IEEJ e-NEWSLETTER
No. 230(Based on Japanese No. 223)

Published: April 12, 2022
The Institute of Energy Economics, Japan(As of April 11, 2022)

Sources:(1) Ministry of Finance "Japan Trade Statistics"(2) Ministry of Economy, Trade and Industry (arrival month basis)(3) Estimated by World Bank (Netherland Title Transfer Facility)(4) 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

ContentsSummary【Energy Market and Policy Trends】
1. Developments in Nuclear Power
2. Recent Developments in the Oil and LNG Markets
3. Update on Policies Related to Climate Change
4. Update on Renewable Energies

1Summary
1. Developments in Nuclear PowerWith Russia’s invasion of Ukraine, discussions on strengthening energy security areaccelerating in Europe, including on nuclear power. Whether Russian uranium will be added tothe sanctions list must also be watched.
2. Recent Developments in the Oil and LNG Markets
G7 Energy Ministers' Joint Statement underlined the importance of investment in the LNG
sector. EU's initiative to procure additional LNG will have a profound impact on the globalmarket. The LNG and oil markets in 2022 will walk a tightrope.
3. Update on Policies Related to Climate Change
The IPCC published the Working Group II contribution to the Sixth Assessment Report on
the impacts, adaptation, and vulnerability related to climate change. The US Biden
administration is running short of policy measures to address climate change heading toward
the mid-term elections.
4. Update on Renewable Energies
Europe is rapidly revising its initiatives and targets related to renewable energy, hydrogenenergy, as well as energy conservation and nuclear power to address energy security. Japanis also expected to steer quickly based on these trends.

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1. Developments in Nuclear Power
Emiri YOKOTA, Senior ResearcherNuclear Energy Group
Strategy Research UnitOn February 24, the Chernobyl nuclear power plant in Ukraine was seized by Russian forces.
The plant lost off-site power from the grid at one point and had to rely on emergency diesel
generators. The International Atomic Energy Agency expressed its deep concern but, in astatement released on March 9, said that the disconnection from the grid would not have a
critical impact as there is sufficient cooling water in the pool to remove heat from the spent fuel.
Off-site power was restored on March 14.
Furthermore, on March 4, the Zaporizhzhia nuclear power plant in southern Ukraine caught
fire after Russian shelling. Reactor operations were not affected as the fire occurred in off-sitefacilities. IAEA Director General Rafael Mariano Grossi expressed deep concern andcondemned the attacks on the plant at the Board of Governors meeting that began on March 7,commenting that such attacks have “caused unprecedented danger of a nuclear accident, risking
the lives of people living in Ukraine and in neighboring countries, including Russia.”
Despite these incidents, discussions on strengthening Europe’s energy security areprogressing rapidly, including on nuclear power as a key point. Following France’s nuclear newbuild programs announced in February, on March 17, Belgium announced a ten-year
operational life extension of two of its nuclear power plants, Doel Unit 4 and Tihange Unit 3,to 2035. The decision was made considering the fear that Russia’s invasion of Ukraine will
drive up already extremely high energy prices even higher.
In parallel with these moves, on March 12, Finland’s Teollisuuden Voima Oyj (TVO)
announced that the company’s Olkiluoto Unit 3 had started to transmit electricity. The plant is
the first European Pressurized Reactor (EPR) in Europe to do so. It is also the first new reactor
in Finland to start transmitting electricity in roughly 40 years since Olkiluoto Unit 2 in 1979.
Plant output will be increased gradually over the next four months or so up to the rated outputof 1720 MW, at which point it will enter commercial operations. It is planned to provide about
10% of Finland’s total electricity output.
Assessment procedures for introducing new types of reactors are also making progress. OnMarch 7, the UK nuclear regulator announced that it has begun a Generic Design Assessment(GDA) for Rolls-Royce’s small modular reactor (SMR). This is the UK’s first-ever GDA
procedure.
On the topic of uranium prices, media reports have stated that the US Senate has begun
discussions on banning Russian uranium imports in the wake of Russia’s invasion of Ukraine.
Russia produces over 40% of the world’s enriched uranium (as of September 2020). Reacting
to this move by the US, the spot uranium price climbed to about $60, and is likely to rise further
if the US decides to add Russian uranium to its import ban list.

32. Recent Developments in the Oil and LNG Markets
Hiroshi HASHIMOTO
Head of Gas Group
Fossil Energies & International Cooperation Unit
G7 Energy Ministers' Joint Statement on 10 March 2022 notably underlined the importanceof investment in the LNG sector to mitigate potential supply disruptions of pipeline gas toEurope. The European Commission (EC) unveiled its REPowerEU plan on 8 March, followedby an announcement on 11 March of its intention to phase out its dependency on Russian fossil
energy supply by 2027. The Commission introduced a proposal of securing gas storage levels
and an idea of collective gas purchases on 23 March.
REPowerEU includes procurement of additional 36 million tonnes of LNG as a measure in2022, which would have a significant impact on the balance in the global LNG market including Japan and emerging markets in Asia - with little spare supply capacity. Shell'sannouncement in late February to withdraw from the Sakhalin 2 LNG project sent shockwaves
through the LNG industry. Japanese stakeholders should not follow the move in considerationof potential impacts on Japan's energy supply security.
EC is proposing a minimum gas storage filling level of 90% at the beginning of November
every year from 2023, following 80% in 2022. Underground storage facilities have been
operated differently depending on sizes, facility features, and regulatory requirements bycountry. Therefore, implementation measures by member countries will also attract attention.
It is also a difficult question to define what "phasing out dependency" exactly means - whatpercentage point, in different EU member countries. It is also important to procure Russian gas
stably and safely until phasing out of it.
Additional LNG supply has been already on the way from the United States. In addition torecent completion of Venture Global LNG's new LNG export plant and Cheniere's Sabine PassTrain 6, the two companies have recently announced progresses of next respective LNG
production projects - through long-term sales agreements and preparatory activities forconstruction.
While spot LNG and European gas prices briefly surged to around USD 70 per million Btu
in early March, they have been more than USD 30 since Russian invasion in Ukraine and areexpected to stay in high ranges.
Crude oil prices have been high, too, with the Brent price reaching USD 139 per barrel on 7March. As Russian oil export was expected to shrink, the International Energy Agency (IEA)
decided on 1 March to release 60 million barrels. While the IEA's Oil Market Report on 16
March forecast a 2.5 million-barrel-per-day reduction of Russian oil export from April, thereduction may be even greater with elevated sanctions and buyers' reluctance. Saudi Arabia,
who is supposed to have immediate potential to increase production, is not apparently so eager
to do so.
The U.S. Energy Information Administration (EIA) forecast an increase of 1.32 million
barrels per day of oil production in the country in 2022 from last year, which would not besufficient to cover the loss of Russian supply. Significant reduction of demand would be needed
to stabilize the global oil market.
43. Update on Policies Related to Climate Change
Takahiko TAGAMI, Senior Coordinator, ManagerClimate Change Group
Climate Change and Energy Efficiency Unit

On February 28, the Intergovernmental Panel on Climate Change (IPCC) published theWorking Group II contribution to the Sixth Assessment Report. The IPCC has three WorkingGroups, and this report was produced by Working Group II, which assesses the impacts,adaptation, and vulnerability related to climate change. Working Group I published their reportin August last year and Working Group III is scheduled to publish theirs in April this year. The
report published this time has several novel elements: (1) cross-chapter papers on climate
impacts, risks and options to act for cities and settlements by the sea, tropical forests, mountains,
biodiversity hotspots, dryland and deserts, the Mediterranean, and the polar regions, and (2)global to regional atlas showing data and findings on climate impacts and risks related tobiogeography, drought, flooding, and so on.
For the United States’ Social Spending and Climate Bill, which includes clean energy
measures worth $555 billion dollars, there is a move to carve out the climate change policy
portion, which is believed to be capable of meeting half of the 2030 target (50–52% GHGemissions reduction) on its own, and pass it through Congress independently. However, thishas also been stalled, partly because Democratic Senator Ben Ray Luján suffered a stroke onJanuary 27 and had an operation, reducing the number of Democrat votes in the Senate to 49.
Senator Luján returned to the Senate on March 3.
Meanwhile, there are moves to limit administrative measures to address climate change. OnFebruary 28, the US Supreme Court conducted a hearing on a case in which 19 states and coalcompanies claimed that there is no legal authority for the US Environmental Protection Agency
to issue new policies to regulate power plants. The Supreme Court is due to give its decision inJune. Conservative justices currently have a six-to-three majority in the Supreme Court.
Climate measures are also being considered in the area of finance, namely by the US Federal
Reserve and the US Securities and Exchange Commission (SEC). The Fed is analyzing the risks
that banks will face from climate change. Currently, three of the seven seats on the Federal
Reserve Board of Governors are vacant, and Sarah Raskin had been nominated as successor toRandal Quarles, Vice Chair for Supervision of the Fed. However, the Biden administration
withdrew her nomination on March 15 after Republican lawmakers and Democrat Senator Joe
Manchin opposed the nomination, asserting that Ms. Raskin may pressure banks through theFed into choking off credit to traditional energy companies, and that thinking about climatechange in economic policy is a threat to prosperity.
On March 21, the SEC proposed rule amendments on the Enhancement and Standardizationof Climate-Related Disclosures for Investors. The proposed rule requires a company to disclose
GHG emissions from upstream and downstream activities in its value chain (Scope 3), ifmaterial (if the risks, such as a potential regulation by the climate change countermeasures onupstream and downstream activities, pose an important challenge to its business). While theresponsibility for determining whether its Scope 3 emissions are material lies with the company,
investors and SEC can file objections on what kind of information the company classifies asmaterial. Views were reportedly divided among the three Democratic Commissioners of thefive-membered SEC on the materiality of certain Scope 3 emissions. The rules will be subject
to a 60-day public comment period. Heading toward the mid-term elections, the Biden
administration is running short of policy measures.

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4. Update on Renewable Energies
Akiko SASAKAWA, PhD
New and Renewable Energy GroupElectric Power Industry & New and Renewable Energy Unit
Four days after Russia invaded Ukraine, an urgent Special Energy Council meeting wascalled in Brussels. In the run-up to the meeting, Germany’s federal economy and environment
minister said that energy sovereignty strengthens a country’s security and stressed theimportance of fast-tracking the energy transition and expanding renewable energy. About aweek later, Germany published draft revisions to the Renewable Energies Act (EEG2023), in
which the country unveiled its target to cover its domestic electricity supply almost entirely
with renewable energy by 2035 and to raise the share of renewable electricity to 80% by 2030.
This is a 15% increase from the current 2030 target and underlines Germany’s commitment toaccelerating the expansion of renewable energy.
European countries are accelerating their efforts to expand renewables one after another. Inthe Netherlands, the Cabinet approved plans to designate three additional wind farm zones andincrease its offshore wind power capacity to 21 GW by 2030 in March. The aim is to actively
expand offshore wind power and make it a main power source of the country. A proposal toinvest approximately 1.7 billion euros in the development of wind farm zones is being discussed
in the Dutch parliament.
In France, an “Offshore Wind Pact” that cements to accelerating the offshore wind powerbusiness was agreed in March. The pact sets a target to work on offshore wind power projects
totaling 20 GW by 2030 in order to operate 18 GW of wind power by 2035 and 40 GW by 2050.
This is a major jump from the current energy plan which sets a target of introducing 6.2 GW
by 2028. Further, in neighboring Belgium, the energy minister is requesting that the 2030 target
for offshore wind capacity be raised to 8 GW. With a coastline of just 67 km and a limitedExclusive Economic Zone, Belgium’s offshore wind capacity is currently just 2.3 GW.
Nevertheless, the country is looking into speeding up the designation of offshore wind energyzones.
In addition to these efforts to expand renewable energy, another move that deserves attention
is the acceleration of hydrogen capacity. On March 16, Germany’s Vice Chancellor andMinister for Economic Affairs and Climate Action and Norway’s Prime Minister had a talk andreaffirmed the importance of speeding up energy development and building related
infrastructure to replace Russian oil and gas. As one concrete action, they agreed to carry out ajoint survey on laying a hydrogen pipeline to carry hydrogen produced in Norway to Germany.
Further, Denmark set a new goal of being able to produce 4 to 6 GW of green hydrogen peryear by 2030. With its immense offshore wind power capability, Denmark aims to become anet exporter of green energy by accelerating its production, to help European countries growindependent of fossil fuels.
Amid the fraught world situation, Europe is rapidly revising its renewable- and hydrogenrelated initiatives and aims to address energy security. Moreover, some countries are taking
concrete steps to utilize nuclear power more actively while also strengthening energy
conservation, thus stepping up efforts to change the energy mix. Japan is also expected to steer
quickly based on these trends.

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