Japan NRG Weekly 20201116

November 16, 2020

JAPAN NRG WEEKLY

NOVEMBER 16, 2020

 

JAPAN NRG WEEKLY

November 16, 2020

 

JAPAN NRG WEEKLY

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NEWS: OIL & GAS

JERA considers LNG contracts tied to Japanese electricity prices instead of oil-link

(Bloomberg, Nov. 9)

• CONTEXT: Several Japanese companies including JERA said at the LNG Producer-Consumer conference 2020 in mid-October that they would like LNG contracts to start reflecting Japanese market fundamentals. See the Oct. 19 edition of Japan NRG for details.
• A number of Japanese utilities have had discussions with LNG sellers about using the country’s spot market for electricity as a benchmark for future contracts, traders, including JERA, told Bloomberg
• Discussions remain at an early stage. The new LNG contracts would be only partly linked to electricity prices on the Japan Electricity Power Exchange (JEPX).
• Japanese utilities are still unsure about adopting new benchmarks such as JKM because of questions over transparency and hedging liquidity.
• CONTEXT: Volumes on JEPX surged this year to over 40% of the total Japanese electricity demand. This is the highest since the market was liberalized in 2016.
• JERA’s head of JERA Global Markets trading unit, Kasai Kazunori, said his company was approached by LNG sellers about creating contracts with a link to JEPX prices. JERA is yet to fully consider this development.
• It’s possible some Japanese utilities that do not have alternative hedging tools could see JEPX-linked contract pricing as useful, Kasai said.
• CONTEXT: JERA buys about 35 million tons of LNG a year. Of that, about seven million tons come through spot and short-term deals that are managed via the JERA Global Markets unit. The parent company is also Japan’s biggest power generation utility, burning mostly LNG or coal for fuel.
• SIDE DEVELOPMENTS:
  Japan looks at replacing oil with hydrogen in carbon-neutral push

  (Bloomberg, Nov. 9)

  • Hydrogen may represent 40% of Japan’s energy by 2050, according to Kawasaki Heavy, an engineering firm developing the world’s first hydrogen tanker
  • Hydrogen offers the greatest potential to decarbonize emissions-heavy sectors like steel, cement and heavy-duty transport: BNEF
  • As much as $425 billion in investment might be needed for Japan to reach its hydrogen goal, Shin Furuno, a senior manager with the Asia Investor Group on Climate Change, tells Bloomberg.

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TEPCO faces difficult decisions over gas unit as breakup looms

(Diamond, Nov. 11)

• Faced with dwindling subscriber numbers, TEPCO Holdings made the bold decision to enter the domestic gas market in 2017 via an alliance with Nichigas.
• While TEPCO once boasted over two million gas subscribers, this number is now declining, causing concern at TEPCO Energy Partners.
• Under pressure from its lenders, Tokyo Energy Partners has begun terminating agreements with some of its sales branches, as well as raising tariffs, in an effort to become profitable.
• Some senior staff at Energy Partners have been reallocated to positions at Tokyo Power Grid, prompting speculation over the future of Tokyo Energy Partners. Some say the company could be split off and sold to ENEOS.

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Gasoline stations hit by languishing sales

(Nikkei, Nov. 12)

• The COVID-19 pandemic has meant people are driving less, and demand for gasoline is down.
• While gasoline prices continue to trend downward, service stations’ profit margins are healthy and growing.
• Although the price of Dubai crude has fallen by 30% since January, this only translated into a 10% drop in petrol prices as domestic petrochemical companies raised margins.
• Lower prices have also meant reduced competition in the industry, as own brand retailers find it difficult to undercut major oil companies on price.
• Notably, DIY retailer Joyful Honda recently sold its petrol station business to Idemitsu.
• CONTEXT: See the Oct. 5 edition of Japan NRG for a detailed explanation of the lucrative margins enjoyed by Japanese oil refineries. While the industry is in a sweet spot right now, it knows this is temporary and a move towards new business development is necessary.

 

 

NEWS: POWER & NUCLEAR

Source: Company websites, JANSI and JAIF, as of Nov. 15, 2020

 

Towns hosting TEPCO’s nuclear plant held elections that could impact reactor restart

(Japan NRG, Nov. 16)

• The town of Kashiwazaki and the village of Kariwa, the two municipalities that co-host the remaining operable nuclear power plant of Tokyo Electric Power Co. (TEPCO), hosted local government elections on Nov. 15.
• Kashiwazaki featured a runoff between incumbent Sakurai Masahiro (58), who ran as an independent, and Kondo Masamichi (73), a former member of the House of Councilors.
• Sakurai’s stance on nuclear was that it is necessary for Japan’s decarbonization plans. He announced “conditional support” for the resumption of operations at the Kashiwazaki-Kariwa NPP.
• Kondo opposed all restarts, claiming nuclear technology to be unsafe. Kondo was backed by several national opposition parties.
• Sakurai won 32,146 votes to his opponent’s 11,433. This was an even stronger lead than Sakurai had in the previous election in 2016, suggesting the local vote is now backing the idea of restarting the nuclear plant.
• In Kariwa, the race was between incumbent Shinada Hiro (63), running for his sixth term, and Goto Hiromasa (59), an administrative scrivener at a nearby town and a political neophyte. Shinada was cautiously positive on nuclear energy on the morning of the election, saying Japan cannot disengage from nuclear power and the village had to follow the nation’s energy policy. Goto said he believes the local nuclear reactors can restart at any time as there is no risk involved with them.
• Shinada won 2,200 votes to his opponent’s 301. Both candidates were pro-nuclear. The re-election of the incumbents suggests the cautiously positive move toward restarts will continue.
• SIDE DEVELOPMENT:
  Many challenges ahead for TEPCO as it pledges to half CO2 emissions

  (Nikkei, Nov. 6)

  • In an unusual move for a Japanese power generator, TEPCO Holdings has pledged to reduce its CO2 emissions to half of 2013 levels by 2030. This amounts to a reduction of nearly 17 million metric tons of CO2 per annum.
  • To achieve this ambitious goal, TEPCO will need to both boost renewables and restart its nuclear reactors. However, approval from local residents will be essential to restart nuclear power units, and it is too early to say how this will pan out.
  • Increasing competition internationally for generation sites suitable for renewable energy could also threaten TEPCO’s ability to develop more renewable capacity.

TAKEAWAY: A sign-off from the local governments is all that stands in the way of the restart at the Kashiwazaki-Kariwa NPP, the only operable nuclear facility owned by TEPCO. The company secured the permit for a restart of Units 6 and 7 of the facility back in Dec. 2017. However, that local sign-off has taken so long to procure that earlier this month the company filed another application to the regulator, the NRA, to confirm that it can go ahead with the restart. TEPCO’s record as operator of the disaster-struck Fukushima Dai-Ichi NPP continues to weigh heavy on the brand and rumors persist that its remaining nuclear assets will pass to another entity, or even a state entity.

These local elections are unlikely to lead to an immediate restart of Kashiwazaki-Kariwa NPP, however, as TEPCO still needs to get the sign off from the Niigata governor. Still, with the local vote on its side, the company will feel that it is in a strong position to persuade the governor to cast his weight behind them. The utility clearly feels that there is positive momentum for its first restart of a nuclear facility since the 2011 Fukushima accident. Fuel has already been loaded into parts of the NPP, an unusually forward step.

A shrewd move from a public relations viewpoint would be for TEPCO to delay the restarts until after the 10-year Fukushima anniversary, in March 2021, and even after the 2020 Tokyo Olympic Games, which are due to take place in July 2021. However, TEPCO has rarely been an astute practitioner of public relations and the company is probably rushing to restart the NPP as soon as it can so that it can then move onto the Higashidori nuclear construction project. The next six months will be critical for TEPCO and its survival in the current form.

• SIDE DEVELOPMENTS:Decision on TEPCO’s Higashidori nuclear plant due by March 2021
  

  (Too Nippo, Nov. 14)

  
  
• TEPCO Holdings CEO, Kobayakawa Tomoaki, said on Nov. 13 that a decision would be made by the end of March 2021 on a proposal that would see Toshiba, Hitachi, Chubu Electric Power and TEPCO jointly operate the Higashi-dori nuclear power plant, which is still under construction.
• Construction at the plant was halted after the 2011 Fukushima disaster.
• SIDE DEVELOPMENT:
• TEPCO CEO: we will compensate residents over radioactive water
• (NHK, Nov. 13)
  • TEPCO Holdings CEO, Kobayakawa Tomoaki, said his company will compensate local residents for damage to the area’s reputation resulting from the release of tritium and other radioactive isotopes into the sea.
  • CONTEXT: the news refers to the water built up in tanks at the Fukushima Dai-Ichi nuclear station site.
• SIDE DEVELOPMENT:
• Green light for TEPCO used nuclear fuel storage facility
• (Yomiuri Shimbun, Nov. 11)
  • Japan’s nuclear regulator said on Nov. 11 that it approved the safety plans for an interim storage facility for nuclear waste in the town of Mutsu, Aomori prefecture. This completes the facility’s screening process.
  • The site will receive its first nuclear waste as early as 2021. Waste will be stored at the facility until it is able to be reprocessed.
  • The temporary storage facility is deemed necessary due to the fact that the Rokkasho reprocessing plant is currently not operational and few local bodies are prepared to approve the construction of nuclear waste dumps.
  • Only fuel from TEPCO and Japan Atomic Power (J-Atomic) will be stored at the facility.
  • CONTEXT: This will be Japan’s first facility to store spent fuel outside of a nuclear station and Rokkasho.

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METI Minister Kajiyama Vows Support for Ammonia-Coal Co-Firing

(Japan NRG via ADIPEC Virtual 2020 Conference, Nov. 9)

• METI minister gave a keynote speech at one of the strategic panels during the ADIPEC Virtual 2020 sessions. Below is an extract of some of his comments.
• “As the demand for energy continues to grow across the world, especially in Asia, Japan will support the clean use of fossil fuels in developing countries.”
• Japan will go carbon-neutral for the whole of its LNG value chain, Kajiyama said, repeating his announcement from last month.
• “Japan will also lead the world in carbon recycling. The reuse of CO2 from fossil fuels is the same as that of the Circular Carbon Economy (CCE) agreed upon at the G20 Energy Ministers’ Meeting held in September.” As carbon emissions gain pace across the world, “Japan will continue to pursue innovation in carbon recycling for the realization of a virtuous cycle between the economy and the environment.”
• Japan will lead the way in creating a hydrogen society, “including the establishment of international supply chains that include oil-producing countries.”
• “Japan is newly focusing on fuel ammonia. Through discussions between the public and private sector, we are aiming at a reduction in CO2 emissions by co-firing ammonia at coal-fired power plants. With these efforts we will promote responsible energy policies.”
• Due to COVID, there has been a drop in investment into upstream energy projects. “It is necessary for us to avoid a downturn in upstream investment, as this would lead to an energy supply crunch in the medium to long term. Here, I would like to emphasize the need for greater cooperation and coordination between oil-producing and consuming countries.”

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Kyushu Electric brings forward Sendai nuclear reactor restart by a week

(Nikkei Shimbun, Nov 14)

• The utility was due to bring back online Unit 1 of the Sendai NPP on Nov. 26, but this will now take place a week earlier, on Nov. 19, after the regulatory inspection finished earlier than expected.
• The restart due date for Unit 2 has not yet changed from Dec. 26, but this date will depend on the inspection timing of the facility.
• CONTEXT: Japan is currently operating just one nuclear reactor, which is also owned by Kyushu Electric. The restart of Sendai NPP was expected as it already had local approvals. The Sendai units were stopped only because work to upgrade the anti-terrorism measures at the site overran deadlines due to COVID outbreak stoppages.

TAKEAWAY: Should all go as planned, Kyushu Electric will have all four of its nuclear reactors back online by the end of this year. Even if one of the unit restarts is delayed, this would already triple the output of nuclear generation in the country. Another reactor due to be back online in the next couple of months is the Takahama-3, operated by Kansai Electric. The latter is facing a number of trust issues with the local population. For an in-depth look at Kansai Electric, see our profile of the company in this week’s Analysis section.

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J-Power sees loophole to secure coal financing despite pressure over ESG

(Sentaku, Nov. 2020 edition)

• J-Power has been asked by its overseas investors to present a plan for reducing CO2 emission. This means the company must reduce its core thermal power generation business. The Co. is under pressure to go as far as divesting its thermal power assets.
• Internally, the Co. executives want to stay quiet and say nothing, fearing that any roadmap on CO2 reductions would “strangle our own neck.”
• CONTEXT: J-Power, also known as Electric Power Development Co., is one of Japan’s biggest utilities. And yet, it does not have a single proposal for reducing CO2.
• Japanese power utilities have generally relied on improving the efficiency of its generation assets to improve their emissions numbers, as opposed to abandoning stations that burn fossil fuels.
• The industry body, the Federation of Electric Power Companies (FEPC), has set a goal for its members to work towards “0.37kg of carbon emissions per kWh by 2030.” The Ministry of Economy Trade and Industry (METI) supports this goal, and the govt. has presented these numbers in the past to show that Japan is working on improving ecological norms.
• J-Power too has showed such emission reduction goals to overseas investors, yet the latter are not satisfied. Foreign investors hold about 30% of J-Power shares, which means the Co. cannot ignore their demands.
• To make a major difference to its CO2 emissions, J-Power must install new technology, such as carbon-capture. The Co. estimates that this will drive up costs so much that its assets will no longer be profitable.
• J-Power has pleaded to METI that it needs to continue to use coal because Japan has limited access to resources. The ministry’s response was cold. An industry insider said that METI is no longer supportive of J-Power as before because the Co. fought against the entry of new players into the electricity market after it was liberalized.
• J-Power’s last hope is that investors won’t press it too hard on ESG, since that would directly affect their dividends. Investment funds, however, are also under pressure to pick stocks based on ESG lines.
• The Co. is relying on the big Japanese banks to save it. Although the big three lenders all announced pledges to stop lending to coal-fired generation projects, this only prohibits financing for specific projects. General purpose loans and other funding avenues are not affected.
• J-Power does not see its funding drying up “for quite a while”, according to a Co. executive.
• Most of all, the Co. is upset that it is seen as a bad actor when in fact pursuing coal-fired generation was a strategic decision made by the government.

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Miyagi Governor gives green light to restarting Onagawa reactor

(Jiji, Nov. 10)

• Sources revealed on Nov. 10 that Miyagi Governor Murai Koji has decided to give his approval to the restarting of the No. 2 reactor at the Onagawa nuclear power station, and will make an official announcement on Nov. 11, having discussed the matter with the mayors of the municipalities affected.
• This will be the first time a region affected by the 2011 tsunami and nuclear disaster has approved restarting a nuclear reactor.
• CONTEXT: Onagawa NPP has two operable reactors (Units 2 and 3). Tohoku Electric has so far only applied for the restart of Unit 2.
• SIDE DEVELOPMENT:
• Tohoku Electric to restart Onagawa reactor despite locals’ concerns
• (Tokyo Shimbun, Nov. 12)
  • The mayor of Misato, a town 30 km from the Onagawa NPP, is opposed to the restart as it will mean the need to formulate an evacuation plan for Misato residents in case of disaster.
  • Local fishermen are also opposed to the restarting of the reactor. The only way to evacuate the isolated Oshiga peninsula in the event of a nuclear accident is by boat, and as of yet, no evacuation drills have been carried out.
  • However, while saying they don’t want the area to be the “next Fukushima”, many local residents were resigned to the decision to restart the reactor, saying the area needs the money.
• SIDE DEVELOPMENT:
• Fukushima residents protest restarting of Onagawa reactor
• (Kahoku Shimpo, Nov. 13)
  • Plaintiffs in a lawsuit against Tohoku Electric and the Japanese government have issued a statement condemning the decision. In a statement, the residents cite the difficulty of evacuating the area in the event of an accident and call Miyagi Governor Murai irresponsible.
  • The plaintiffs are residents of Fukushima and surrounding prefectures. They are using legal process to prevent the restart of the Onagawa NPP.

TAKEAWAY: Onagawa NPP is an unusual case in Japan. The station has now won the local political approval for a restart, but it has yet to secure the final green light from the industry regulator, the NRA. As detailed in a recent Japan NRG report on the state of nuclear energy in the country, Tohoku Electric has clashed with regulators on the readings of seismic motion underneath the facility. The geological assessment of the Onagawa site is complete, but the seismic motion evaluation is not. In an October announcement, the NRA said it wants to review another geological fault recently detected to the east of the facility. That will be a “major discussion point”, according to the NRA. In that sense, Tohoku Electric is lucky in not planning the actual restart of Onagawa Unit 2 until 2022. The utility is conducting work to upgrade the facility. If the restart schedule is to be maintained, the company has a little over a year to convince the NRA that the NPP is safe. That will not be an easy feat.

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Carbon-neutral policy is a catalyst for consolidation in the power industry

(Diamond, Nov. 12)

• JERA plans to phase out its inefficient coal-fired power stations by 2030, and blend ammonia with the coal burned by its more efficient stations to reduce their carbon footprint. By 2050, JERA plans to replace all of its coal-fired stations with ammonia-fired ones.
• In a recent radio appearance, JERA executive director Okuta Hisahide said his company is looking for partners, both from the electricity industry and from other industries, who could work with JERA to achieve a sustainable society. While this sounds commendable, in reality, JERA is using the move away from carbon as a way to absorb its competitors.
• Industry insiders say JERA is already approaching regional generators. The Chugoku Electric Power Company is most worried about the prospect of a takeover, say insiders.
• While Chugoku Electric denies cooperating with JERA, it is in a difficult financial position, with some 60% of its coal-fired power stations classified as inefficient. The utility is also faced with a bill of ¥600 billion for safety improvements at its nuclear power stations.
• Chugoku’s debt levels are relatively high. It has a capital adequacy ratio of less than 18%.

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Why is Toshiba withdrawing from coal and betting on renewables?

(Nikkei, Nov. 11)

• Toshiba said it will stop taking orders for new coal-fired power stations. It will honor the work commitments on the 10 or so existing coal-fired projects.
• Instead, Toshiba said it will shift strategy to renewable energy. Investments in green energy will rise to ¥160 billion within two-three years, which is five times the current level. Sales related to green energy equipment are expected to grow ¥650 billion within a decade, from around ¥190 billion today. Most of that will be in solar and wind power equipment.
• Co. noted that as the movement to reduce greenhouse gas emissions gathers pace, world demand for coal-fired power stations has slumped. The recent U.S. election also points to more investments in renewables, according to Toshiba executives.
• Toshiba will still provide maintenance services to existing coal-fired stations.
• CONTEXT: Siemens and GE are among Toshiba’s direct overseas competitors that have withdrawn from coal-fired power generation.
• SIDE DEVELOPMENT:Mitsui E&S resumes construction of a coal-fired power plant in Indonesia

  (Asia Nikkei, Nov. 10)

  • Work was halted earlier this year due to the COVID pandemic. The Japanese engineering company was supposed to finish building two 1,000 MW facilities by November.
  • Following setbacks caused by a defective pipe discovered in 2018, Mitsui E&S has already lost ¥150 billion ($1.45 billion) on the project since signing the deal in 2012.

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Dominance of the big 10 regional power utilities already a thing of the past

(Diamond, Nov. 11)

• Ten major electricity generators have dominated the Japanese market since World War II, but that is about to change, as Prime Minister Suga sets out a roadmap that aims to make Japan carbon-neutral by 2050.
• Noted academic Tachikawa Takeo says that based on the experience of deregulation in Germany, Japan might soon only have six electricity utilities. Ten is unsustainable, he says.
• One scenario involves Tokyo Power Grid merging with Tohoku Electric Power Network.
• There is also a possibility that major nuclear power plants such as Kashiwazaki-Karima will be nationalized, says Tachikawa.

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Carbon-free policy not necessarily good news for nuclear reactor manufacturers

(Diamond Online, Nov. 13)

• Jobseekers are expressing increased interest in employment seminars hosted by nuclear reactor manufacturers Hitachi, Mitsubishi and Toshiba, with applications to attend these seminars doubling in the last year.
• However, while the Japanese government’s decision to become carbon neutral by 2050 may seem like good news for reactor manufacturers, the government is reluctant to replace aging reactors, instead pursuing an approach of progressively restarting existing reactors while attempting to gain public support.
• Manufacturers’ efforts to sell reactors overseas have also failed completely, with projects in Lithuania, Taiwan, the U.S., Turkey and the U.K. all either cancelled or frozen.

NEWS: RENEWABLES & OTHERS

Key Japan decarbonization body identifies which energy sources should be supported

(Japan NRG, Nov 15)

• Green Innovation Strategy Conference, a private-private sector body set up this year to develop and support carbon-neutral technologies, published its plans for future action.
• CONTEXT: The Conference was established in July. It comprises academics, experts from national research institutes, as well as officials from the public and private sector. The government officials from the Cabinet, METI, and other ministries are classified as “observers” in the Conference.
• At its third meeting, the Conference identified hydrogen, storage batteries, carbon recycling and offshore wind power as sectors the country should promote.
• The body plans to develop a roadmap for action by year’s end. The roadmap will suggest what should be done in R&D to achieve cost reduction, mass production and large pilot projects, as well as changes in regulations and standardization frameworks. Its recommendations would also touch on project financing, international cooperation and market forecasts.
• The Conference’s next meeting is in mid-December.
• SIDE DEVELOPMENT:Japanese government holds meeting to discuss zero emissions

  (Denki Shimbun; Nov. 11, 2020)

  • The Japanese government held a meeting on Nov. 9 to discuss going carbon neutral by 2050.
  • The government may consider providing financial support for green investments and development cost for technologies such as small modular reactors (SMR) and carbon-capture utilization and storage (CCUS).

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Japan to promote carbon-reduction through tax-breaks and establish fund for green tech

(Nikkei, Nov. 12)

• Govt. wants to incentivize the private sector to invest in products and equipment the reduce carbon emissions to help the country meet its 2050 carbon-neutral goal. Tax breaks could be available from next year.
• This could spur investment in the manufacture of components for wind turbines. Firms that enter the field would enjoy a partial corporate tax exemption. The size of the tax break should be decided by the end of the year.
• The incentives would stretch to next-generation lithium-ion batteries for EVs and hybrids, as well as for power storage. Semiconductor makers might also qualify for their work in regulating voltage.
• In addition, govt. and the ruling LDP party consider setting up a fund to support R&D in green technology.
• CONTEXT: What qualifies as “green technology” will likely be in line with the recommendations of key public-private bodies such as the Green Innovation Strategy Conference. See the news item above.

TAKEAWAY: We have discussed the details of this issue in several earlier editions of Japan NRG. In short, the govt. would feel much more comfortable supporting solar and wind power if the country had manufacturers that supplied the relevant equipment. Most solar panels and related tech are imported from China or South Korea. In wind, Japan boasts just one manufacturer (MHI), and even that company outsources much of its turbine work to its Danish business partner (Vestas). In previous years, other Japanese manufacturers exited the wind turbines market, citing low profitability. For now, it is not clear which major manufacturers would be tempted by the tax breaks. Toshiba, for example, has declared its intention to enter the grid and Virtual Power Plant space. Toyota is heavily invested in batteries and storage, as are Panasonic and Murata. More will need to come forward to create a vibrant renewables supply chain in the domestic market.

• SIDE DEVELOPMENT:
• Top big business group proposes new growth strategy with focus on decarbonization
• (Denki Shimbun, Nov. 10)
• Keidanren (the Japan Business Federation) has announced its new growth strategy for 2030. It calls for five actions, among which is greater use of decarbonization technology.
• This initiative supports the construction of new types of steel furnace by 2030 and calls on the government to provide tax incentives for firms to go green or to develop new green technologies.
• Chairman Nakanishi Hiroaki stressed that while Japanese corporate investment in energy has been stagnant of late, the new govt. carbon-neutrality target requires companies to pour capital into technical innovation.
• CONTEXT: The proposal from an industry group, which includes the major steel manufacturers, supports a switch from blast furnaces to electric-arc furnaces in the steelmaking process. The latter has lower emissions.
• SIDE DEVELOPMENT:
• Biden will be ‘180-degree turnaround’ from Trump on climate, says Environment Minister Koizumi
• (Asia Nikkei, Nov. 11)

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Erex and ENEOS may build world’s biggest biomass-fired plant in Niigata

(Nikkei, Nov. 10)

• Major biomass generator Erex said Nov. 10 that it was discussing partnering with ENEOS to build one of the world’s largest biomass-fired power plants, in Niigata.
• The 300 MW plant would be built on the site of a golf course owned by ENEOS, and require an investment of around ¥100 billion.
• Erex would not take advantage of the feed-in tariff system when selling electricity generated by the plant, and instead aims to achieve profitability by developing cheaper feedstock.
• CONTEXT: Japan’s government set a target of sourcing 4.6% of total electricity from biomass by 2030.

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Bids in sixth solar feed-in-tariff tender drop to an average of ¥11.5/kWh

(Smart Japan, Nov. 11)

• The Green Investment Promotion Organization released the outcome of its sixth tender for FIT (feed-in tariff) solar electricity.
• The weighted average of the 254 bids submitted was ¥11.48 per kilowatt hour. The lowest bid entered was ¥10.0 per kilowatt hour.
• The upper limit imposed on bids, not disclosed to bidders until after the tender process has concluded, was set at ¥12 per kilowatt hour. This is down ¥1 per kilowatt hour from the last tender.

TAKEAWAY: Earlier this year, METI made a presentation to renewable energy investors hinting that it saw FIT pricing heading down to ¥12 / kWh. That drew gasps from the audience, yet it has obviously been absorbed by the industry as the price levels of the latest bids show.

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Hokkaido government inviting submissions for 1 GW offshore wind farm at Ishikari

(City of Sapporo, Nov. 13)

• Public submissions are now being sought in response to the environmental impact assessment for the wind farm planned by Japan Renewable Energy.
• A wind farm with an output of 1 GW is planned.

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Toshiba to build carbon-capture unit for Sekisui Chemical waste-to-ethanol plant

(New Energy Business News, Nov. 13)

• Toshiba Energy Systems will install a carbon-capture and utilization unit at an experimental plant being built by Sekisui Chemical in Iwate that will turn household waste into ethanol.
• The facility is scheduled to go online in June.
• While the carbon-capture unit will only capture 10 kg of CO2 per day, the technology is easily scalable.
• The technology makes use of a property of aqueous solutions to absorb carbon dioxide at low temperatures and release it at high temperatures, and can be applied to any process that emits carbon dioxide.

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Japanese EV autos chase Chinese, South Korea rivals with new storage batteries

(Asia Nikkei, Nov. 7)

• Japanese firms betting on solid-state battery technology to catch up with market leaders in China such as CATL and BYD.
• Solid-state batteries use solid electrodes and solid electrolytes to produce electric current. This helps create a long-life, heat-resistant battery that are also quick to charge.
• A solid-state battery offers autos a 1,000 km run on a single charge, which means that Japan retains its technological lead in this battery category. Toyota and Panasonic are working on an in-vehicle solid-state battery, set to launch before 2025.

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Shinsei Bank, Daiwa Energy to provide ¥40 billion of mezzanine finance for renewables

(Nikkei BP, Nov. 2)

• Beginning on Oct. 28, Shinsei Bank and Daiwa Energy Infrastructure will offer mezzanine financing for renewable energy projects via Shinsei Trust & Banking.
• By offering generators more financing options than simply senior bank loans and equity, Shinsei and Daiwa aim to encourage environmentally friendly generation projects.
• Mezzanine financing of large energy projects allows the generator to make use of leveraging so that it needs to put up less of the required equity.

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Asahi joins RE100, pledges to transition to 100% renewable energy by 2050

(New Energy Business News, Nov. 9)

• Asahi Holdings has joined RE100, an international initiative for the use of 100% renewably-generated electricity, and aims to source 100% of its electricity from renewable sources by 2050.
• Asahi is the first Japanese beverage manufacturer to join RE100.
• Asahi’s pledge was supported by the Japan Climate Leaders’ Partnership, an industry body that aims to create a sustainable, carbon-free world.

ANALYSIS

ANALYSIS

GLOBAL VIEW

Below are some of last week’s most important international developments monitored by the Japan NRG team because of their potential to impact energy supply and demand, as well as prices. We see the following as relevant to Japanese and international energy investors.

STOCK MARKET PERFORMANCE

	As of close on Nov 13, 2020	Ticker	Market Cap	1W (%)	MTD (%)	YTD (%)
			billions of yen
Energy
	INPEX CORP	1605 JP	786.73	7.60	-51.80	0.00
	JAPAN PETROLEUM EXPL.	1662 JP	100.14	3.55	-38.99	2.22
	ENEOS HOLDINGS INC	5020 JP	1178.41	0.36	-22.38	-1.41
	IDEMITSU KOSAN CO LTD	5019 JP	652.92	1.86	-23.36	-0.63
	COSMO ENERGY HOLD.	5021 JP	142.33	5.13	-29.70	7.22
Industrials
	MITSUBISHI CORP	8058 JP	3700.19	3.17	-9.38	1.36
	MITSUI & CO LTD	8031 JP	3058.16	3.37	-4.14	-0.81
	JGC HOLDINGS CORP	1963 JP	241.33	4.26	-46.22	1.31
	CHIYODA CORP	6366 JP	63.26	4.74	-14.13	0.41
Utilities
	TOKYO ELECTRIC POWER	9501 JP	461.21	2.14	-38.54	-2.38
	CHUBU ELECTRIC POWER	9502 JP	962.28	0.99	-14.73	2.59
	KANSAI ELECTRIC POWER	9503 JP	933.66	1.62	-17.80	-0.34
	KYUSHU ELECTRIC POWER	9508 JP	433.40	1.44	0.14	-1.72
	J-POWER	9513 JP	274.21	2.25	-41.21	0.20
	TOKYO GAS CO	9531 JP	1144.36	4.55	-0.13	10.25
	OSAKA GAS CO	9532 JP	907.53	6.82	6.67	10.06
	TOHO GAS CO	9533 JP	661.10	5.39	41.82	19.24
	SAIBU GAS CO	9536 JP	113.98	9.97	23.66	20.10
	SHIZUOKA GAS CO	9543 JP	75.74	-1.78	5.44	8.87

DATA

Domestic Fuel Sales

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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