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Electricity Fukushima Daiichi Japan's energy sector Renewable energy

Reduce your energy costs in Japan and Japan’s energy situation post-Fukushima

Energy costs in Japan: A presentation to diplomats from the 28 EU countries (+ Norway and Switzerland) given at the EU Delegation in Tokyo on Thursday 18 May 2017

How can you reduce your energy bills?

Energy costs in Japan, how to reduce energy costs, and the current energy situation in Japan post-Fukushima are inherently linked and are the topics of this talk given by Gerhard Fasol at the EU Delegation (EU Embassy) in Tokyo on Thursday 19 May 2017.

Electricity prices in Japan compared to EU countries. Electricity charges in Japan are about 40% cheaper than in Germany.

Energy costs in Japan: Even now, post-Fukushima, electricity costs in Japan are not particularly high, if Japan was a EU country, Japan’s electricity costs would be ranked at about 15th or 16th rank.

Japan’s electricity charges are about 40% cheaper than in Germany, and on a similar level as in France or UK.

  • Ireland c€59.01
  • Germany c€40.28
  • Spain c€37.26
  • Sweden c€36.11
  • Portugal c€33.41
  • Denmark c€32.78
  • Czech Republic c€31.92
  • Cyprus c€31.79
  • Austria c€29.88
  • Finland c€29.20
  • Italy c€26.61
  • Slovakia c€26.30
  • France c€25.09
  • Luxembourg c€24.29
  • Croatia c€23.10
  • Japan c€23
  • Slovenia c€22.68
  • UK c€20.19
  • Poland c€18.80
  • Hungary c€18.35
  • ….

(source: Eurostat as of July 2013, energy costs in Japan: electricity costs for Japan are typical Tokyo household electricity charges)

Paradigm shift: redesign the electricity grid

We see a paradigm shift: we need to change how we think about energy. Our electricity supply system has been built over the last more than 100 years and many design principles have been decided 100 years and have then been frozen in, although they might not be the best choices any more in today’s world.

Traditional electricity grids are designed top-down, with large centralized power stations at the top, and a distribution system down to the end users.

This traditional hierarchical top->down integrated grid structure is globally in the process of reinvention. The different services:

  1. generation
  2. transport
  3. grid frequency stabilization
  4. distribution

are being split into separate businesses, and each one is being deregulated. In addition, the top-down structure is changed: renewable energy sources, micro-hydropower station and other sources feed electricity into the grid from the bottom-up, requiring changes in the design and management of power grids.

In Japan the traditional electricity grid has three hierarchical layers:

  1. Special high voltage (特別高圧)
    1. 500kV, 270kV, 140kV
    2. 60kV
    3. 20kV
  2. High voltage (高圧) 6kV
  3. Low voltage (低圧) 200V, 100V

These three markets (1) Special high voltage, (2) High Voltage, (3) Low voltage, are approximately of equal size in Japan, and represent each about 1/3 of Japan’s electricity market. The (3) Low voltage market was deregulated on April 1, 2016, and the other two market sectors earlier. Up to March 31, 2016, 10 regional electricity operators had the monopoly in the retail (low voltage) sector of their regions. Since April 1, 2016, all markets are liberated and low voltage segment consumers are free to buy their electricity from a number of suppliers.

50Hz/60Hz

Electricity started in Japan in 1893:

  • The first generator in Tokyo was from the German firm AEG, and therefore 50Hz
  • The first generator in Osaka was from the US firm General Electric, and therefore 60Hz

Event today the west of Japan has 60Hz, while the east has 50Hz. Since semiconductor electronics enables frequency conversion, and since long distance transport is frequently DC anyway, this 50Hz/60Hz split is very unlikely to change.

AC/DC

For historic reasons, most electricity is delivered to end customers as AC (alternating current), however most consumption today is increasingly DC (direct current). e.g. LED lighting, computers and most IT equipment including data centers require DC electricity. Solar power plants also produce DC electricity. Battery storage also requires and delivers DC electricity. So we might see an increasing shift to DC electricity supplies.

How to reduce your energy bill

Energy costs in Japan: in the past urban design typically maximized electricity sales:

  • “All Denka” was a long-term campaign by Japan’s electricity industry to maximize the consumption of electricity
  • design model:
    • build the town in order to sell as much electricity/air-conditioners/gas as possible
    • top-down: huge nuclear power stations far away + top-down distribution system
    • single windows, save money on insulation
    • heating in winter, air conditioning in summer

In the future

  • communities, companies and household take responsibility of energy locally
  • “positive energy buildings”: buildings generate and sell electricity instead of consuming. Example: MORI-Roppongi Hills
  • THINK: Marunouchi & MORI Buildings: “we want to be so well prepared for disasters, that people don’t run from our buildings, but that people come to our buildings for safety”
  • take responsibility!

How to reduce your energy bill > earn money selling electricity

  • cut consumption
    • Insulate
    • buy low-energy equipment, e.g. air-conditioner, washing machine
    • LEDs instead of bulbs and fluorescent tubes
    • energy management system
  • generate electricity:
    • solar, wind, heat-exchangers, heat-pumps, co-generation
    • fuel cells (e.g. Bloom (gas), or Enefarm, Panasonic) > off-grid
  • negotiate supply contracts, combine gas & electricity & phone/internet to get discounts
    • e.g. all three major phone companies (KDDI, Docomo, SoftBank) sell electricity, internet access etc + electricity. Combine: phone, internet, electricity to get discounts.

Nature governs energy – nature cannot be fooled

Today’s energy situation in Japan is directly a function of the outcome of the Fukushima-Dai-Ichi disaster.

To understand the reasons for why the Fukushima-Dai-Ichi disaster happened, it is necessary to go back in history, there is not one single reason for this nuclear disaster but many starting at the design decisions taken even before the construction started.

It is instructive to compare the situation of TEPCO’s Fukushima-Dai-Ichi nuclear power plant with Tohoku Electric Power’s Onagawa nuclear power plant:

  • TEPCO’s Fukushima-Dai-Ichi nuclear power plant: tsunami height = 13 meters, one of the worst nuclear disasters
  • Tohoku Electric Power’s Onagawa nuclear power plant: tsunami height = 13 meters: successful shut down without damage, served as a refuge for about 300 people from the neighborhood who had lost their homes in the tsunami and earthquake disasters

Why the difference?

  • TEPCO’s Fukushima-Dai-Ichi nuclear power plant: ground elevation was reduced from 35 meters to 10 meters to save cooling water pumping costs
  • Tohoku Electric Power’s Onagawa nuclear power plant: Yanosuke Hirai carefully research previous tsunamis, especially the Great Jogan Tsunami of July 13, AD 869, built 13.8 meters above sea level

Read in detail in our review of the Fukushima and Tohoku disasters, 6 years after, our blog of March 11, 2017:
http://www.eurotechnology.com/2017/03/11/tohoku-disaster-6-years/

A few days after the Fukushima-Dai-Ichi disaster, US President Obama sent 150 top nuclear engineers to Japan for 11 months to assist directly the Japanese Prime Minister and the Japanese Government and TEPCO to mitigate the nuclear disaster. The Leader of this team of 150 US nuclear experts was Chuck Casto, who I invited two times to talk at the Ludwig Boltzmann Forum events. Read Chuck Casto’s explanations of the Fukushima Disaster here:

I also invited the Kiyoshi Kurokawa, the former Chairman of Japan’s Parliamentary Commission into the Fukushima Nuclear Disaster, to speak at the Ludwig Boltzmann Forum:
Kiyoshi Kurokawa: “Groupthink can kill” (6th Ludwig Boltzmann Forum 20 February 2014)

Summary

  • Nature governs energy, and nature cannot be fooled (Richard Feynman)
  • Global trend: reengineering the grid. Localize, democratize, liberalize, deregulate
  • Renewable energy: wind power can cover all of Japan’s energy needs (in principle)
  • Energy, electricity and gas market liberalization is going ahead

Interview in The Economist:

Japan energy market report

Renewable energy Japan research report

Copyright (c) 2017 -2019 by Eurotechnology Japan. All Rights Reserved.

Categories
Electricity

Japan electricity sector disruption – new business models and deregulation overdue

Japan electricity regional operators’ income peaked about 10 years ago

Japanese electricity companies’ business models face massive disruption by technology innovation and the Fukushima nuclear accident

With the annual general shareholder meetings completed and financial results published, we have analyzed the financial results of Japan’s 10 regional electric power companies (plus several other Japanese electricity companies, including J-Power) in detail.

We find that each of Japan’s electrical power companies has its own particular circumstances, and some are coping better than others, while of course Tokyo Electric Power Company is a special case due to the incalculable costs of the Fukushima nuclear accident, and due to possible changes in case of a change of Japanese Government policy regarding TEPCO.

Our financial analysis shows, that revenues of Japan’s electricity sector have increased substantially, due to increased electricity costs. On the other hand, revenues of Japan’s electricity companies overall have been declining steadily since a peak around 2005, i.e. ten years ago.

Switching off nuclear power generation contributes to financial problems, but is clearly not the root cause

From our analysis it is obvious that the financial profitability issues of Japan’s electricity sector have started about 10 years ago, long before nuclear reactors were switched off due to the Fukushima accident – while of course the switch-off of nuclear power does contribute to a worsening of the financial situation in the last 3 years.

Clearly, the electricity deregulation which is now on track with regulatory and legal changes, was long overdue, and in my opinion is more due to the declining profitability of Japan’s electricity sector, than immediately triggered by the Fukushima accident. The financial data clearly show that a change of business model for Japan’s electricity sector is needed.

Japan electricity: Combined annual operating income of Japan's regional electric power companies
Operating income of Japan’s electricity sector has been falling continuously since the peak in 2005

Chugoku Electric Power Company as an example

Our analysis shows that each of Japan’s 10 regional electricity companies have different financial circumstances.

We discuss Chugoku Electric Power Company which serves the area around Nagoya in the middle of Japan as an example. The Figure below shows that Chugoku Electric Power Company’s income peaked around 2004-2005, about ten years ago, and since then has been continuously falling, with net income dropping into the red for the first time for Financial Year 2008 (ending March 31, 2009), about two years before the Fukushima nuclear disaster. An important point to consider is that only about 10% of the electricity generation capacity of Chugoku Electric Power Company is nuclear power, which is one of the lowest ratios of nuclear power in Japan. It follows logically, that switching off this 10% of nuclear generation capacity has a much lower impact than for other regional power companies, where the nuclear contribution was about 30%.

Japan electricity: income and margins of Chuo Electrical Power Company have been continuously falling since their peak around 2004
Japan electricity: income and margins of Chuo Electrical Power Company have been continuously falling since their peak around 2004

We conclude that the peak around 2004-2005 in profitability followed by a long decline in profitability indicates a deep rooted need for change of business models which was exacerbated but not directly caused by the Fukushima nuclear accident. Japan’s Government is now reacting to this fact by deregulating the electricity sector.

Japan electricity: Why do current business models need to change?

  • Japan’s regional electricity companies enjoyed monopoly power within their regions, where the electricity prices were regulated by Government, and in exchange electricity companies could enjoy a financial model where they could charge costs + profits to customers. There was no competition and little incentive to reduce costs
  • Japan will now follow the global trend from top-down electricity grids with large central generation facilities and a top-down distribution grid to more de-centralized, localized smart-grids, driven by technological progress, and the emergence of renewable energy.

Renewable energy Japan – research report

Japan’s energy sector – research report

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Categories
Electricity Japan's energy sector Natural Gas, LNG

Japan nuclear free since Monday, Sept. 16, 2013, when the last reaction was switched off. Restart unclear.

Japan went 100% nuclear free since Monday, Sept. 16, 2013. When nuclear reactors will be restarted is totally unclear.

Kansai Electric Power (KEPCO) on Sunday Sept 15, 2013 at 16:40 started to reduce power output of Japan’s last remaining active nuclear power reactor (Oi No. 4 reactor), and stopped operations of this reactor on Monday Sept 16, 2013 morning.

Since Monday September 16, 2013 Japan is nuclear free, and will remain so for the foreseeable future. It is unclear currently, when and if nuclear power will be restarted again in Japan.

Japan is strongly polarized over nuclear power

The reason Japan is currently nuclear free is not a policy decision by the Government of Japan or the Prime-Minister, the reason is mainly technical and a consequence of Japanese local politics:

Japan’s nuclear reactors are stopped every 13 months for checks, cannot be restarted in the current political and legal climate

Japan’s nuclear reactors are switched off for routine maintenance and security checks once every 13 months. In order to restart each reactor after this periodic maintenance both Japan’s nuclear safety agency, and also “the local community” have to give their formal agreements. Before the Fukushima disaster, both these two agreements were a formality and given quickly. Since the Fukushima disaster however, the approval by the newly formed Nuclear Safety Agency has been a far higher barrier to overcome.

However, more importantly, it has turned out that “the local community” who’s approval is also necessary is in some cases not well defined. Therefore many community authorities which in the past did not raise their voices, now join in the decision making process. In addition, some regional administrative leaders, such as the Governor of Niigata-ken, have expressed their very strong distrust in current management of nuclear power stations, and are refusing to give their agreement, without which the restart of nuclear power stations within the Prefecture they govern is impossible.

Nuclear power is mainly replaced by LNG

For the time being, nuclear power is replaced predominantly by electricity generation from Liquid Natural Gas (LNG). As a consequence Japan’s payments for LNG are at an all-time high.

You will find detailed statistics and analysis of Japan’s electricity and energy situation in our report on Japan’s Energy Sector.

Japan's last operating nuclear power station was switched off on Monday Sept 16, 2013.
Japan’s last operating nuclear power station was switched off on Monday Sept 16, 2013. source: https://www.eurotechnology.com/store/j_energy/

Japan’s last operating nuclear reactor (No. 4 reactor at KEPCO’s Oi plant) was switched off on Monday, Sept 16, 2013. Since then Japan is nuclear free. It is unclear when nuclear power plants will be operated again in Japan.

Read detailed analysis in our report on Japan’s energy sector:

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Categories
Electricity Japan's energy sector Renewable energy

Feed in tariff Japan for renewable energy: approvals drying up?

Feed in tariff Japan for renewable energy are about three times higher than in Germany

Approvals peaked just before the latest feed in tariff reduction

The figures below show an overview of renewable energy sources currently installed and operational in Japan (the majority of which is water power), and also renewable energy projects approved by Japan’s industry ministry METI under the renewable energy feed-in-tariff (FIT) law, which started in July 2012.

Approvals peaked just before March 31, 2013

The figures below clearly show that approvals peaked in March 2013, and dropped off dramatically from April 2013. The reason is most likely the decrease of FIT-tariffs from April 1, 2013: it seems that many applications were rushed in order to take advantage of the higher FIT-tariffs for projects approved up and until March 31, 2013.

Renewable energy capacity approved so far under the FIT-law will increase renewable energy capacity in Japan approximately by 70%, including water power. 94% of renewable energy projects approved under Japan’s feed-in-tariff programs are for solar energy generation (see our past blog analyzing FIT approvals).

The figures below show, that almost no fresh generation capacity was approved during March, April and May 2013: the approval of new renewable energy capacity is drying up.

Thus, companies seeking to build solar power stations in Japan based on pref-approved METI-projects, are faced with a fixed pool of approved projects, with almost no additional projects being added until May 2013.

More details in the latest 6th edition of our Renewable Energy Report.

Feed in tariff Japan for renewable energy: Approvals for renewable energy projects under the feed-in tariff law until May 2013 in comparison with installed renewable energy in Japan
Accumulated total generation capacity of approvals for renewable energy projects under the feed-in tariff law until May 2013 in comparison with installed renewable energy in Japan. Approvals seem to have dried up: almost no new capacity has been approved during March-May 2013.
Feed in tariff Japan for renewable energy: Figure shows solar energy projects approved by Japan's Industry Ministry METI under the renewable energy FIT law.
Figure shows the accumulated generation capacity of solar energy projects approved by Japan’s Industry Ministry METI under the renewable energy FIT law. Approvals seem to have dried up: almost no new capacity has been approved during March-May 2013.
Feed in tariff Japan for renewable energy: Approvals under Japan's renewable energy feed-in-tariff law per month
Approvals under Japan’s renewable energy feed-in-tariff law per month. Figure shows that approved generation capacity drops to a low level after March 2013 – the most likely explanation for the dramatic drop of approvals after March 2013 is the reduction of FIT-tariffs from April 1, 2013: it looks likely that many applications were rushed to meet with the higher FIT tariffs available for projects granted at the higher rates up to March 31, 2013 (42 yen/kWh in case of large scale solar)

“Renewable energy Japan” research report

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Categories
Electricity Japan's energy sector Natural Gas, LNG Renewable energy

Japan energy – myths versus reality, mantra versus smart

A lecture a the Embassy of Sweden for the Stockholm School of Economics

European Institute for Japanese Studies EIJS

Gerhard Fasol "Japan energy - myths versus reality, mantra versus smart" Embassy of Sweden
Gerhard Fasol “Japan energy – myths versus reality, mantra versus smart” Embassy of Sweden

Outline of the lecture:

  • Energy and DNA
  • Energy and Physics, why you need to understand physics to understand energy
  • Ludwig Boltzmann’s tools and laws to work with energy
  • Myth versus reality, mantra versus smart – psychology of judgment and decision making
  • Parliamentary commission results: “regulatory capture” caused the Fukushima nuclear accident
  • History: Japan’s energy architecture frozen since 1952
  • Primary energy: 96% imported
  • Why Japan pays so much for LNG
  • Electricity architecture and liberalization
  • renewable energy
  • Future: where do we go from here?

Thank you to all those who attended the event “Japan’s energy – myths vs reality” at the Embassy of Sweden – an event organized by the European Institute for Japanese Studies of the Stockholm School of Economics.

We had about 120 registrations for 100 seats in the Alfred Nobel Auditorium of the Embassy of Sweden – participants included an official from Japan’s Prime Minister’s Cabinet Office, Officials from several Embassies including the Swedish, US, Norwegian, Swiss, Hungarian and more Embassy, executives from Japanese and European telecom and energy companies, including also several independent power producers (IPPs), legal professionals, and groups of students and MBA students from Tokyo University, Hitotsubashi University and others.

We had very vivid discussion, and continued the discussions over nijikai.

Detailed data, statistics and analysis of Japan’s energy markets:

All the data of the talk are from our reports on Japan’s energy sector:

Japan’s energy market report:

Renewable energy Japan – research report

Copyright 2013 Eurotechnology Japan KK All Rights Reserved

Categories
Electricity Japan's energy sector

US$ 15 billion losses for Japan’s electricity sector continue

On April 30 Japan’s electricity operators announced their financial results for the financial year that ended on March 31.

Japan’s ten regional electricity operators again announced combined net losses in excess of US$ 15 billion for the Financial Year ending March 31, 2013, similar in size as the previous year: energy remains one of Japan’s most pressing problems.

Japan's electricity operators announce losses higher than US$ 15 billion
Japan’s electricity operators announce losses higher than US$ 15 billion

Losses continue

For Financial Year FY2010, which ended March 31, 2011 three weeks after the March 11, 2011 disaster, Tokyo Electric (TEPCO) already announced net losses in excess of US$ 10 billion as an immediate consequence of the nuclear disaster at their Fukushima nuclear power station. In FY2010 other electricity operators beyond TEPCO were not yet substantially affected.

In FY2011 (ending March 31, 2012) and FY2012 (ending March 31, 2013) all electricity operators (except Okinawa Electric Power Corporation) were directly affected by the stop of all except 2 of Japan’s nuclear power stations, and by the replacement of nuclear power with thermal power stations – mainly fired by LNG.

Currently all Japanese regional electricity operators, except Hokuriku Electric Power Corporation and Okinawa Electric Power Corporations show net losses.

These losses drive dramatic actions to reduce fuel cost, to introduce renewable energy, to introduce demand management and smart-grids, and liberalization of Japan’s electricity sector.

Net margins are negative for all but two electricity operators

Only Okinawa Electric Power Corporation (which operates no nuclear power stations and is not linked to any other region) continues to announce profits. Hokuriku Electric Power Corporation announced very small profits, while all other eight regional power companies show large negative margins.

All but two regional electricity operators announce losses
All but two regional electricity operators announce losses

Electricity revenues show no slow-down

Electricity revenue statistics show a striking slow-down as a consequence of the Lehman shock. No such slow-down occurred as a consequence of the March 11, 2011 Tohoku disaster. Partially of course revenue increases are due to price increases to offset increased fuel costs.

Unlike the Lehman shock, March 11, 2011 did not impact revenues
Unlike the Lehman shock, March 11, 2011 did not impact revenues

More details and analysis in our report on Japan’s energy sector

Read an article in The Economist, which is partly based on our input, and our reports.

Copyright (c) 2013 Eurotechnology Japan KK All Rights Reserved

Categories
Electricity Japan's energy sector Natural Gas, LNG

Japan’s successful and growing gas companies

Liberalization leads to increasing competition and partnerships between Japan’s regional electricity and gas companies

Japan gas companies grow at an annual rate of 4.1% and show steady income

Japan gas companies grow at an annual rate of 4.1% and show steady income, and have developed into serious competitors for Japan’s electricity operators, while also cooperating in electricity generation.

We have added 50 pages coverage of Japan’s very successful gas sector to our Japan-Energy-Report.

Gas companies show healthy income. Electricity operators report increasing losses
Gas companies show healthy income. Electricity operators report increasing losses

Japan’s gas companies are profitable and grow while electricity operators’ revenues stagnate and descend into losses:

We compared Japan’s gas sector with Japan’s electricity operator sector:

  • Japan big-4 gas companies’ revenues grew 4.1% per y
    Japan gas companies grow at an annual rate of 4.1% and show steady income. Increasing competition and cooperation between electricity and gas companies
    Japan gas companies grow at an annual rate of 4.1% and show steady income. Increasing competition and cooperation between electricity and gas companies
    ear for the last 12 years, while reporting stable income.
  • Japan’s 10 regional electricity operators show stagnating revenues, while descending into deep losses.

Japan’s gas companies develop into competitors for the regional electricity operators

Electricity operator's descent towards losses started in 2007, well before the Fukushima nuclear disaster
Electricity operator’s descent towards losses started in 2007, well before the Fukushima nuclear disaster

Descent into crisis of Japan’s electricity operators started in 2007:
Figure above clearly shows that the decent of Japan’s electricity operators started years before the Fukushima nuclear disaster. Therefore we conclude that restarting the nuclear reactors alone will not cure the crisis of Japan’s electricity operators, which for many years have enjoyed a monopoly position, and are now increasingly under attack by competitors including Japan’s very successful gas companies.
We added approx. 50 pages analysis of Japan’s gas sector to our Japan-Energy-Report.

Copyright·©2013 ·Eurotechnology Japan KK·All Rights Reserved·

Categories
disruption Electricity Fukushima Daiichi

Financial instability of Japan’s electricity companies started in 2007

Financial instability of Japan’s electricity companies started long before the Fukushima nuclear accident

Japan’s electricity companies ran into financial instability long before the March 11, 2011 disaster

It is often assumed that the financial difficulties of Japan’s electricity companies are caused by the shut-down of almost all Japanese nuclear power stations within 13 months of the Fukushima disaster.

This newsletter shows that the financial impact of switching off Japan’s nuclear power stations does not seem to be the major contribution to the financial instability of Japan’s electricity companies.

However, this newsletter clearly proves that Japan’s electricity companies ran into financial instability long before the March 11, 2011 disaster and long before Japan’s nuclear power stations were switched off. The financial instability of Japan’s electricity companies seem to have started in 2004 – about 7 years before the Tohoku Earth-quake, as shown below. Therefore reform of Japan’s electricity industry sector is highly overdue.

Japan's electricity crisis predates the Fukushima disaster by several years
Japan’s electricity crisis predates the Fukushima disaster by several years

Financial instability of Japan’s electricity companies started with the increase of natural gas payments in 2004

Japan’s electricity industry sector is dominated by 10 regional electricity operators, which to a large extent have the monopolies of electricity business in their regions. In exchange, their profits are calculated as a fixed percentage of costs. However, the figure above shows, that this system had become unstable around 2009 following a strong increase of natural gas costs since 2004. The figure above clearly shows that the net profits of Japan’s 10 regional electricity operators started a steady decline since 2007, and dropped firmly into the red in the financial year FY 2010, which ended on March 31, 2011, ie almost entirely before the Fukushima disaster, and about a year before nuclear power stations were switched off in Japan.
This argument shows, that the difficulties of Japan’s electricity sector are even more profound than the cut-off of nuclear power stations, and shows that reform of Japan’s electricity sector is long overdue. For details read our report on Japan’s electrical industry sector.

Financial trouble of Japan's electricity companies started before Fukushima
Financial trouble of Japan’s electricity companies started before Fukushima

<

h2>Financial instability of Japan’s 10 electricity operators started in FY2007 – several years earlier than the Fukushima nuclear disaster

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h2>
This figure shows the combined annual net income of Japan’s 10 regional electricity operators for the period FY1999 – FY2011. The figure clearly shows, that combined net after-tax income was extremely stable until 2007, when net income started to drop dramatically, and has been falling ever since, culminating in combined net losses of over US$ 20 billion in FY2011. Losses are expected to increase even further for FY2012.

This figure clearly shows, that the financial instability of Japan’s electricity companies started several years earlier than the March 11, 2011 disaster and well before any nuclear power stations were switched off. More details in our report on Japan’s electricity and energy sector.

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Categories
Electricity Natural Gas, LNG

Japan’s electricity industry suffers huge losses from nuclear to fossil switch

What is the financial impact of Japan’s switch from nuclear to fossil on Japan’s electricity industry?

Japan’s electricity operators switched from profits to huge losses

What is the financial impact of Japan’s switch from nuclear to fossil on Japan’s electricity industry?
Answer: Japan’s electricity operators switched from about US$ 10 billion/year combined net profits to US$ 20 billion/year losses – far more dramatic than the impact of the Lehman shock. – Selected graphics below in this blog, and detailed analysis in our report on Japan’s electricity and energy industry.

annual net income of Japan's electricity operators
annual net income of Japan’s electricity operators

Electricity operator losses may drive innovation

Losses are caused by high costs of fossil fuels and additional generation capacity brought online, and drive innovation, by forcing operators to look for new solutions to time-shift demand such as smart grids, and smart meters.

net margins of Japan's electricity operators
net margins of Japan’s electricity operators

Electricity sales revenues were affected much more by the Lehman shock than by switching from nuclear to fossil
The figure below shows combined sales revenues of Japan’s 10 regional electricity operators. Sales were strongly affected by the industrial downturn after the Lehman shock in September 2009, and have recovered since. There is no strong effect of the Fukushima disaster and nuclear -> fossil switch on electricity sales:

US$ 200 Billion/year = combined annual income of Japan's electricity operators
US$ 200 Billion/year = combined annual income of Japan’s electricity operators

Because Japan’s electricity operators have monopoly status in their regions, their financials are mainly affected by the economic status of their regions. All were affected dramatically on the sales side by the Lehman shock. This figure also shows that Japan’s electricity industry has been very static for many years. Japan’s Governments recent energy strategy provides for liberalization – executing this strategy will be the challenge.

More in our report on Japan’s electricity sector.

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Categories
Electricity Fukushima Daiichi Japan's energy sector Natural Gas, LNG nuclear Renewable energy

Japan’s energy foxtrot: Two steps forward one step back

Two steps forward one step back:

describes a frog struggling to climb out of a well, slipping back one step on the ladder for each two steps upwards out of the well

Before the Fukushima disaster, Japan’s energy policy, strategy and execution were essentially decided behind closed doors by a small group of (about 100) Japanese people, and while European countries, Canada, USA experimented with electricity liberalization, Japan’s electricity industry structure went unchanged for a very very long time with a rigid top-down structure. However with the Fukushima disaster, Japan’s energy landscape has been brought onto the world stage, catching global attention for the first time.

Two steps forward (actually much more than two steps): Last Friday, September 14, 2012, Japan’s Cabinet released Japan’s new “Innovative Energy and Environmental Strategy”. We have analyzed the full Japanese text of this strategy paper, and you can find a summary on pages 5-23 in our “Japan Electrical Energy Landscape” report.

Most English language press reports focus only on the first few pages which describe a plan to phase out nuclear energy in Japan over the next 30-40 years. However this Government paper contains many other policy measures to reform Japan’s electricity industry and to completely change the principles of Japan’s energy landscape – steps which are long overdue, and where Japan has fallen behind most other advanced countries, because pre-Fukushima, Japan’s electricity industry was functioning “too well” – although at very elevated prices (for detailed analysis, read our report).

The strategy plan announced on September 14, 2012 has not yet created any irreversible facts – although two irreversible facts could soon be implemented: the Government announced a few days ago, that 3 nuclear power reactors should be decommissioned under the new 40-year-limit-rule, Tsuruga’s No 1 reactor (started March 1970), and Mihama’s No. 1 (started Nov 1970) and No. 2 reactors (started July 1972).

One step back: Sept. 19, the Cabinet released a “Kakugikettei” (Cabinet Decision) which is 4 and 1/2 lines long, which says:

We will carry out our energy and environmental policy based on the “Innovative Energy and Environmental Strategy” as decided by the Energy and Environment Council on Sept 14, however we will hold responsible discussions with concerned self-governing regional bodies of Japan and with concerned international organizations, and we will continuously and flexibly verify and adjust our policy. (Kakugikettei, Cabinet decision of Sept 19, 2012, our unofficial translation from bureaucratic official complex Japanese into simplified English, attempting to keep the same meaning).

Note, that this “step back” is not uniquely Japanese: Sweden decided in the 1980s to go zero-nuclear with a Parliament approved schedule, and Sweden’s parliament reversed the earlier zero-nuclear decision, and went back to continue nuclear power in 2010 and renewing or building new nuclear power stations.

Subscribe to our report on Japan’s energy sector and receive regular updates.

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Categories
Electricity Japan's energy sector Natural Gas, LNG Renewable energy

Japan’s new energy strategy: much more than nuclear exit

Japan’s Cabinet released Japan’s new “Innovative Energy and Environmental Strategy”

Japan’s new energy strategy

Last Friday, September 14, 2012, Japan’s Cabinet released Japan’s new “Innovative Energy and Environmental Strategy”, which the Cabinet is required to produce by law, and which actually contains much more than the plan to work towards a future nuclear power free society.

We have analyzed the full official “Innovative Energy and Environmental Strategy” in the original Japanese version, and we have prepared a 19 page English language summary which you can find on pages 5-23 of our “Japan Electrical Energy Landscape” report

Most English language press reports have focused on the three principles to work towards a nuclear free society

  1. strictly limit the operation of nuclear power plants to 40 years age
  2. restart those nuclear power plants, where the safety has been assured by the Nuclear Safety Commission
  3. no new construction or expansion of nuclear power stations

These principles – if maintained – may lead to the last nuclear power station in Japan to be switched off around 2052, ie about 40 years from now.

However, Japan’s new energy strategy framework paper contains much more

  • five policy packages concerning: the nuclear fuel cycle, human resources and technology development, cooperation with the global community, regional measures, the nuclear industry system and system for compensation of damages
  • measures for reducing electricity and energy consumption with targets until 2030 for two different economic growth scenarios
  • measures for promoting investment in renewable energy, with renewable energy generation targets until 2030
  • targets for electricity cogeneration until 2030
  • electricity power system reform, including unbundling of generation, transport and retail with the promotion of vibrant electricity markets
  • opening, strengthening and neutral electricity grid network, fair and accessible to all electricity producers
  • and most of all, a planned transition from passive electricity bill paying consumers to aware and active market participants who as much as possible generate their own electricity, and who instead of paying electricity bills, earn money from electricity they generate

In particular, the strategy plan states explicitly:

“…. it is indispensable, that electricity grid networks can be used by anyone, and to have competitive electricity markets”.

When trying to predict the far future, whether Japan will actually go completely non-nuclear or not, keep in mind that Sweden has decided to go non-nuclear in the 1980s, and has reversed this decision around 2010.

Currently only two of Japan’s remaining 50 nuclear reactors are in operation. It will be interesting to see if and when the safety of additional reactors are approved, and how rapidly the announcement dramatic deregulation and structural reform of Japan’s electricity system will be implemented, and how much of the announced policy steps might be reversed – or accelerated – by future Governments.

The strategy plan announced on September 14, 2012 has not yet created any irreversible facts.
Subscribe to our report series on Japan’s electricity industry landscape and our report on renewable energy in Japan.

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Electricity Japan's energy sector Natural Gas, LNG Renewable energy

Joe Oliver: Briefing the Minister for Energy and Natural Resources of Canada

Joe Oliver, Minister for Energy and Natural Resources of Canada

Was asked today to be one of a group of about 5 Japanese experts to brief the Minister for Energy and Natural Resources of Canada, Mr Joe Oliver. We were asked to keep the conversation off-the-record, so I can’t write about the meeting.

Minister Oliver visited Japan leading a delegation of about 100 Canadian Energy sector leaders, CEOs, Government Officials, and the confidential briefing and discussion about Japan’s energy sector among a small group of about 5 Japanese experts, the Ambassador and Minister Oliver, was followed by a large lunch with about 100 Japanese and Canadian energy leaders and CEOs.

Presentation was based on our report on Japan’s energy sector:

Japan energy market report:

Mr Joe Oliver photograph image credits:  Author: Rocco Rossi  Source: https://en.wikipedia.org/wiki/File:Joe_Oliver.JPG  License: This file is licensed under the Creative Commons Attribution 2.0 Generic license.
Mr Joe Oliver photograph image credits: Author: Rocco Rossi Source: https://en.wikipedia.org/wiki/File:Joe_Oliver.JPG License: This file is licensed under the Creative Commons Attribution 2.0 Generic license.

Image credits

Mr Joe Oliver photograph image credits:
Author: Rocco Rossi
Source: https://en.wikipedia.org/wiki/File:Joe_Oliver.JPG
License: This file is licensed under the Creative Commons Attribution 2.0 Generic license.
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attribution – You must attribute the work in the manner specified by the author or licensor (but not in any way that suggests that they endorse you or your use of the work).
see: https://en.wikipedia.org/wiki/File:Joe_Oliver.JPG

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Electricity Japan's energy sector

Japan’s PM Noda hints at new energy policy: Phasing out nuclear power by the 2030s

Develop as soon as possible a society which does not rely on nuclear power

Eliminate nuclear power according to three principles

By law Japan’s government must prepare a national energy strategy plan. The currently valid plan provides for an increase of nuclear power from 30% to 50% and is vehemently opposed by public opinion following the Fukushima nuclear disaster and much loss of public trust in nuclear power in Japan – while at the same time many Japanese traditional industry leaders promote nuclear power as a necessity.

Decision on the new energy plan has been postponed, but is likely to be announced later this week. However, Japan’s public Radio and TV NHK reports, that Prime-Minister Noda yesterday at a Press Conference hinted at the content of the new energy policy plan. Some sources say that the new energy plan has already been approved by the cabinet.

NHK reports the following about Japan’s new energy policy

  • Develop as soon as possible (translated word by word from Japanese: “one day earlier than possible”) a society which does not rely on nuclear power
  • use all political means to enable zero nuclear power in the “2030s” (which might mean 2040 depending on the interpretation)
  • promote renewable energy in order to enable zero nuclear power
  • eliminate nuclear power according to three principles
    • no nuclear power station older then 40 years
    • restart only those nuclear power stations, for which safety has been approved by the Nuclear Safety Commission
    • no new power stations
  • operate nuclear power stations, for which the safety has been assured, as an important power source

We expect Japan’s new energy policy plan, which is required by law, to be announced later this week.

Regarding nuclear phase-out keep in mind that:

The Swedish Parliament in 1980 decided that no new nuclear power stations shall be built and that Sweden should complete shut-down of all nuclear power stations by 2010.
However, Sweden reversed nuclear phase-out, and on June 17, 2010, Swedish Parliament decided to replace the existing reactors with new nuclear reactors starting from January 1, 2011.

Therefore, if in the future Japan reverses the nuclear phase-out, Japan would not be the first country to do so.

Japan’s current nuclear near-shut down:

After the Fukushima nuclear disaster Japan effectively stopped nuclear power generation. There are no black-outs - how could Japan manage?
After the Fukushima nuclear disaster Japan effectively stopped nuclear power generation. There are no black-outs – how could Japan manage?

Detailed statistics, analysis and frequent updates – in our report on Japan’s energy sector.

Copyright (c) 2013 ·Eurotechnology Japan KK All Rights Reserved

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Electricity Japan's energy sector Natural Gas, LNG Renewable energy

Japan energy dilemma

Japanese law requires the government to have an energy strategy plan in place

Keep nuclear power off – or restart nuclear?

Japan’s current energy strategy plan provides for nuclear power to provide 30% of the electricity, rising to 50% in a few years by building additional nuclear power stations.

However, contrary to the current strategy plan the figure below shows, that Japan essentially switched off all nuclear power over the last year, with 2 exceptions.

A new energy strategy plan is delayed, but could be announced in the next few days. The Cabinet is in a dilemma to decide between the interests of the pro-nuclear business association Keidanren and the pro-nuclear electrical industry and considerable anti-nuclear movements in the general (voting) population.

One major problem is that Japan’s energy architecture and electricity industry is regulated by laws and regulations established in 1952. Essentially, Japan’s energy and electricity architecture has been frozen in 1952, and has not been changed until the Fukushima nuclear accident now forces change. The contribution of “new” renewable energy to Japan’s energy mix is so minute (except for water power), that it would be too small to be seen on the figures below. Our Japan-Energy report explains the major issues facing Japan’s energy architecture and its structure.

Japan’s energy peak is in summer (because energy consumption in Japan for air conditioning in summer is higher than for heating in winter), there were no black-outs, or brown-outs – how did Japan manage successfully despite the sudden unplanned exit from nuclear power? Read below…

How did Japan cope with the sudden exit from nuclear power?

After the Fukushima nuclear disaster Japan effectively stopped nuclear power generation. There are no black-outs - how could Japan manage?
After the Fukushima nuclear disaster Japan effectively stopped nuclear power generation. There are no black-outs – how could Japan manage?

Japan's survived by reducing summer peaks, and by increasing traditional caloric power production
Japan’s survived by reducing summer peaks, and by increasing traditional caloric power production

How did Japan cope with the sudden shut-down of nuclear power?

Japan’s peak power consumption is in summer, all nuclear power (with 2 exceptions) was switched off since this spring, and there were no black-outs, no brown-outs, and no major problems. How did Japan achieve this?

As the lower figure shows, traditional caloric energy production was increased by installing new power plants, and by bringing back old caloric power plants which had already been switched off, and by reducing the summer peak compared to recent years through energy savings. It has been estimated that the additional costs for imported fuel are on the order of US$ 40 billion.

Expect Japan’s new national energy strategy plan to be announced in the next few days.

Japan’s energy architecture is maybe a victim of its pre-Fukushima success: because Japan’s electricity supply was working so well, nobody felt motivated enough to change the existing monopolies, grid, energy mix, or to develop renewable energies. More in our Japan-energy report.

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