Aged oil tanker prices surge in part due to Russian demand
Itochu signs LNG supply deal with NextDecade in the U.S.
ANALYSIS
A NEW BEGINNING: OVERVIEW OF THE LONG-TERM DECARBONIZED CAPACITY AUCTION
The government plans to introduce a new auction system that will provide price guarantees for non-fossil power generation. It should reduce the risk of investing in building new sources of electricity that don’t emit CO2. The system will be an extension to the existing power capacity market, but with different rules. It promises one of the biggest changes for the industry. Successful bidders will win 20-year contracts that offer fixed revenue for operable capacity. In return, the govt hopes to improve the security of Japan’s electricity supply, which has deteriorated in recent years.
THE EU’S CROSS-BORDER CARBON TAX: BOON OR BUST FOR JAPAN?
Geopolitics have brought Japan and the EU closer together. One area, however, where the two were expected to clash was over carbon pricing. Japan has long feared a carbon tax at the EU border, claiming it could put its exports at a disadvantage. That EU carbon tax system takes effect later this year, and paradoxically it might be a boon rather than a bust for Japan. While lagging in development of its domestic carbon markets, Japan has several ways that it can use the new EU mechanism to its advantage.
GLOBAL VIEW
A wrap of top energy news from around the world.
EVENTS SCHEDULE
A selection of events to keep an eye on in 2023.
JAPAN NRG WEEKLY
PUBLISHER K. K. Yuri Group
Editorial Team Yuriy Humber (Editor-in-Chief) John Varoli (Senior Editor, Americas) Mayumi Watanabe (Japan) Yoshihisa Ohno (Japan) Wilfried Goossens (Events, global)
New Energy and Industrial Technology Development Organization
kWh
Kilowatt hours (electricity generation volume)
TEPCO
Tokyo Electric Power Company
FIT
Feed-in Tariff
KEPCO
Kansai Electric Power Company
FIP
Feed-in Premium
EPCO
Electric Power Company
SAF
Sustainable Aviation Fuel
JCC
Japan Crude Cocktail
NPP
Nuclear power plant
JKM
Japan Korea Market, the Platt’s LNG benchmark
JOGMEC
Japan Organization for Metals and Energy Security
CCUS
Carbon Capture, Utilization and Storage
OCCTO
Organization for Cross-regional Coordination of Transmission Operators
NRA
Nuclear Regulation Authority
GX
Green Transformation
NEWS:ENERGY TRANSITION & POLICY
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NEWS:POWER MARKETS
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XX
NEWS:OIL, GAS & MINING
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ANALYSIS
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ANALYSIS
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GLOBAL VIEW
BY JOHN VAROLI
Below are some of last week’s most important international energy 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.
Africa/ Renewable energy
Masdar, the leading clean energy company in the United Arab Emirates, signed deals for projects with a total generation capacity of 5 GW in Angola, Uganda, and Zambia. Etihad 7, a global development fund launched by the UAE, plans to provide 100 million people across African continent with clean electricity by 2035
China/ EVs
The country accounts for 70% of global EV sales; Chinese consumers will buy as much as 10 million EVs in 2023, up from a record 6.5 million in 2022 and 3.5 million in 2021. This compares with nearly 3 million in Europe and 2 million in the U.S.
China/ Commodities
Mining company BHP said China would act as a “stabilising force” for commodity demand this year as Beijing’s pro-growth policies offset weak economies in other developed markets.
COP28/ Energy transition
Sultan al-Jaber, head of ADNOC and president of COP28, called for a tripling of renewable energy generation by 2030. He also called for supporting oil and gas from the “least carbon intensive producers”, saying the world was “way off track” to meet climate goals.
EU/ Energy transition
European Commission head Ursula von der Leyen told the WEF meeting in Davos that the EU’s Green Deal will make the bloc a center for clean technology. The EU plans to utilize state aid and a sovereignty fund to keep innovative firms from moving to the U.S.
Insurance/ Energy transition
Insurance group Aviva aims to be the world’s top renewable energy insurer by 2027. Four years ago, Aviva stopped insuring fossil-fuel power projects, and it’s now building up its renewable energy insurance portfolio in wind, solar and battery storage.
Saudi Arabia/ Oil payments
Saudi Arabia said it’s open to discussing oil trade settlements in currencies other than the U.S. dollar. The Saudi move could be another threat to the dominance of the U.S. dollar in global oil trade. Saudi oil exports have supported the petrodollar system from the 1970s.
Spain/ Renewable energy
EDP Renewables, the world’s fourth-largest renewable power producer, turned on its first hybrid wind-solar farm on the Iberian Peninsula. The plant 186 miles north of Lisbon, combines 17,000 new PV panels in an area with wind turbines.
UAE/ Renewable energy
The U.S. and United Arab Emirates will allocate the first $20 billion of their $100 billion renewables energy partnership to fund 15 GW of projects by 2035. Led by Masdar, the deal includes $7 billion in private sector cash equity and $13 billion in U.S. debt financing.
UK/ Oil and gas
TotalEnergies, the second-biggest oil and gas producer in the North Sea, expects a $2.1 billion loss from windfall taxes in the UK and EU on 2022 earnings, with half the bill coming from the UK. A 25% energy profits tax introduced in May increased to 35% on January 1, increasing the headline tax rate on UK oil and gas production to 75%.
UK/ Offshore wind
King Charles will redirect to the “wider public good” profits from a Crown Estate wind farm deal that would have generated a multimillion pound surge in royal revenues in the next few years. Six new offshore wind energy lease agreements, which came into effect on Thursday, were set to generate more than £8 billion for the Crown Estate over the next decade.
2023 EVENTS CALENDAR
A selection of domestic and international events we believe will have an impact on Japanese energy
ASEAN-Japan summit to mark 50 years of cooperation
Last market trading day (December 30)
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NEWS
・Govt specifies timing, revenue stream for ¥20 trillion in GX bonds as legislature for the issuance goes up before parliament
・Japan posts ¥20 trillion trade deficit in 2022, due largely to a surge in energy commodity prices and a weak yen
・Ex-minister of METI calls on Japan to use more biofuels as EV alternative and says nation could deploy abandoned arable land
