IEEJ e-NEWSLETTER
No. 232(Based on Japanese No. 224)

Published: May 16, 2022
The Institute of Energy Economics, Japan(As of May 16, 2022)

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

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)

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

Sources: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 and Energy Conservation
4. Update on Renewable Energies

1Summary
1. Developments in Nuclear Power
Russia has withdrawn from Chernobyl but still controls Zaporizhzhia. The UK released
the British energy security strategy, which includes expanding nuclear power. In Japan,
JBIC invested in an SMR company.
2. Recent Developments in the Oil and LNG Markets
With the increase in supplies and the release of reserves by OPEC and the US, it may
now be possible to prevent serious oil shortages. Europe’s growing demand for LNG
continues to put upward pressure on spot LNG prices for Asia.
3. Update on Policies Related to Climate Change and Energy Conservation
The IPCC published the Working Group III contribution to the Sixth Assessment
Report. The Report presented the analysis result that to limit warming to 1.5°C from preindustrial levels, it is necessary to reach peak global GHG emissions before 2025 at thelatest.
4. Update on Renewable Energies
To strengthen energy security under the current uncertain international energy
situation, it is necessary to fully leverage domestic renewable energies and hydrogen tominimize reliance on imports.

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1. Developments in Nuclear Power
Kenji Kimura, PhD
Senior ResearcherNuclear Energy Group
Strategy Research UnitOn April 1, the International Atomic Energy Agency (IAEA) announced that Russian forces
have withdrawn from Ukraine’s Chernobyl nuclear power plant. The withdrawal has also been
confirmed by an official statement from Russia, in addition to a report by Ukraine to the IAEA.
Subsequently, Ukraine also reported to the IAEA the first change of plant staff since the startof the Russian invasion. Also, according to an April 13 statement, an IAEA expert team led by
Director General Rafael Mariano Grossi is finalizing preparations for sending missions to help
ensure safety and security at the power plant. Radiological assessments and repairs of remotesafeguards monitoring equipment will also be conducted at the plant.
The Zaporizhzhia (Zaporozhye) nuclear power plant which was also attacked is still under
Russian control. The plant remains in operation according to an IAEA announcement, but thefact that the country’s key electricity supply facility is in foreign hands is an extreme threat tonational security.
It is earnestly hoped that Ukraine will regain full sovereignty and achieve reconstruction,including restoring the two plants to their condition before the invasion. The international
community should hold Russia responsible for the invasion and impose serious consequences
to prevent similar acts by any other country in the future.
Last month’s Newsletter reported on Belgium’s decision on a ten-year extension of theoperating life of two of its nuclear power plants, and the UK has now made similar moves. OnApril 7, the UK government announced the British energy security strategy, a development
policy package for wind, solar PV, and hydrogen to become more self-sufficient in energy. Theplan also sets an extremely ambitious target of adding up to 24 GW of nuclear capacity by 2050
to provide 25% of the country’s power supply. In expanding the use of nuclear power, it is
crucial to execute continuous measures based on a long-term plan. Whether the strategy will beimplemented consistently as a long-term policy rather than a knee-jerk response to the invasionof Ukraine must be carefully watched.
On April 4, the Japan Bank for International Cooperation (JBIC) announced that it has madea $110 million investment in NuScale, a US developer of small modular reactors (SMR). Two
Japanese companies, JGC Holdings Corporation and IHI, have already invested in NuScale.
JBIC’s investment will be executed through a special-purpose company established by the twoparties. As the global competition to develop SMRs intensifies, it is hoped that this investment
will strengthen Japan-US cooperation and the countries’ competitiveness in nuclear power.

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2. Recent Developments in the Oil and LNG Markets
Tetsuo Morikawa, PhD
Senior Economist, ManagerOil Group
Fossil Energies & International Cooperation Unit
Oil and natural gas prices remain at high levels. Since the start of April, Brent has been
trading at $100–110/barrel and natural gas at $30–35/Mbtu for spot LNG for Asia and for theDutch TTF and at $6–8/Mbtu for US Henry Hub. Japan’s LNG import price is unannounced asof April but is estimated at around $16/Mbtu.
In its April 13 Oil Market Report, the International Energy Agency (IEA) forecasted a dropin Russian oil production of 3 mb/d in May and beyond due to the impact of economic sanctions
and import bans by the US and other countries. In response to this decrease in exports, importers
have begun releasing their stocks in unprecedented amounts. The IEA and the US have decided
to release 300 million barrels in total (an average of 0.82 mb/d on an annual basis) in Marchand April. In the same report, the IEA predicts oil demand of 99.5 mb/d for 2022 and supply of
99.3 mb/d when factoring in the decrease in Russia’s output and the increase in the output ofOPEC and the US. This suggests that oil supply will turn to a surplus in 2022 including therelease of reserves and assuming that the decline in Russia’s output remains as estimated.
Meanwhile, the industry stocks of OECD countries remain at low levels.
The impact of sanctions and embargoes on the price of natural gas varies greatly by region
and pricing scheme, as the natural gas market is less globalized than that of oil. The EU isproposing that its member states fill their underground storage facilities to 80% by thebeginning of November and is set to reduce its dependence on Russian natural gas. Americanand Qatari LNG are the most likely alternative supplies, but even so, Europe’s increased
demand for LNG will put upward pressure on spot LNG prices for Asia. The rise in Japan’s
average import prices, being mostly oil-indexed, is relatively modest even though spot LNG
prices remain high. However, the supply-demand balance remains tight for the LNG market asa whole.
Russian forces are intensifying their attacks on eastern Ukraine. Civilian casualties are risingand the use of chemical weapons is suspected, with warnings that even nuclear weapons may
be used. On April 7, the EU and the G7 member countries announced an import ban on Russiancoal. Among fossil fuels, coal is a relatively easy fuel to ban, but the ban is still causing concern
about power supply stability. EU Commission President Ursula von der Leyen has revealed that
arrangements are being made to ban Russian oil. If civilian casualties increase further andchemical and even nuclear weapons are used in Ukraine, the EU will ban Russian oil and naturalgas imports, or even remove all Russian financial institutions from SWIFT. If that happens,
Russia’s oil output will decrease by far greater amounts than the currently estimated 3 mb/d,and the oil market will once again see severe supply shortage, and the impact on natural gasand LNG markets will be even more serious. Thus, energy supply stability is facing a criticalsituation, particularly in Europe. However, it is also true that the risk of supply disruptions andsoaring prices of fossil fuels will increase the economic advantages of renewables and nuclear
power, and, combined with climate action, suppress the demand for fossil fuel in the medium
to long term.

43. Update on Policies Related to Climate Change and Energy Conservation
Naoko DOI, PhD, Senior Economist, Manager
Energy Efficiency Group
Climate Change and Energy Efficiency Unit

On April 5, the Intergovernmental Panel on Climate Change (IPCC) published the Working
Group III contribution to the Sixth Assessment Report. The IPCC has three Working Groups,of which Working Group III studies measures for mitigating climate change. This reportpresented the analysis result that to limit warming to 1.5°C from pre-industrial levels, it isnecessary to reach peak global GHG emissions before 2025 at the latest and to conduct deep
and rapid emissions reductions by 2050. It also found that not strengthening existing policies
would lead to a median global warming of 3.2°C by 2100. The report calls for strengthening
measures for energy transition, including reducing the use of fossil fuels, introducing
technologies that reduce or eliminate carbon, transporting hydrogen energy using ammonia andliquefied hydrogen, conserving energy on both the supply and demand sides, and taking
measures for cities, agriculture, forestry and land use.
On April 6, US NPO American Council for an Energy-Efficient Economy (ACEEE)
published the International Energy Efficiency Scorecard. The fourth issued since the first one
published in 2012, this report ranks 25 countries and regions by their energy efficiency efforts.
Japan ranked 7th this time, compared to 5th in the last report in 2018. France ranked 1st,
followed by Britain and Germany. The ranking is based on 36 metrics for evaluating, first,
overall national efforts such as setting goals and providing subsidies as well as specific energy
consumption values, in addition to measures and energy saving results in the three othercategories of residential/commercial, industry and transportation. The report evaluatedJapanese industry as number 1 in the world but noted that there is room for improvement in theresidential and commercial sector, with challenges particularly in standards compliance andlabeling of buildings, as well as renovation of existing buildings. Meanwhile, the ranking
underrates the fact that Japan has achieved the world’s highest equipment efficiency under its
Top Runner Programs, raising doubts about the impartiality and accuracy of the evaluations.
On April 18, South Korea’s LG Energy Solution announced its collaboration withIndonesia’s Aneka Tambang (a mining and metals company) and Indonesia Battery
Corporation. The consortium aims to build a seamless production process that spans theexploration and refining of the raw material nickel, battery materials, and EV battery assembly.
In Indonesia, a presidential decree to accelerate the development of battery electric vehicles(BEVs) was issued in 2019 to make Indonesia the BEV production hub of Asia. The decreepresents a policy to raise the share of BEVs in the country’s new car production to 20% by2025. By investing in Indonesia, which has the world’s largest nickel deposits, LG seeks tosecure a stable supply of raw materials.
On April 14, Japan’s Ministry of the Environment released a report on the national GHG
emissions for FY2020, which were 1.15 billion tonnes, down 5.1% from the previous year. The
total without forest absorption was 1.16 billion tonnes, which is a 21.5% decrease from FY2013
levels.
Also in Japan, the media had reported that the planned submission of revisions to the Building
Energy Efficiency Act to the Diet would be postponed at least till the coming autumn. Therevisions will require all new houses and small and medium-sized buildings to comply withenergy efficiency standards starting from FY2025. However, in a sudden shift in policy, therevised Act was approved by the Cabinet on April 22, with the aim of legislating it during thecurrent Diet session.
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4. Update on Renewable Energies
Yoshiaki SHIBATA, Senior Economist, Manager
New and Renewable Energy GroupElectric Power Industry & New and Renewable Energy Unit

There is growing attention on hydrogen energy as Europe accelerates efforts to reduce its
dependence on Russian natural gas following the invasion of Ukraine.
The REPowerEU plan released by the European Commission in March aims to make Europe
independent from Russian fossil fuels well before 2030 and sets additional targets to those underFit for 55 (the policy package for a 55% reduction of GHG emissions from 1990 levels in 2030).
For hydrogen, the plan raised the target for green hydrogen supply from 5.6 million under Fit
for 55 to 20 million tonnes, a jump of roughly 15 million tonnes. Of the 15 million tonnes, 5million will be produced within the EU’s borders while 10 million will be imported fromoutside. This will enable Europe to reduce its imports of Russian natural gas by 30% (50 bcm).
Changes are also being made to plans to import Russian hydrogen. In the European Hydrogen
Backbone report issued by a consortium of European gas infrastructure companies in 2020,
Europe had planned to transport hydrogen from the North Sea, Ukraine, and North Africa via
pipelines and Russia was one of the candidate sources. However, Russia was removed as acandidate in the supplement to the report released in April. In its energy strategy revised in 2020
for the first time in 11 years, Russia included the use of hydrogen for the first time and set goalsof exporting 200,000 tonnes in 2024 and 2 million tonnes in 2035. With exports to Europe, its
key customer, now impossible, those goals are unlikely to be met.
In Japan, the Ministry of Economy, Trade and Industry has signed a Joint Statement of Intenton Sustainable Energy Cooperation with Russia’s Ministry of Energy and a Memorandum ofCooperation on Hydrogen, Ammonia, CCS, and CCU/Carbon Recycling with Novatek andGazprom in September 2021. Further, since 2020, JOGMEC has been working with Japaneseand Russian private-sector companies on a feasibility study on the Japan-Russia ammonia valuechain. As the Ukraine crisis deepens, however, plans to import Russian hydrogen and ammonia
may be revised.
Amid the global trend toward carbon neutrality, worldwide demand for hydrogen andammonia is expected to expand. However, hydrogen and ammonia exporters may use theirrenewable energy and CCS resources preferentially to meet their own goals. In addition,
Europe’s rapid exit from Russian natural gas and efforts to expand hydrogen imports may resultin a race among countries to secure hydrogen and ammonia. This would push up the prices ofhydrogen and ammonia imports and seriously undermine their competitiveness.
As the uncertain international energy situation looks set to continue, in order to strengthenenergy security it will be necessary to reduce dependence on imports by making maximum useof domestic renewable resources, including not only hydrogen but also biomass and marineenergies.

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