Japan: Climate Change And Energy Round-Up (December 2013/January 2014)

British Embassy Tokyo

January 2014

Summary

 

Nuclear: TEPCO’s new business plan involves shedding jobs and requires restarts to four reactors at Kashiwazaki. Nuclear an important issue in Tokyo’s gubernatorial election on February 9, delaying energy announcements.  

Climate Change and Energy Policy: The new draft energy strategy includes nuclear as important base load energy source but no numbers for % of energy sources in the mix expected until 2016.  

Low Carbon Growth: Generous Feed In Tariffs for solar boost planning but not deployment as companies delay construction while panels cheapen. 35 yen/kwh offshore wind tariff to be introduced.    

Detail

Nuclear & Energy Security

Analysis: Nuclear

On 15 January, the government approved TEPCO’s new business plan ensuring more financial aid in return for 4.8 trillion yen in cost-cutting savings (up 1.4 trillion yen from the earlier plan) over the next decade. This includes setting up a joint venture with other utilities to purchase fuel, shedding 2,000 employees (through early retirement), and improving the fuel efficiency of old power stations. The plan’s success hinges on restarting 4 of the  7 nuclear reactors at Kashiwazaki-Kariwa (KK) from July 2014.  Governor Izumida of Niigata Prefecture (where KK is sited) remains firm in his opposition to restarts and openly criticised TEPCO’s plan as ‘a moral hazard which neglects the responsibility of shareholders and financial institutions’. Without these restarts, TEPCO will have to raise prices by at least 10% by  the Autumn.  The business plan will also shift TEPCO to a holding company in 2016 with three subsidiaries each responsible for power generation, transmission/distribution and retail. A separate subsidiary will deal with decommissioning at Fukushima.

In the meantime, Tokyo’s gubernatorial election (9 February) is being fought partly over whether nationally, Japan should use nuclear power.  Former PM Hosokawa has announced his intention to run with an anti nuclear agenda after securing the backing of former PM Koizumi, who wants to phase out nuclear and has made this the focus of the election.  Former Head of the Bar Association Kenji Utsunomiya (supported by the Social Democratic Party and the Japanese Communist Party) is also running on an anti-nuclear ticket. The other front runner, former Health Minister Masuzoe, who is running as an independent (with support from the ruling coalition), has said he wants to reduce reliance on nuclear power rather than phase it out.  PM Abe has said that the use of nuclear power is not an appropriate topic on which to decide the Tokyo gubernatorial elections. And Chief Cabinet Secretary Suga has said that the issue requires a national debate and cannot be decided by Tokyo alone. 

News

  • Rokassho Reprocessing Plant’s safety review based on the new standards began on 17 January: It is expected to take 6 months and JNFL plans to launch operations in October 2014.

  • Nuclear Restarts safety review: The Nuclear Regulation Authority (NRA) originally announced that their safety reviews for reactors would take about 6 months, additional calls for evidence on seismic matters is causing some complication and delays. The latest speculation for timings of safety approvals is late spring.

  • NRA decided to use individual radiation ingestion levels as the safety measure, rather than  atmospheric radiation levels.  This allows safety levels to be lowered as much as one-seventh (technically a relaxation of regulations) and will allow the Government to lift some of the evacuation orders.

  • TEPCO began the process to remove spent nuclear fuel from the No 4 reactor in November.  This is a big step forward for decommissioning.  1,331 spent nuclear fuel rods and 202 new ones will be transferred to the pool located in the compound by the end of 2014.

  • TEPCO announced the decommissioning of  No 5 and 6 reactors at Fukushima Daiichi and the establishment of a company to deal with decommissioning.  Naohiro Masuda, Vice Head of Nuclear Safety Oversight Office, was appointed as the Chief Decommissioning Officer.  

Climate Change and Energy Policy

Analysis: Basic Energy Plan (Energy Strategy)

The Japanese government has a legal requirement to review the Basic Energy Plan (or Energy Strategy), which is designed to set the direction of mid/long-term energy strategy, at least every three years according to changing conditions in the energy sector.  The previous review in 2010 included an increase of Japan’s dependence on nuclear from 30% (in 2010) to 50% by 2030.  Post-Fukushima, the previous DPJ government adopted a policy designed to enable Japan to be in a position to make a decision to phase out nuclear power in the 2030s.  Prime Minister Abe has set Japan in a new direction, instructing the Government to carry out an energy plan review in January 2013.

The previous energy plan included numerical government targets for the energy-mix.  The current government, however, only plans to set the direction of energy strategy in the mid-term (in the next 20 years) and to identify policy issues. Energy-mix targets are to be decided in three years time.  There are three reasons why the government wants to wait until 2016 to decide energy-mix targets.  One is nuclear.  16 (of 48 idled) reactors have applied for safety inspection with some expected to restart in 2014/2015.  Without clarity on how many restarts, it is difficult to assess the levels of other technologies required.  Second is renewable energy.  Japan’s Feed-in-tariffs (FITs) have boosted renewables take-up, by ensuring profits for generators for the first three years. But the FIT is in place from 2012-2015.  From 2015 onwards, the FIT tariff is likely to be lowered. Based on this and the take-up after 2015, the government is expected to re-assess renewable deployment in the long-term.   Third is electricity market reform.  Based on the passage of the Electricity Market Reform Bill, the government plans to launch full retail market liberalisation from 2016, which would encourage new entrants to enter into the electricity market.  This should help the government to make reasonable assumptions about the type of power generation which might be entering the market. 

The draft plan includes measures to expand co-generation technology and renewable energy and adjust their positions vis-a-vis oil, LNG, nuclear and or LP gas.  Nuclear was described as an important base load from the point of view of energy security, affordability and climate change. This position has elicited negative reaction from those hoping to see phase out including some in the LDP who have pointed out that it is at odds with the party’s manifesto which promises to strive for a society without dependence on nuclear. The Nuclear Regulation Authority has also criticised the government for failing to explain their shift in nuclear policy position.  METI had planned to put the Energy Strategy draft to the Cabinet in January but has decided to postpone until after the Tokyo elections on 9 February.

News

  • MOE Minister Ishihara thought COP19 was a step forward as all Parties agreed in calling for self-imposed commitments.  On Japan’s new target of a 3% increase on 1990 levels , Ishihara emphasised that ‘many countries/regions understand Japan is serious about climate change’. He was keen to contribute to the new international framework as well as to promote low carbon and energy saving domestically.

  • Japan achieved its KP target of a 6% reduction on 1990 levels: Japan’s total emissions reduction 2008-2012 was 8.2% (on 1990 levels).

  • METI and a state in Canada concluded a memorandum on energy cooperation to start exports of  LNG to Japan from 2019.

  • Japan signed Joint Credit Mechanism agreements with Costa Rica  and Palau.  There are now 10 countries with which Japan has such agreements. 

Low Carbon Growth

Analysis: Japanese FITs: merits and demerits of solar energy promotion 

The Japanese government introduced very generous FITs for renewable energies in July 2012.  Solar energy was particularly attractive as it is easy to deploy quickly and the rates were very high. Around 90% of Japan’s non-hydro renewable capacity (around 3GW)  is solar. Nonetheless, the FIT policy has created a situation which is delaying  actual deployment. This is because generators approved for FIT deals can get a fixed tariff for 20 years no matter when they start the actual electricity generation.  According to government research, about 90% of the authorised solar power generators have not yet started generation: they are waiting for the price of (foreign manufactured) solar panels to drop further before constructing plants.  To accelerate investment, the government plans to further review the tariffs for solar to lower the current price of 38 yen/kwh to 30 yen/kwh in the next two years.

In order to solve the current imbalance of renewable deployment, the Japanese government aims to expand FITs by introducing a separate FIT price for offshore wind: they plan a price of around 35 yen/kwh, a 60% increase on the price for onshore wind (22 yen/kwh).  The energy strategy being submitted to the Cabinet soon, will place greater emphasis on the use of wind and geothermal power.  In furthering deployment of these renewable sources, acceleration of deregulation is also crucial. 

 News

  • TEPCO plans to build two integrated coal gasification combined cycle (IGCC) facilities in Fukushima prefecture.  TEPCO and Mitsubishi group will jointly build 500,000 kW-level facilities within the compound of their existing power generation facilities.  The planned facilities will start operating in early 2020.

  • Mitsubishi Heavy Industries are ready to implement coal-fired thermal power CCS.  The company completed its feasibility study on CCS, jointly done with the U.S’s Southern Company. 

  • METI announced that Japan will chair the 5th general meeting of IRENA being held in January 2015.  IRENA is an international organisation to promote sustainable use of renewable energy.  As of January 2013, 122 countries and EU are member states.

  • The Japanese Government plans to develop wind energy vessels in collaboration with the University of Tokyo and major shipping companies by 2016 to halve CO2 emissions of ships.

Disclaimer

The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.

Countries: Japan
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