APEC Workshop on Renewable Energy Promotion and Pricing Mechanism, Taipei, Chinese Taipei

The Renewable Energy Development and

Taipei, Chinese Taipei

The Renewable Energy Development and Related Promotion and Pricing

Mechanism in Japan

September 26, 2013

Takao IkedaThe Institute of Energy

Economics, Japan (IEEJ)

Generation Mix

1

Generation Mix Trend in Japan§ LNG mainly compensates for the decline of nuclear after 2011§ LNG mainly compensates for the decline of nuclear after 2011

2

(Source) METI

Current Generation Mix in Japan

Among the total electricity generated in fiscal 2010, renewable energy, etc. accounted for approximately 10%; approximately 9% of which is hydraulic power generation.Other renewable energy is still cost prohibitive.

Composition of annual electricity generated in Japan

FY 2010 FY 2011

PetroleumCoal

Natural gasNuclear power

HydropowerApprox. 1.4%

Renewable energy excluding hydropower

Approx. 24% Approx. 8%

Approx. 9% Approx. 1%

Hydropower

Renewable energy

Natural gasNuclear power

Approx10.7％

Approx. 9%

Approx

Approx. 31%

Approx. 27%Natural gas

Nuclear power

energy excluding

hydropower

Petroleum

Approx. 14.4%

Approx39.5％

Nuclear power

Coal

Approx. 25%

Note: “Etc.” of “Renewable energy, etc.” includes the recovery of energy derived from waste, refuse derived fuel (RDF) products, heat supply utilizing waste heat, industrial steam recovery, and industrial electricity recovery.

Source: Prepared based on the Agency for Natural Resources and Energy’s “Outline of Electric Power Development in FY 2010”3 3

Promotion and Pricing Mechanism f N d R bl Eof New and Renewable Energy

4

Major laws and strategies for Renewable Energy in Japan #1

1 Sunshine Project (1974)1. Sunshine Project (1974)Long-term national project for new energy technology research and development in

Japan launched in July 1974.In 1993, Sunshine project was renewed as the New Sunshine Project consolidated with

Moonlight Project ( Energy Efficiency) and other environmental project. The project has finished in 2000.2. Law Concerning Promotion of the Development and Introduction of Alternative Energy (1980）

Known as “Oil Alternative Energy Law” Oil Alternative Energy were developed andKnown as Oil Alternative Energy Law . Oil Alternative Energy were developed and introduced for (1)Combustion, (2)heat, (3)energy, and (4)electricity which are generated from other than oil products. In 2009, oil alternative law was renewed as “NonFossil Energy Law” In this law energy suppliers (Electricity/Gas/Oil companies) have to use non fossilLaw . In this law, energy suppliers (Electricity/Gas/Oil companies) have to use non-fossil energies while using fossil oil efficiently.3. Law Concerning Special Measures to Promote the Use of N E (1997)New Energy (1997)

Known as “New Energy Law”. New Energy is energy which are not price-competitive among Oil Alternative Energy. Hydropower and Geo-thermal power are not included because of their price-competitiveness.（http://www.japaneselawtranslation.go.jp/law/detail/?ft=1&re=02&dn=1&co=01&ky=%E6%96%B0%E3%82%A8%E3%83%8D%E3%83%AB%E3%82%AE%E3%83%BC&page=3）

5

Revision of “New Energy”Innovative High-level

OilAlternative Energy

Innovative High level Energy Utilization Technology

Development of Renewable EnergyPV（High Efficiency, New Materials）,

Large HydropowerRenewable Energy

Natural Gas Nuclear PowerCoal Battery for PV and Wind in parallel including capacitor, Ethanol Production Technology from lignocellulosicbiomass, BTL （Biomass to Liquid） Production Technology, Gasification Power

Photovoltaic PowerBiomass

Biomass Power

Geothermal(binary)

New EnergySmall Hydropower GeothermalRapid Advancement of Energy

Efficiency

Generation from Biogas

Stationary Fuel Cell, Hybrid Auto, Natural Wind PowerSolar ThermalUnutilized Energy(Snow Ice)

Biofuels

Biomass Thermal

(Black Liquor)(Scrap Wood)

Unutilized Energy(Temperature

Deference Energy)

Diversification of Energy Source

y , y ,Gas Cogeneration, Heat Pump, Oil Residue Gasification Technology (IGCC, IGFC, etc), Clean Coal Technology

Ocean Energy

Recycling EnergyNatural Energy

(Energy Crops)

BiofuelsFuel Cell Vehicle, Electric Vehicle, Plug-in Hybrid Vehicle, CNG Vehicle, Diesel-substitute LP gas Vehicle, Hydrogen Vehicle, High Concentration Bio Fuel Vehicle, GTL Production

Waste-based Fuels (RDF)Waste Power

Waste Thermal

,Technology, DME Production Technology, Non-traditional Fossil Fuel Usage Technology (Methane Hydrate, Oil Sand, etc)

6(Source) Agency for Natural Resources and Energy, Ministry of Economy, Trade and Industry (METI), Japan (modified by IEEJ)

Major laws and strategies for Renewable Energy in Japan #2

4. Special Measures Law Concerning the Use of New Energy by Electric Utilities (2002)Known as RPS (Renewable Portfolio Standard) Law. In this law, the amount usage ofKnown as RPS (Renewable Portfolio Standard) Law. In this law, the amount usage of

renewable energy goals were established with 5 kinds of electricity (wind, solar, small hydropower, biomass power generation , binary geothermal).（http://www.rps.go.jp/RPS/new-contents/top/toplink-english.html）

5. Biomass Nippon Strategy (2002/2006)Comprehensive strategy of utilization of biomass set by Ministry of Agriculture, Forestry

and Fisheries in cooperation with Ministry of Economy Trade and Industry the Ministry ofand Fisheries in cooperation with Ministry of Economy, Trade and Industry, the Ministry of the Environment, and Ministry of Land, Infrastructure, Transport and Tourism etc.6. New National Energy Strategy (2006)

f ( )National energy strategy for 2030. Regarding renewable Energy, (1) promoting innovation in new energy technologies (achievement of PV power cost reduction comparable to thermal power generation etc.), (2) introducing 20% alternative energy in t t ti t ttransportation sector etc.7. Special Measures Law Concerning the Purchase of Renewable Energy Electricity by Electric Utilities (2011)gy y y ( )Known as FIT (Feed in Tariff) Law, which will start from July, 2012. In this law, the purchasing price and its duration will be determined separately.

7

Outline

RPS (Renewable Portfolio Standard)wind, solar, small hydropower, biomass power generation , binary geothermal8-year target set by every 4 years

2003

8-year target set by every 4 years

Buyback surplus PV electricity from residenceDeveloped from Utilities’ voluntary Net metering system

2009 NovDeveloped from Utilities’ voluntary Net metering system

Passage of FIT Law2011 Aug

Proposal from the Advisory Committee Proposal from Advisory committee for the purchasing rate and the duration

2012 Apr

Public CommentFrom May 16 to June 1

2012 May

Commencement of FITStart from July 1

2012 Jul

8

Revision of PV tariffBased on the PV system price decline

FY 2013

Renewable Energy Purchased by Utilities under RPS

(TWh)

0.0 2.0 4.0 6.0 8.0 10.0 12.0

2003

2004

Wind

Wind Hydro

Hydro

Biomass

BiomassPV

PV

Commencement of RPS

2005

2006

Wind

Wind

Hydro

Hydro Biomass

PV

PVBiomass

2007 Wind Hydro

y

Biomass

PV

PV2008

2009

Wind

Wind

Hydro

Hydro

Biomass

Biomass

PV

PV

PV under Buyback

Buyback System for surplus PV electricity from residence

2010 Wind Hydro BiomassPV

PV

PV under Buyback

9

Source: METI

Buyback System started from Nov 2009(1)Major points of the buyback system

○Of the electricity generated by photovoltaic generation systems, surplus electricity will be purchased.○ The buyback period is within the 10 years from the start of the program. The buyback price is fixed. 

(※The buyback price may differ depending on the fiscal year in which a panel is installed. In the initial stages, it is \48/kWh for residential use [less than 10kW].)

○ Expenses will be born by all electricity users.

Surplus electricity

E Ele

Purchase revenue(\48/kWh for residential use)

f N 2009

p y

Electricity

lectric C

ompa

ectricity

as of  Nov. 2009Solar surcharge

(Born by all electricity users)

Pow

er anies

y UsersSurplus electricity

Users  of photovoltaic generation systems

Purchase revenue(\24/kWh  for purposes other 

than residential use))

※In the initial stages after installation,  \48/kWh for residential use (less than 10kW) and \24/kWh for other uses.In the case where a private electric generator is also installed, \39/kWh and \20/kWh, respectively. 10

Buyback System started from Nov 2009(2)

November 2009‐ March  2011 

April 2011‐March 2012 (FY2011)Continued until April 2013 (FY2012)(FY2012)

Residential Use 48 JPY/kWh 42 JPY/kWhUnder 10kW (39 JPY/kWh)  (34 JPY/kWh)

Non Residential Use and Residential Use 

24 JPY/kWh(20 JPY/kWh)

40 JPY/kWh(32 JPY/kWh)

Over 10kW( / ) ( / )

*Rate increased because of finishing subsidy

Rate inside the brackets are for the houses/ facilities using private generation system (photovoltaic generation plus fuel cells, etc.)B backs rate ill be decide each ear and the rate contin es for 10

11

Buybacks rate will be decide each year and the rate continues for 10 years after the start of the program.

FIT Basic Scheme (Started From July 2012)

UtilitiPower producers

utilizing renewable

Electricity from Renewable Source Supply Electricity

Utilitiesgenergy

PV

Middle & Small Hydro

Wind

Purchase Electricity

Collecting Surcharge rate for FIT

With ordinary electricity rate

Fund for Purchasing Electricity from

Renewable Energy

Payment of collecting amount

of surcharge

BiomassCustomers

Organization for adjusting the surcharge by different region

Geothermal Decide Surcharge rate for FIT every

fiscal year

Decide the tariff rate every fiscal year with respect for the opinion

from advisory committee for purchasing price

Mi i t

Power from PV at houses

f

Approving power generation facilities

Advice of Rate and Duration

Minister Economy, Trade and Industry

Source: METI

Advisory committee for purchasing price etc

Major Revision from RPS to FIT

RPS(PV: Buyback)

Feed in Tariff

PV Under about 500kW No Limitation by Capacity

Wind - -Wind

Hydro Under 1MW Under 30MW

Geothermal Only Binary Cycle power plantNo Limitation

(Including Flash Steam Plant)

Biomass No category Differentiate the purchase rate by category

Source: METI

Biomass No category Differentiate the purchase rate by category

13

Electricity Cost Estimation in Japan

201020202030(Japanese Yen/kWh)

Source: National Policy Unit, Cabinet Secretariathttp://www.npu.go.jp/policy/policy09/archive02_shisan_sheet.html

14

Feed in Tariff started from July 2012

FY 2013; PV 10kW >=: \37.8(36.0+Tax)/kWh, 10kW< \38.0/kWh (Incl. Tax)

15Source: METI

Deployment in FY2012 and FY2013(April and May)

Major part of deployment under FIT is PV due to the development Terms 

(MW)

Cummulative Deployment Volume as of March 2011

(Approxmate)

Start operation from April 2012 to March

2013

Start operation from April to May

2013

DevelopmentTerm

(Approxmate) 2013 2013

PV (Residential) 4,4001,269

(Apr-Jun: 300)279 2-3months

PV (N R id ti l) 900706

961 1 YPV (Non Residential) 900(Apr-Jun: 2)

961 1 Year

Wind 2,60063

(Apr-Jun: 0)2 4-5 Yrs

Middle and Small Hydro(More than 1MW)

9,4001

(Apr-Jun: 1)0 2-3Yrs

Middle and Small Hydro200

30 2 3Yrs

(Less than 1MW)200

(Apr-Jun: 1)0 2-3Yrs

Biomass 2,30036

(Apr-Jun: 6)38 3-4Yrs

16Source: METI

Geothermal 5001

(Apr-Jun: 0)0 9-13Yrs

PV System cost revison (residential use)

FIT for PV residential sect which is started from July 2012 was based on the PV System cost of JPY(10 thousand) 46.6 / kW in 1st Q 2012.Revised FIT for residential PV for FY 2013 should be based on the latest (4th Qtr) cost which is JPY(10 

thousand) 42 7 / kWthousand) 42.7 / kW. About JPY(10 thousand) 4 / kW has dropped

(10thousand JPY/kW))

Already Build

Total Ave.

Newly BuildNewly Build

System cost for FY2012 tariff

Source: METIOct-Dec,

2011Jan-Mar,

2012Apr-Jun,

2012Oct-Dec,

2012Jul-Sep,

2012Jan-Mar,

2013Apr-Jun,

2013

FY2012 tariffLatest System cost

for FY2013 tariff

Fiscal YearSubsidy

(10Thousand JPY/kW)Condition

(10Thousand JPY/kW)Buy BackTariff

(JPY/kWh)

National Government Subsidy for Residential PV system

17

2010 70 650 48

2011 48 600 42

2012 35 475 42

2013 20 410 38

Development in the Future

18

Geothermal Power Plants (Japan)

M ori G eotherm al Plant(H okkaido Electric Pow er C o., Inc. D onanG eotherm al Energy C o., Ltd.)

O num a G eotherm al Plant(M itsubishi M aterials C orporation)

Sum ikaw a G eotherm al Plant(Tohoku Electric Pow er C o., Inc.and M itsubishi M aterials C orporation)

U enotai G eotherm al Plant(Tohoku Electric Pow er C o., Inc.and A kita G eotherm al Energy C o., Ltd.)

M atsukaw a G eotherm al Plant (Japan M etals & C hem icals C o., Ltd.)

Kakkonda G eotherm al Plant, U nit 1(Tohoku Electric Pow er C o., Inc. and Japan M etals & C hem icals C o., Ltd.)

Kakkonda G eotherm al Plant, U nit 2

H acchobaru G eotherm al Plant,U nit 1 and U nit 2(Kyushu Electric Pow er C o., Inc.)

O take G eotherm al Plant(Kyushu Electric Pow er C o., Inc.)

Suginoi G eotherm al Plant(Suginoi H otel)

(Tohoku Electric Pow er C o., Inc. and Tohoku G eotherm al Energy C o., Ltd.)

O nikobe G eotherm al Plant(Electric Pow er D evelopm ent C o., Ltd.)

Yanaizu-N ishiyam a G eotherm al Plant(Tohoku Electric Pow er C o., Inc. and O kuaizu G eotherm al C o., Ltd.)

Takigam i G eotherm al Plant (Kyushu Electric Pow er C o., Inc.and Idem itsu O ita G eotherm al C o., Ltd.)

Kokonoe G eotherm al Plant(Kokonoe Kanko H otel)

T k G h lPl

H achijojim a G eotherm al Plant (Tokyo Electric Pow er C o., Inc.)

Takenoyu G eotherm al Plant(H irose Trading C o., Ltd.)

Yam agaw a G eotherm al Plant (Kyushu Electric Pow er C o., Inc. and

O giri G eotherm al Plant (Kyushu Electric Pow er C o.,Inc. and N ittetsu Kagoshim aG eotherm al C o., Ltd.)

19(Source) Agency for Natural Resources and Energy, Ministry of Economy, Trade and Industry (METI), Japan

( y ,Japex G eotherm al Kyushu C o., Ltd.) Kirishim a Kokusai H otel G eotherm al Plant

(D aiw abo Kanko C o., Ltd.)

Governmental support measures FY 2012 budget

Ch i f E O ti I d J 2012

Exploration (drilling of C t ti t Installation of power

Choice of Energy Options:Issued on June 2012The geothermal amount of introduction is made into 3% of the total electric power production (27,200 millions kwh) at the maximum in 2030. ※2010 track record: 0.2% (2,600 millions kwh)

Exploration (drilling of exploration wells, etc.)

Construction stage Installation of power generation facilitiesGeological survey

Risk

[Targets] Cost of test drilling, etc. including geological surveys

Subsidy Investment Loan guarantee

[Targets] Cost of drilling exploration wells to check

[Targets] Cost of drilling ll f

Electric utilities h l t i it

Feed-in tariff scheme

including geological surveys.

Budget: \9 05 billion

exploration wells to check whether a sufficient volume of steam can be stably extracted from heat sources.

Budget : \5 billion

wells necessary for power generation

B d t \1 billi

purchase electricity generated from renewable sources including geothermal at the procurement price

d f th tBudget: \9.05 billionSubsidy ratio: 50% to 75%

Budget : \5 billionInvestment ratio: 50%

Budget: \1 billionLoan guarantee ratio: 80%

and for the procurement period.

20

Regulations on geothermal development

１ Natural Park Act１．Natural Park ActGeological surveys and drillings for geothermal energy in national parks are restricted according to the protection

zones.

２．Hot Spring ActDrilling in pursuit of hot springs (hot water, mineral water, steam and other gas from underground) requires a

permission of the prefectural governor.

３．Forest LawCutting down protected forests for constructing a base for drilling or a power generation plant requires delisting

from protected status. Delisting requires a proven necessity for the public interest.p g q p y p

４． Act on Special Measures concerning Reform of National Forest Business ManagementConstructing a base for drilling or a power generation plant in a national forest requires loaning. A national forest

b d f bli i hi 5h i h i i b dcan be used for public use or within 5ha in area, otherwise it cannot be used.

５． The Environmental Impact Assessment LawConstructing a power generation plant with output of 10,000kW or over requires EIA.Constructing a power generation plant with output of 10,000kW or over requires EIA.When constructing a power generation plant with an output of 7,500kW-10,000kW, the necessity of EIA is judged

by project.

６ El t i Utiliti I d t L６． Electric Utilities Industry LawPower facilities requires placing chief engineers in charge of supervision of safety matters of construction work,

maintenance and operation of the power facilities. 21

Offshore Wind demonstration project

Offshore of Fukushima PrefOffshore of Fukushima Pref. METI

2MW class Floating offshore wind turbine and 2 set of 7 MW class floating wind turbine

Floating substation from FY2013g

Wi d RWind ResourceWind Speed

Offshore of Choshi, Chiba Pref.(2.4MW)/Offshore of Kitakyushu, Fukuoka Pref (2.0MW)

METI (NEDO)2MW class wind turbine

Offshore of Goto, Nagasaki Pref.(2.4MW)MOE

100KW class floating wind t bi f FY2012

22

2MW class wind turbineWind observatory towerdemonstration projects

started from FY2012

turbine from FY20122MW class floating Wind

from FY2013

Renewable Energy Deployment Potential in Japan -19%

23

Grid Framework in Japan

Hokkaido

Tohoku

Direct current power

transmission

Tokyo

KansaiChubu

Hokuriku

Kyushu Frequency converter station

Shikoku

24

Direct current power transmission

Solar and Wind Power Deployment Potential in Japan

25

Large Battery Demonstration Projects

Hokkaido Electric Company Tohoku Electric CompanyChubu Electric CompanyKansai Electric Company

Large Battery Demonstration Projects for Grid Stabilization

p yType of Battery Redox Flow battery Lith ium-ion Battery NAS BatteryCapacity 40MW 20MW 6MW

Project ObjectiveSurplus Electric ity from

Wind powerFrequency Fluctuation

Grid Stabilization from PV(Surplus Elec . & Frequency

)Wind power

Fluctuation)

R&D Target : Cost reduction of batteries as same level as Pumped Hydro in 2020R&D Target : Cost reduction of batteries as same level as Pumped Hydro in 2020

Lithium-ion Battery NAS BatteryRedox Flow Battery

26

Demonstration Project on Next-generation Energy and Social Systems in Japan (FY 2010-FY2014)

Large-scale and cutting-edge pilot projects have been launched in 4 areas. The outcomes to be accumulated through the projects will be utilized to create smart communities and smart cities in Asia and other countries

Kyoto Keihanna District

create smart communities and smart cities in Asia and other countries.

Demonstration using new technologies in science cityKitakyushu City

Yokohama City

Kitakyushu City

Large scale demonstration in

Demonstration in industrial city

Large-scale demonstration in major city

Toyota City

Community-based

y y

ydemonstration in provincial

city

27

Information of Smart Community Projects

htt //j j / /http://jscp.nepc.or.jp/en/http://jscp.nepc.or.jp/en/video.shtml

28

Th kThank you for your attention!for your attention!

29