanso
Low-cost epi / joining technology	AIST
Evaluation and structural design technology for moving body modules	Miyazaki University
High-efficiency multi-junction thin film cell; Development of process technology for realizing practical size perovskite silicon tandem solar cells	Tokyo UniversityAIST
High-efficiency tandem solar cell module	Kaneka
Formulation of technical standards for high-safety PV modules and high-safety PV systems	PVTEC
Formulation of guidelines for ensuring safety of photovoltaic power generation facilities with special installation formsThree items: sloping land installation type, farming type, and water installation type	AIST, Structural Performance Evaluation Institute, Yachiyo Engineering, JPEA: Japan Photovoltaic Energy Association, Deloitte Tohmatsu Consulting
Safety / reliability evaluation of photovoltaic power generation, technical information infrastructure maintenance of recovery technology	AIST, Structural Performance Evaluation Institute, SOMPO Risk Management, JPEA
Technological development to promote practical application of evaluation and recovery for long-term and stable PV power generation	KEPCO, XSOL, CO2O, Nippon Chiko, Asia Air Survey
Demonstration of low environmental impact material recycling technology for crystalline silicon and CIS solar cell modules	Solar Frontier
Recycling technology using low-temperature thermal decomposition process of solar cell modules	Tokuyama
Research on the feasibility for creating adjusted power via photovoltaic power generation	AIST, Central Research Institute of Electric Power Industry
Basic design of supply-demand integrated photovoltaic power generation systems utilizing self-consignment between multiple points	TEPCO Energy Partner, NEC
Advancement of new solar cell evaluation element technology and development of high-precision evaluation technology	AIST
Short-term prediction of solar radiation	Japan Weather Association
Power generation prediction evaluation technology	Tokyo University of Science

Source: Shin Energy Shimpo

GLOBAL VIEW

GLOBAL VIEW: SPECIAL FEATURE

BY JOHN VAROLI

Joe Biden’s Energy, Transportation, and Climate Team Likely to Play Significant Role in Influencing Japanese Energy Policies in the 2020s

The climate crisis is at the top of Joe Biden’s agenda, and to tackle the problem he’s assembled a team of professionals who bring decades of climate and environmental experience to the White House. In Japan Prime Minister Suga also made an historic pledge to achieve carbon neutrality by 2050 shortly after he took office in September.

Below is a brief overview of the key players in the Biden Administration with their respective counterparts in the Suga administration.

First, it’s important to note that the extent of White House influence on the U.S. energy policy is still unclear. Unless the Democrats win in the Jan. 5, 2021 Georgia race, Biden’s administration will have to tackle a Republican-led Senate. Also, as some of Biden’s cabinet nominations are from the U.S. House of Representatives, including the secretary of the interior, which could deplete the Democratic majority in the lower house for several months, further constraining Biden’s legislative agenda.

However, the U.S. federal system allows states, and even cities, to pursue their own energy and climate policies. While Democratic-controlled New York and California have long been leaders in green energy policies, Republican-controlled and sunny Texas also has a strong track record as a proponent of green energy, such as solar power.

Biden is also expected to make use of Executive Actions to push his energy and climate policy agendas. This will allow him to bypass the U.S. Congress but these could be subject to litigation in courts where GOP nominees predominate. Nevertheless, Biden will begin his term with the most climate-focused group of appointments in U.S. history.

DATA

SOURCES: the Ministry of Economy, Trade, and Industry (METI), Ministry of Finance, and the Petroleum Association of Japan

SOURCES: the Ministry of Economy, Trade, and Industry (METI),
Ministry of Finance

SOURCES: the Ministry of Economy, Trade, and Industry (METI), and the Japan Electric Power Exchange

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