IEEJ e-NEWSLETTER
No. 217(Based on Japanese No. 216)

Published: September 21, 2021
The Institute of Energy Economics, Japan(As of September 20, 2021)

Sources:(1) Ministry of Finance "Japan Trade Statistics"(2) World Bank (Netherland Title Transfer Facility)(3) DOE-EIA, NYMEX (Front-month Futures)

Sources:(1) DOE-EIA(2) Investing.com

Sources:

Source: x-rates.com(1) Finance. Yahoo.com(2) Investing.com

Contents
Summary【Global Monitoring】
1.

US: Political Bargaining Accelerates to Pass Infrastructure Bill in Late September

2.

EU: UK Releases Its Hydrogen Strategy

3.

China: Ramping Up Efforts to Make Renewables a Main Electricity Source

4.

ME: Taliban Movement Seizes Control of Afghanistan

5.

Russia: Developments in Hydrogen and Moves around Nord Stream 2

1

Summary【Global Monitoring】
1. US: Political Bargaining Accelerates to Pass Infrastructure Bill in Late September
The Biden administration’s trademark infrastructure bill passed the Senate, but the scale ofthe budget and decarbonization measures were cut back. Deliberations will now start in theHouse; political bargaining within the Democratic Party to restore the dropped climate
measures will be fierce.
2. EU: UK Releases Its Hydrogen Strategy
The UK released its hydrogen strategy. The strategy sets different time frames, as well as aroadmap for the production, networks, and use of hydrogen, key milestones, and necessary
supporting policies.
3. China: Ramping Up Efforts to Make Renewables a Main Electricity Source
China is accelerating efforts to make renewables a main power source, including reviewing
the time-based electricity tariff system and establishing an institutional framework forincreasing its energy storage capacity. Developments will continue to be monitored.
4. ME: Taliban Movement Seizes Control of Afghanistan
The Taliban, an insurgent group opposed to the Afghan government, rapidly expanded its
area of control and captured the capital, Kabul. In Tunisia, the president dismissed the prime
minister and suspended parliament. In Iran, the new president formed his cabinet.
5. Russia: Developments in Hydrogen and Moves around Nord Stream 2
The Russian government approved the Concept for the Development of Hydrogen Energy
in Russia, recognizing hydrogen technologies as an economic growth driver for the country.
Nord Stream 2 is nearing completion but is facing a string of court rulings that are affecting
and delaying its launch.

2

1. US: Political Bargaining Accelerates to Pass Infrastructure Billin Late September

Ayako SUGINO, Senior Researcher
Associate Professor
Musashino University

On August 10, the US Senate passed the bipartisan Infrastructure Investment and Jobs Act by 69
votes to 30. The Senate bill is a $1.2 trillion package including $550 billion of new spending, andis a huge reduction from the $2.2 trillion infrastructure resilience and decarbonization investment
plan that President Biden announced in April. Its scope was also scaled back. The President’s
proposal included decarbonizing the power sector and expanding the use of EVs, as well as climate
measures (such as reinforcing power grids and EV charger facilities, and making buildings more
efficient), funded by raising taxes for companies and the rich. In contrast, although the Senate billappropriates $15 billion for expanding the use of EVs, $65 billion for modernizing power grids(including R&D for carbon capture and hydrogen), and $250 billion for transportation infrastructure,it has removed $566 billion in investments for innovative R&D and building domestic
manufacturing hubs and $363 billion in tax breaks for clean energy, and has dropped the proposed
tax raises. The Senate bill gave priority to the bipartisan agreement, and compromised by cuttingback the scale and softening the emphasis on decarbonization.
On August 23, the House returned from its summer recess and resumed legislative activities.
There is a growing rift among the House Democrats on how to proceed with the infrastructure bill:whether to deliberate and vote on the infrastructure bill passed from the Senate immediately, or
whether to do so simultaneously with the 2022 budget resolution and the voting rights bill thatprevents the violation of voting rights by state governments, in which case the infrastructure votewould be delayed. Progressive House Democrats lawmakers, who account for the majority, areeyeing appropriating $3.5 trillion for climate measures and social security including free preschool
and community college and paid family leave, in addition to the $1.2 trillion infrastructure bill.
However, with no prospect of gaining Republican support, Democrats intend to pass the $3.5 trillion
social security spending through a special procedure for budget deliberation called “financial
reconciliation” that allows the bill to pass with only a simple Senate majority (51 votes from 50
Democratic lawmakers plus Vice President Harris). Financial reconciliation becomes possible only
after passing the budget resolution, which sets the federal government revenue and expenditure forthe fiscal year.
The fiscal 2022 budget resolution passed the Senate on August 11 in a partisan vote with 50 votes
to 49. All Senate Republicans voted against the resolution as it was clear that Democrats would
push ahead with the $3.5 trillion reconciliation once it passes. However, with an eye on the midterm
election next year, nine moderate Democrats in the House and two in the Senate declared that theywould vote against both the bill and the reconciliation if House Speaker Nancy Pelosi andprogressive Democrats insist on the liberal public promise and delay the vote on the infrastructure
bill. With such a small difference in votes between the parties, a rebellion by moderates would leaddirectly to the rejection of the bill.
This game of chicken between moderates and progressives, holding the president’s infrastructure
legislation hostage, was suspended temporarily by Speaker Pelosi’s proposal to advance the voting
rights bill and vote on the infrastructure bill by September 27. The House immediately voted on thevoting rights bill and the budget resolution sent from the Senate. All Republicans voted against bothof them. However, Democrats have yet to agree on even the faintest outline of which policies toinclude in the $3.5 trillion financial reconciliation. Given that the president’s party almost always
loses seats in the midterm elections, there are fears that Democrats may suffer a major loss of seatsas President Biden’s popularity declines with the recent surge in Covid-19 and the situation in
Afghanistan. Even so, progressives show no sign of easing their demands; rather, the political gameis intensifying.

32. EU: UK Releases Its Hydrogen Strategy
Kei SHIMOGORI, Senior Researcher
Global Energy Group 1
Strategy Research Unit
On August 17, the United Kingdom released its first-ever hydrogen strategy. The strategy isbased on the Ten Point Plan for a Green Industrial Revolution announced by Prime Minister
Boris Johnson in November 2020 and sets the goal of obtaining the capacity to produce 5 GW
of low-carbon hydrogen by 2030. The Strategy admits that the role of hydrogen in 2030 or 2050
is highly uncertain, including the production method and the scale of demand, but that support
for new technologies must start in the 2020s in the commercial, technological, and user sectors
across the entire value chain. The Strategy is based on different timeframes, namely the early2020s, the mid and late 2020s, and the mid-2030s, and sets a roadmap for the production,
networks, and use of hydrogen, key milestones, and necessary support policies.
Taking the mid-2020s (2025–2027) as an example, the roadmap sets the following goals.
Production: establishing large-scale CCUS-enabled production of blue hydrogen in at least one
location, and expanding the scale of water electrolytic production of green hydrogen. Networks:
enhancing dedicated small-scale pipelines and trucking and promoting small-scale storage. Use:applications to industry and transport (heavy goods vehicles (HGVs), rail and shipping trials),use of heat in houses, and hydrogen blending. As shown by the roadmap, the UK’s hydrogenstrategy is not limited to a single hydrogen production technology. It intends to use both green
and blue hydrogen, currently comprises nine hydrogen production technologies, andconsultations are underway toward designing the UK Low Carbon Hydrogen Standard. The
scope of the consultations includes: (1) setting the scope of and designing the system for the
Net Zero Hydrogen Fund to support the commercial deployment of new low-carbon hydrogenproduction plants (240 million pounds, or roughly 36 billion yen), and (2) a business model for
narrowing the cost gap between low-carbon hydrogen and fossil fuels, such as applying the CfD
mechanism to low-carbon hydrogen. The details are to be released in early 2022, based on the
results of the consultations.
In the Ten Point Plan for a Green Industrial Revolution, the UK government set a milestone
to complete the trials necessary to mix gas with 20% hydrogen in the residential gas networks
by 2023. The Hydrogen Strategy goes one step further, and aims to assess the cost performanceof mixing hydrogen into existing gas networks by autumn 2022 and to make the final policy
decision in late 2023.
Other European countries are also looking into using hydrogen in their gas networks. One
example is the Netherlands, whose domestic natural gas production is declining. In its reportfor the first half of 2021 released in July, Dutch Gasunie announced that it will invest 7 billion
euros by 2030 at the request of the government to build a hydrogen network. The network,
which is scheduled to be built by 2027, will use existing gas networks for 85% of the pipelines
and is believed to cost only one quarter of that of a new build. While hydrogen entails
uncertainties such as future demand, supply, and transport, the concrete efforts being pursued
by various countries amid such circumstances must be watched.

4

3. China: Ramping Up Efforts to Make Renewables a Main Electricity Source
Li ZHIDONG, Visiting Researcher
Professor at Graduate School
Nagaoka University of Technology
China is aiming to achieve net-zero carbon emissions before 2060. To meet this goal, it is necessary
to make renewables, mainly wind power and solar PV, a main power source. This involves challenges
including ensuring grid stability and reducing integration costs. The government has released a series ofmeasures in quick succession.
On July 29, the National Development and Reform Commission (NDRC) issued a notice on further
improving the time-of-use electricity tariff mechanism. Since the 1980s, China has been implementing
a seasonal and time-of-day-based (peak, daytime excluding peak, and nighttime (“valley” hours))
electricity tariff system nationwide to level the electricity demand and ease supply-demand crunches.
Meanwhile, fluctuations in demand have widened and the demand structure has changed in recent years
with the spread of air-conditioning, resulting in the occurrence of peak loads in winter as well as insummer. Further, an increase in variable power sources has caused significant fluctuations in supply
capacity. According to NDRC, while summer and winter peak hours are less than 60 hours in aggregate
in most regions, an estimated installed capacity of over 100 GW is required to deal with the peak,pushing up the cost of stabilizing supply and demand. The key points of the new electricity tariff system
are a larger electricity tariff difference and finer time slots. First, the price ratio between peak hours and“valley” hours will increase from the current level of a maximum of 3:1 to at least 4:1 in regions where
the peak-to-valley excess ratio is expected to be over 40%, and to at least 3:1 in other regions. This will
make the peak-hour electricity tariffs more expensive than they are now. Further, the hours with a loadof 95% of the maximum electricity generation or higher are designated as “high peak hours,” with aprice that is 20% higher than the peak price. Furthermore, for regions with a high ratio of renewables
and a serious demand shortage in some hours, a “deep valley price,” which is 20% lower than the “valley”
price, will be introduced. Consequently, in regions where the peak-to-valley excess ratio exceeds 40%,
the price difference between the “high peak” and “deep valley” hours will be six times or more.
The new electricity tariff will be applied first to the industrial and commercial sectors and then will
be expanded to the residential sector when conditions are met. Incentive measures include
simultaneously promoting the following, to spur the expansion of variable renewable electricity andensure grid stability: (1) peak shifting (by utilizing batteries), peak cutting (introducing variable solarPV, etc.), and the bottom-up approach (charging EVs, etc.) on the demand side, (2) securing output
adjustment capacity for electricity sources (retrofitting CCS coal thermal power for flexibility andincreasing gas thermal power, expanding pumped-storage hydroelectricity plant and batteries, etc.) on
the power generation side, and (3) enhancing power storage capacity on the electricity network side.
Regarding any rise in integration costs resulting from these measures, NDRC states that the revenue
from electricity sales (paid through tariffs by all consumers) will not change. However, it will be achallenge to control the rise in costs.
Measures exclusively for enhancing energy storage capacities have also been announced. On July 23,
NDRC and the National Energy Administration issued the Guidance on Accelerating the Developmentof New Energy Storage. The Guidance defines new energy storage technologies to include all storage
technologies aside from pumped-storage hydroelectricity, and sets a goal of increasing their combined
capacity from 3.81 GW in 2020 to at least 30 GW in 2025, and further, to a level necessary forrenewables to serve as a main power source in 2030. Then, on August 10, a notice was issued toencourage renewable power producers to acquire energy storage capacity. The notice promises to allow
additional grid connection capacity for those renewable power producers that have a certain level ofstorage capacity, whether built for themselves or purchased.
Making renewables a main power source has now become a global movement. To achieve this, China
is accelerating the establishment of an institutional framework. Developments in this effort and theireffects will continue to be monitored.

54. ME: Taliban Movement Seizes Control of Afghanistan
Shuji HOSAKA
Director of JIME Center

The Taliban, an insurgent group opposed to the Afghan government, rapidly expanded its
area of control and entered the capital, Kabul, on August 15. President Ghani fled to the UAE
and his government collapsed. The Taliban has started the power transition process, and acoordination council has reportedly been set up, joined by former President Karzai and former
Chief Executive of Afghanistan Abdullah, to discuss the change of government. Many foreignembassies have closed temporarily and embassy staff have been evacuated. The Japanese
Embassy has also evacuated all embassy staff and opened an interim office in Doha, Qatar.
The Taliban has promised to continue to allow education and jobs for women, as well as
business activities including banking and investment, and that no attacks on other countries byforeign combatants operating in Afghanistan will be tolerated. However, whether theinternational community will recognize the new government depends on whether the Taliban
lives up to its promises. Islamic State, an international terrorist group which is against the
Taliban, issued a statement condemning them, and on August 26, carried out a suicide bombingthat killed and injured many U.S. military members and local citizens.
Meanwhile, in Tunisia, anti-government protests have broken out in various parts and on July
25, President Saied dismissed Prime Minister Mechichi and suspended parliament, fuelingconfrontation within the country. On August 24, Algeria announced that it had cut diplomatic
ties with Morocco.
In both Turkey and Algeria, forest fires have broken out in more than one hundred places,
causing many deaths and injuries. The fires have also caused indirect damage in Turkey,
including the crash of a Russian-manufactured amphibious fire-fighting aircraft while inoperation. Algeria’s fires are suspected to have been caused by torching.
In Iran, the new President Raisi submitted a list of cabinet members to parliament and gained
approval. Many of the new cabinet of hardliners are veterans in their respective areas of
responsibility, including former Deputy Foreign Minister Hossein Amir-Abdollahian who was
appointed as Foreign Minister, and Javad Owji, former managing director of the National
Iranian Gas Company (NIGC), who was appointed as oil minister.
On July 29, an Israeli-operated oil tanker owned by a Japanese shipping company was
attacked off the coast of Oman, killing two crew members. The G7 foreign ministers issued ajoint statement on August 6 condemning the attack and blaming Iran for involvement.
On August 28, the Baghdad Conference for Cooperation and Partnership began in Iraq,
joined by the presidents of Egypt and France, the King of Jordan, the Emir of Qatar, the Vice
President of the UAE, and the foreign ministers of Saudi Arabia and Iran. The conference saw
improvement in ties between Qatar and UAE, but it is not clear whether there were direct talks
between adversaries Saudi Arabia and Iran.
Japan’s Foreign Minister Motegi visited Egypt, Palestine, Israel, Jordan, Turkey, Iraq, Iran,and Qatar from August 15 through 24.

6

5. Russia: Developments in Hydrogen and Moves around Nord Stream 2
Sanae KURITA, Senior Researcher
Global Energy Group 2Strategy Research Unit
On August 5, the Russian government approved the Concept for the Development of Hydrogen
Energy in Russia for realizing a low-carbon society. In the first phase (from the present to 2024), apilot project for low-carbon hydrogen production will be launched with the goal of exporting
200,000 tonnes of hydrogen in 2024. A hydrogen consortium of facility companies andmanufacturers will also be established, and infrastructure for hydrogen storage and transport will
be constructed. In the second phase (2025–2030), commercial production will start with the goal ofexporting 2–12 million tonnes of hydrogen in 2030, as well as hydrogen-related facilities (bluehydrogen production plants, electrolytic baths, and facilities for storing, liquefying, and transportinghydrogen). In the third phase (2031–2050), the export of green hydrogen will start with the goal ofexporting 15–50 million tonnes in 2050. The goal is to export large volumes of hydrogen to the
Asia Pacific region and Europe, as well as hydrogen technologies to the world.
Further, the Concept proposes establishing three hydrogen production clusters, with the NorthWest cluster exporting hydrogen to Europe and alleviating the carbon footprint of export companies.
The East cluster will export hydrogen to Asia, aiming to develop hydrogen infrastructure in thetransport and energy areas. The Arctic cluster will supply low-carbon electricity to the Russian
Arctic.
The following technologies are regarded as necessary to develop the hydrogen industry and arebeing given priority: hydrogen production from natural gas and gasified coal by combining thesteam reforming of methane and CCS technology, water electrolysis using electricity from nuclear
and hydropower plants, and the development of storage and transport technologies for hydrogenenergy (liquefied hydrogen, ammonia, and metal hydrides). Prime Minister Mishustin has expressedhigh hopes, stating “The development of hydrogen energy will allow mitigating the risks of losing
energy markets and support economic growth through the formation of new production operations,as well as the creation of high-tech jobs, export of products and technologies.” On August 23, theconcept and roadmap for the production and use of EVs and hydrogen vehicles up to 2030 werereleased. Created jointly by the Industry and Trade Ministry and the Economic Development
Ministry, they set the targets of producing 25,000 EVs by the end of 2024 and 217,000 by 2030. No
numerical targets were announced for hydrogen vehicles.
On August 20, US President Biden signed the Executive Order on Blocking Property with
Respect to Certain Russian Energy Export Pipelines. “Certain pipelines” refers to Nord Stream 2,
TurkStream, and their succeeding projects. On the same day, the US Treasury Department alsoannounced additional sanctions on Russia. However, with only 15 kilometers of Nord Stream 2
remaining to be built, the sanctions are unlikely to have any real impact on its completion.
On August 25, Germany’s Dusseldorf Higher Regional Court dismissed an appeal by the Nord
Stream 2 operating company, a Gazprom subsidiary. The company had demanded exemption fromthe EU directive which requires pipeline owners and gas suppliers to be legally independent fromone another and denies the company exclusive pipeline access. As a result, the company will beentitled to use just 50% of the capacity of Nord Stream 2. The project continues to suffer court
rulings that are delaying the pipeline’s launch and worsening the project’s profitability, including
the July ruling by the Court of Justice of the European Union that dismissed the German
government’s appeal and supported Poland’s complaint that Gazprom should be denied exclusive
use of OPAL, the onshore extension of Nord Stream and Nord Stream 2 in Germany.

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