Japan Energy Brief

No.16:
November 2011

Published by The Institute of Energy Economics, Japan Editor-in-Chief: Kensuke Kanekiyo and Akira Ishimura
Inui Building Kachidoki, 13-1 Kachidoki 1-chome, Chuo-ku, Tokyo 104-0054 Japan
Homepage http://eneken.ieej.or.jp

Contents
1. Tight electricity supply likely to persist as nuclear plants are inoperative
2. Growing uncertainty over international energy trends - IEEJ Asia/World Energy Outlook 2011 –3. IEA says door to 2 ℃ scenario is closing
4. Northeast Asian oil industry discusses strategies for cooperation
5. Energy committee highlights- Government starts review of the Basic Energy Plan after the Fukushima accident- Fukushima decommissioning to take three decades

6. Energy news in Japan and Asia
7. APERC letter

Tight electricity supply likely to persist as nuclear plants are inoperative
The work to bring the ill-fated Fukushima Dai-ichi Nuclear Plant under control is proceeding
faster than initially expected. The government lifted the 20-30 km Evacuation-Prepared Area
designation on October 1, and announced a draft decontamination plan on October 30 todispose of contaminated soil. In the revised work schedule announced on October 17, Tokyo
Electric indicated that cold shutdown would be reached before the end of the year; i.e. the stablestate where the temperature at the bottom of the reactor vessels is kept below 100℃ and therelease of radioactive material to outside of the power plant premises is essentially controlled
under a limit. However, nuclear plants after regular inspections are inoperative throughout
Japan waiting for permission to resume operation. Tight electricity supply is likely to persist
longer.

All nuclear power plants to stop by summer 2012
Of 54 nuclear power plants installed in Japan, only 11 are operating as of late November.
Without resumption of nuclear plants after regular inspection, there will be a mere 6 reactors
operating in January, and most likely will be none in summer 2012. As nuclear power is used
to supply a quarter of Japan's electricity demand, a complete loss of these units will inevitably
have a serious impact on electricity supply nationwide. Nevertheless, Junichi Ogasawara,
Electricity Group Leader at the Institute of Energy Economics, Japan (IEEJ), advises that theprospect of restarting nuclear plants by next summer is dim.
The first reason for this is, even though several power companies have already started stresstests to evaluate safety margins of nuclear power plants currently shut-down, the procedure totreat their outcomes is yet to be established. The Nuclear and Industrial Safety Agency (NISA)
of METI has formed a council consisting of 11 experts for evaluation of the stress test results.
Its first meeting held on November 14 had a heated discussion on the evaluation criteria andmethod, but failed to proceed with the evaluation of the report submitted for the No.3 Unit of-1-the Ohi Power Station. Separately, NISA announced on October 30 specific subjects to bereviewed for safety in relation to earthquakes and tsunamis individually for 21 nuclear power
plants at 9 locations. The results of this reassessment could have a material effect on theevaluation of the stress tests. As of this writing, investigation on the cause of the accident at
the Fukushima Daiichi Plant has not yet started. It is likely to take sometime to develop
guidelines on nuclear safety that could be accepted both on technical as well as institutional
points of view.
Secondly, an area with an 8 to 10 km radius from a nuclear power plant has previously been
set as a guideline for the Emergency Planning Zone (EPZ), a zone designated with an emphasis on
preparing for specific nuclear safety measures in case of an accident. In October, the Nuclear
Safety Commission of Japan (NSCJ), which is reviewing nuclear disaster prevention guidelines,
proposed a plan of ”expanding the applicable area to a circle with a 30 km radius from nuclear
power plants.” This will greatly enlarge the geographical area subject to the regional disasterprevention plan and will increase the number of local governments to be involved. It will,
however, take considerable time to establish the new guidelines, develop relevant legal systems,
and determine the applicable areas. Only when these preparations are completed, discussions
with local stakeholders can be initiated. Timing is extremely tight for obtaining consent fromlocal governments on resumption of nuclear plants operation before the peak demand season ofnext summer.

Government requests electricity conservation for coming winterIn view of the possibility that nuclear plants after regular inspection will be unable to resume
operation this winter, the Japanese government announced on November 1 a request forelectricity conservation during this winter heating season. As peak demand in winter is lower
than that of summer, it is forecast that the national average reserve capacity will fall within therange of 2.4% for January and 2.2% for February, slightly below the 3% guideline for stablesupply. (Peak demand is projected based on records for the winter 2010 or the estimates by
individual electric utilities for the winter 2011, whichever is higher.)Electricity Supply/Demand Outlook for the coming Winter and Summer
January 2012
SupplyCapability
Hokkaido
TohokuTokyo
Eastern Japan (50Hz)
Chubu
Kansai
Hokuriku
Chugoku
Shikoku
KyushuCentral/Western Japan (60Hz)
Total

Peak
DemandJanuary 2012
SupplyReserve
Ratio

SupplyPeak
Capability Demand

SupplyReserve
Ratio

August 2012
Demand =2010
Demand =2011
SupplySupplySupplyPeak
Peak
Reserve
Reserve
Capability Demand
Demand
Ratio
Ratio

MW

MW

%

MW

MW

%

MW

MW

%

MW

%

650
1,342
5,457
7,449
2,487
2,477
561
1,146
544
1,499
8,714
16,163

579
1,390
5,150
7,119
2,342
2,665
528
1,074
520
1,533
8,662
15,781

12.3
-3.4
6.0
4.6
6.2
-7.1
6.2
6.7
4.6
-2.2
6.2
2.4

649
1,364
5,375
7,388
2,487
2,412
559
1,146
531
1,506
8,641
16,029

563
1,370
5,150
7,083
2,342
2,665
528
1,074
520
1,474
8,603
15,686

15.3
-0.5
4.4
4.3
6.2
-9.5
5.9
6.7
2.1
2.2
0.4
2.2

474
1,485
5,193
7,152
2,750
2,533
565
1,234
529
1,534
9,145
16,297

506
1,480
6,000
7,986
2,709
3,138
573
1,201
597
1,750
9,968
17,594

-6.4
0.3
-13.4
-10.4
1.5
-19.3
-1.5
2.7
-11.3
-12.3
-8.3
-9.2

485
1,246
4,922
6,653
2,520
2,784
533
1,083
544
1,544
9,008
15,661

-2.3
19.2
5.5
7.5
9.1
-9.0
5.9
13.9
-2.7
-0.6
1.5
4.1

Source: Energy-Environment Council, Cabinet OofficeAmong power companies, however, peak demand is anticipated to exceed supply capacity
for Tohoku, Kansai and Kyushu EPCs. The shortage will be largest for Kansai EPC, whose
nuclear dependency ratio exceeds 50%. Therefore, the government has requested theconsumers in the Kansai EPC service area for voluntary electricity conservation with a targeted
reduction of 10% or more year-on-year, and 5% or more for consumers in the Kyushu EPC
service area, while it requested electricity conservation with no numerical targets for consumers
in other areas. It is expected that Tohoku EPC will be able to get through its peak via relief-2-supplied from neighboring Tokyo and Hokkaido EPCs, and the government takes a specificposture not to press too much upon the disaster areas affected by the earthquakes and tsunamis.
No compulsory regulations or planned blackouts based on the law will be enforced this coming
winter.
Peak demand in the summer occurs early afternoon when the temperature is high, but peakdemand in the winter occurs in the morning and evening when the temperature is low. The
winter peak hours overlap with times when people are commuting or preparing meals at home,
and thus different electricity saving measures are needed compared to the summer, where
factories and businesses are required to cut down on electricity consumption.
In light of this, METI has elaborately prepared andFigure-1 Winter Electricity Demand (Weekday)kWannounced an “Electricity Saving Menu“ andelectricity conservation goals to suggest the types ofeffective electricity conservation means for customers
Total Demandwith different patterns of electricity use.
For
example, specific electricity conservation measures
are listed for each subsector, i.e., reviewingHome
operation methods of pumps and fans (15%) and
improving insulation of electric heating equipment
Large Business/Industry(7%) in the manufacturing industry; regulating
Small Business
operation of air-conditioning (8-12%) and adjusting
Saving requested
lighting (10%) in department stores andsupermarkets;savinglighting(3%)
and Source: METI 7:00 9:00 12:00 14:00 18:00 21:00
air-conditioning (1%) in medical institutions; andwearing warm clothes with room temperature set at 20℃ (7%) and turning off unnecessary
lighting (6%) at residences. METI expects that a capacity margin above 3% could be secured
through these fine-tuned countermeasures. In addition, electricity demand during the firsthalf of the fiscal 2011 was comparatively low at minus 7.7% and peak demand minus 12.6%
year-on-year, while there is some room, though tiny, to raise the load factor at thermal power
generation on the supply side. Although there is a possibility that electricity supply anddemand will be tight for a few days during the height of cold waves, the power companies
should generally be able to ride through the winter.

Demand-side measures for the summer peak season in 2012
The real problem is the summer next year. As shown in the table, if the summer peakdemand will revive like the extremely hot summer of 2010 while nuclear power plants will notresume operation, there will be a supply deficit of as much as 16.56 GW. Assuming a demandlevel similar to the summer of 2011 when economic activities were low reflecting the effects ofearthquake and tsunami and conservation measures were taken extensively, a capacity marginof 4.1% will be secured as a nationwide average. However, supply deficits are anticipated in
the service areas of Hokkaido, Kansai, Shikoku and Kyushu EPCs with high nuclear power
ratios. In contrast, Tohoku EPC, which lost the majority of its thermal power in the tsunami,
will have a balance with comfortable leeway brought by restoration of these capacities.
In response to this outlook, METI has decided that it will be more effective to establish thepractice of electricity conservation within a reasonable scope through budget and institutional
reforms, rather than triggering electricity use restrictions, and announced measures involving
budgetary provisions worth a total of ¥579.4 billion. More specifically – taking the 16.56 GW
supply deficit as the starting point – the plan expects electricity consumption to be reduced by-3-

9.80 GW through demand control, while a 6.42 GW supply increase achieved by creating
additional supply capacity. The breakdown of these measures is as follows:
On the demand side, 1) a saving of 7.10 GW could be achieved by making pricing information
more comprehensive and using market mechanisms, such as lowering the contract maximum
demand, revision of the electricity tariff menus, and expanded use of multiple tariff option
contracts that can be invoked during peak periods or under a tight supply situation ; and 2) an
additional 2.70 GW will be saved through subsidy-driven promotion of investments for
introducing energy conservation equipment and systems, investing in energy conservation forresidences, introducing HEMS/BEMS energy management systems, introducing lithium-ion
storage batteries, and implementing energy conservation diagnosis.
On the supply side, an additional 4.09
Figure-2 Measures to cope with 2012 Summer Demand
GW will be obtained by improving
supply capacity at power companies,
Visualization(Multiple Tariff Options)
Demand Control
together with another gain of 2.33 GW
7.1MW
SupplyMax. 9.8MW
Deficitbypromotingsubsidy-driven-16.56 MW
Energy conservation(-9.2%)(with budget for promotion)
introduction of technologies such as
2.7MW
renewable energy, private generation
Supply Increase by Multiple Players(with budget for promotion)and cogeneration, and home fuel cell
2.33MW
Supply Increase
Supply Increase by Powersystems. Continuing these measures
Max. 6.42MW
Companies
4.09MWand having them take root in the society
Source: METI
will make it possible to expand theconservation effect through investments by customers from 2.70 GW in 2011 to 6.53 GW in 2014,
to increase supplies by players other than power utilities from 2.33 GW to 3.99 GW for an
aggregate incremental supply via the overall measures from 16.22 GW to 21.71 GW. In orderto actualize these effects, regulatory and institutional reform action plans covering 26 items will
be implemented.
As discussed above, the government is drawing on all policy measures available and working
to minimize the peak electricity deficit, but it may take a little more time until the effects can be
felt with a degree of certainty. With regard to restart of the nuclear power plants that havebeen shut down for regular inspection, it is understood that the NISA will evaluate the stresstests conducted by utility companies, and NSCJ will confirm its validity. On that basis, anoverall judgment will be made at the government level, also taking into account whether it ispossible to obtain understanding of local community and trust of the general public, while apracticable time schedule is yet to be shaped for carrying out these procedures.

Growing uncertainty over international energy trends- IEEJ Asia/World Energy Outlook 2011 –The IEEJ Asia/World Energy Outlook 2011 was presented at an open symposium held inTokyo on October 26. For this year, the report has developed projections taking account of theworldwide policy movements toward energy security and global warming after experiencing
the Great East Japan Earthquake of March 11 and the accident at the Fukushima Dai-ichi
nuclear power station. Mr. Yuji Matsuo, Senior Researcher, Energy Data and Modelling
Center, reported the analysis as below:
Under the assumptions that the world nuclear development would not be significantly
affected despite the Fukushima accident, outcomes of the Reference Case and the Advanced
Technology Case are mostly the same with those of the Outlook 2010, while the Low Nuclear-4-Case casts serious impacts on emissions reduction as discussed later. Under the Reference
Case where the current trends of ongoing energy and environmental policies are extended, theworld primary energy demand will increase from 11.2 billion tons oil equivalent (Btoe) in 2009
to 17.3 Btoe in 2035 at an annual growth rate of 1.7%. Asian energy demand will lead thistrend expanding from 3.89 Btoe in 2009 to 7.51 Btoe in 2035, at an annual growth rate of 2.6%,
with its global share rising from 34.7% to 43.5%. China and India are the key players; thecombined energy growth of the two countries during the projection period, at an annual growthrate of 2.8%, amounts to 2.7 Btoe, or 45% of the world increase in energy consumption.
Figure-1 World Energy Outlook through 2035
Reference Case

Billion toe

2035
17.3

18.0
16.0

Others
14.0 3.3%
12.0 Hydro 2.5%

2009
11.2

2020
14.1

1980
8.0
6.6

6.4%
2.5%
6.2%

22.7%

4.0

16.0

2035
14.7

94%
2020
13.3

14.0

9.8%
3.0%
10.3%

10.0

31.4%

Oil

8.0

Coal

29.4%

27.5%

Natural Gas

25.4
%

Oil

31.0%

22.9%

6.0
4.0

35.8%

2.0

85%

18.0

25.4% 12.0

6.0

.0
1980

20.0

Natural Gas

10.0

Advanced Technology Case

Billion toe

20.0

2.0

Coal

.0
1990

2000

2009

Fossil fuels

87.9%

2020

2030 2035

1980

1990

84.3%

2000

2009

2020

20302035
77.1%

Among energy sources, oil will account for the largest share even in 2035 at 31.4% of the total
primary energy supply, growing at an annual 1.2%, while coal will continue to be the second
largest energy source at 27.5% growing at 1.4%; although both of them will have decreased theirshares from 35.8% and 29.4% in 2009, respectively. Natural gas consumption will show thefastest growth among fossil fuels, at an annual 2.2%, increasing its share from 22.7% to 26.0%
supported by the expanding resource base in unconventional natural gas. Nuclear will
increase at a moderate annual rate of 1.7%, while new and renewable energies will increase
fastest at 4.3%. Nevertheless, fossil fuels continue to be dominant even in 2035, supplying 84%
of the primary energy requirement.
Figure-2 CO Reduction by Region

2
Adopting advanced technologies extensively,
Gt-CO
45.0
42.7
the above primary energy demand will be
OECD
40.0
curbed by 7% in 2020 and 35% in 2035 in the
38.4
35.8
Reference Case
Advanced Technology Case.
This is 35.0
Non-OECD
29.1
30.0
32.3
particularly important in terms of emissions
28.6
Advanced
reduction. As shown in Figure-2, the global 25.0 21.3 World
Technology
20.7
Case
China
CO2 emissions will increase from 29.1 giga tons 20.0
16.1
India
11.7
(Gt) in 2009 to 35.8 Gt in 2020 and 42.7 Gt in 15.0
Other Asia
14.3
12.7
Asia
2035. However, they will be reduced in the 10.0
5.0
Advanced Technology Case down to 32.3 Gt in 5.0
2020 and 28.6 Gt in 2035; the latter being below 0.0
1990
2000
2009
2020
2035
the 2009 level. Emissions will increase mostly
in Asia, i.e. 9.0 Gt out of the world total of 13.6
Gt, while great reduction potential exists in the non-OECD region, 9.8 Gt out of the world totalof 14.1 Gt including Asia’s 8.0 Gt. To realize this potential, the world needs to enhancedissemination and deployment of advanced technologies through international cooperation. It
2-5-should be noted that China and India are projected to become the single largest and the thirdlargest CO2 emitters by 2035, while their cumulative amounts will also become significant.
Advanced countries with high per capita energy consumption should endeavor reducing
energy intensity while emerging countries with relatively low per capita energy consumption
are urged to direct their economies toward less energy intensive structure in their development
plans.
Figure-3 Annual and Cummulative CO2 Emissions
Annual CO2 Emissions

Gt-CO218.0

Shares in 2035

16.0

USA
13%

14.0
12.0

China

4.0

Japan

.0
1930

1945

Japan
4%

China

1960

1975

1990 2001
2 008 2020

2035

India

WesternEurope

100

India

2.0
1915

Europe18%
India
5% China
17%

200

USA

1900

300

Western Europe

USA

USA
22%

Others
34%

China
26%

India
10%

6.0

400

Others

Japan
3%

10.0
8.0

Shares in 2035

Europe8%

Others40%

Cummulative CO2 Emissions

Gt-CO2

500

Japan

0
1900

1915

1930

1945

1960

1975

1990

2007 2020

2035

The Outlook Team has also made a super long-term projection up to 2050, and examined
effects of slower nuclear development anticipated in the wake of the Fukushima Dai-ichi
accident. As shown in Figure-4, the global CO2 emissions will continue to increase in the
Reference Case to 49.7 Gt in 2050, or 2.3 times the 1990 level. Adopting every conceivablereduction measure would reduce this to 19.3 Gt. This is below the 1990 level but still
substantially higher than the global target to halve the emissions. It should also be noted thatthe emission level would become much higher if the assumed carbon capture and storage (CCS)
are not implemented as planned.
Figure -4 Super Long-term Projection and Low Nuclear Case
Gt-CO 2
55.0

Emissions Reduction by Source
55.0
49.7

50.0

40.0
35.0

Advanced
Technology Case

25.0

CCS: 33%

49.7
Reference Case

45.0
40.0

No Nuclear Power

35.0
30.0

29.1

25.0
20.0

20.0

Without CCS, CO 2 emissions in
2050 will be 29.4 Gt-CO 2.

15.0
10.0
1990

LIquid Biofuel : 1%
Solar, Wind, etc. : 7%
Nuclear: 11%
Fuel Switch: 8%

29.1

30.0

50.0
E Conservation : 39%

Reference Case

45.0

Effect of Nuclear Scenarios

Gt-CO 2

19.3

Slower Nuclear Development
Advanced
Technology Case

15.0

2009

2020

2035

2050

22.6
19.3

A half of 2005 (13.6)
1990 (10.6)

10.0
2000

26.1

1990

2000

2009

2020

2035

2050

Further, in the cases where nuclear power development is substantially slowed down or
nuclear power generation is totally stopped, by 2050, the global CO2 emissions will increase by
3.3 Gt or 17% and by 6.8 Gt or 35%, respectively. Even with nuclear power generation
projected without significant changes, it looks extremely challenging to achieve the target ofhalving the emissions by 2050 on the basis of merely extending the present way of thinking. A
question then will be, “do we have the luxury of dropping nuclear altogether?” At any rate,
we need to endeavor developing epoch making breakthroughs in technology and restructuringsocio-economic systems in order to secure the sustainable development of the world.

-6-

The Japanese version of the IEEJ Outlook is available on the IEEJ website (for subscribers onlyat http://eneken.ieej.or.jp/data/3434_summary.pdf), and its English summary will be posted
shortly.

IEA says door to 2 ℃ scenario is closing
At the joint IEA-IEEJ energy symposium held on
November 16 in Tokyo, Ms. Maria van der Hoeven, the
new Executive Director of the IEA, told that revision of
nuclear energy policy will most affect the countries withleast energy resources. In her portrayal of the IEAWorld Energy Outlook 2011, she discussed a specificanalysis on the Japanese energy outlook and explained
that, in the low nuclear case with no new reactors built
beyond those already under construction, the share of
nuclear power will decrease to 18% of the total power supply compared with 30% under the
New Policy Scenario with modest nuclear increase and 53% under the Basic Energy Plan 2010 ofJapan.
The Low Nuclear Case has an important implication for Japan’s energy security as well as
global warming policies. In addition, significant additional economic cost will be incurred inspending on imports of natural gas. Japan’s gas import bill will double to $66 billion in 2035
under the New Policies Scenario. This will be further pushed up to $80 billion under the Low
Nuclear Case. At present, if all the reactors are shut down, Japan will incur additional fuelcost of $3 billion per month as an immediate effect. Mr. Nobuo Tanaka, former Executive
Director of the IEA and Special Advisor of IEEJ, commented on this point that other gas
importing countries such as China are closely watching development in Japan as it has
substantial impact on their energy import bill as well.
In a world full of uncertainty, one thing is sure: rising incomes and population will pushenergy needs higher. Some key trends are pointing in worrying directions, such as CO2
emissions, energy efficiency and spending on oil imports. Policy actions are being affected
while the world is trapped in financial instability and economic stagnation. In particular,
global movements on the emissions reduction are slow though the direction is right. She
warned that the door to the 2 ℃ scenario is closing. Without further action, by 2017, all CO2
emissions permitted in the 450 Scenario will be “locked in” by existing plants, factories,
buildings, etc.
Later that same day, she also spoke at the Advisory Committee for Natural Resources andEnergy and advocated that energy policy should consider security, economics andsustainability, and that energy efficiency, renewable energy and nuclear are all essential toachieve the goal. Japan’s energy self-sufficiency is extremely low among OECD countries,
while costs of renewable energies remain high elsewhere in the world. If one is to say “no” tonuclear, its consequences including the significant replacement cost must be considered at thesame time, while the decision solely rests with Japan.

Northeast Asian oil industry discusses strategies for cooperation
Northeast Asia Petroleum Forum 2011 was held in Seoul, Korea, on October 18 and 19. It
was the 10th anniversary of the biannual conference, where stakeholders of petroleum
industries in Japan, China, and Korea got together to facilitate cooperation among-7-

oil-consuming countries in Northeast Asia. The forum started with a CEO session on ”Issuesof Global Oil Market and Strategies for Oil Industry in Northeast Asia,” in which CEOs ofJapanese, Korean, and Chinese oil corporations shared their views on oil markets and theirstrategic visions. Mr. Vladimir L. Likhachev of the Energy Research Institute of Russian
Academy of Science, who took part in the session as an observer, also presented the outlook of
petroleum development in eastern Russia. The forum covered issues and prospects of oil andgas industries in a number of realms. The following are brief reports on major discussions in
the forum:
One of the most notable points was that mostspeakers regarded Northeast Asian oil markets asundergoing
unprecedented
anddramaticchanges. Even in this year the oil industries had
been facing rapidly changing situations including
political destabilization of Middle East and North
Africa, the Great East Japan Earthquake andresulting accidents at Fukushima Daiichi nuclear
power plants, and volatile crude oil prices due toeconomic conditions in Europe and the US. This
prompted many speakers to voice their opinion
that it was crucial for oil-consuming countries to Mr. Jun Arai, President of Showa Shell Sekiyu, presents the
emergency responses of the Japanese oil industry in theseek out strategic cooperation and collaborative wake of the Great East Japan Earthquake.
actions. Japan delivered a vivid report on thedisastrous consequences of the Great East Japan Earthquake and how the Japanese oil industry
had responded to the situation, arguing for the need of revisiting the role of oil in developing
future energy policies.
Respective Northeast Asian countries reported brief summaries on trends of oil and natural
gas in their countries as follows:
China: Oil demand will further grow due to continuing motorization and growing passenger
and freight transportation resulting from economic expansion, causing an averageannual demand growth of 7% in gasoline, 8% in jet fuel and kerosene, and 5% in diesel
oil between now and 2015. China will import higher-standard oil products as its
standards for transportation fuels will gradually be upgraded to the Euro-IV level.
Annual demand for natural gas will increase to 320 Bcm by 2020 encouraged by thefavorable government policies. On the other hand, domestic production of natural
gas is projected to be 210 - 250 Bcm per annum leaving import demand at 70 - 110 Bcm
annually.
Korea: With minuscule increase in oil demand, Korea is seeing intensified competition in theoil products market, specifically among service stations. Oil products are Korea's
major strategic goods with exports of 50 billion dollars per annum, positioned at thethird place in terms of nominal exports following ships and semiconductor products.
Korea will further increase exports of oil products in order to make the most of thedomestic refining capacity.
Japan: Oil will continue to be the most essential energy, although Japanese oil demand isdeclining by 0.1 million barrels per day (bpd) each year. As such, it is important forJapan to maintain the domestic supply chain of oil products robust and efficient
starting from procurement of crude oil, refining, transportation, storage, and all theway to marketing.

-8-

Russia: It plans to boost oil exports to Northeast Asia making the total amounts exported to
Asia Pacific markets 0.8 to 0.9 million bpd in 2020 and 1.1 to 1.5 million bpd in 2030.
These appear to be rather conservative projections as Russia is already exportingnearly 1 million bpd from Sakhalin and Siberia.
Northeast Asian countries are becoming more dependent on imported energy and several
speakers voiced their hopes for unconventional natural gas (UNG), a hot topic in energy
industries. The problem with UNG is that only China can mass produce it in Northeast Asiaand at full-scale after 2015. Rather, major impacts of UNG on Asia will materialize from alarge amount of LNG flowing into Northeast Asia that is derived from UNG in other areas.
The above prospect led the participants of the forum to earnest discussions on CBM-LNG
projects already in progress in Australia as well as export projects of LNG derived from shale
gas in the planning stage in North America. As LNG import into Northeast Asia is steadily
increasing, one participant advocated that Northeast Asian purchasers should produce simple
messages in unison concerning terms and conditions on LNG trade including prices. Joint
development effort will also become indispensable in areas with high country risks. Pipelinetransportation of natural gas from Russia to South Korea through North Korea, though it is a
hot topic of late, was mostly regarded to be premature with arguments like “the project has too
many uncertainties and it is too early to seriously study.”
There were several other presentations on energy savings, as well as alternative fueldevelopment projects and demonstration projects such as biofuels and fuel cell vehicles.
During a report on natural gas vehicles, representatives from China and Korea asked a numberof questions on infrastructure development and technical issues required to overcome forpervasive use of them.
The next forum will be held in China in 2013.
soon be shared on IEEJ’s website.

Summary and materials of the forum will

Energy Committee Highlights
Government starts review of the Basic Energy Plan after the Fukushima
accident
The Basic Energy Planning Subcommittee of the Advisory Committee for Natural Resources
and Energy convened on October 3 their first meeting after the Great East Japan Earthquake,and started debating on revision of the Basic Energy Plan taking into account the accidents at
the Fukushima Dai-ichi nuclear power plants. Current Basic Energy Plan, revised in June 2010,
stipulates that the share of nuclear power of the electricity supply should be increased to about
50% by 2030 in order to create a low-carbon society, but this no longer seems viable as theaccidents seriously damaged public confidence in nuclear power generation. Now theJapanese government is turning to a policy of lowering dependencies on nuclear generation.
However, it remains to be seen if a viable scenario can be produced consistent with stablesupply of electricity and global warming objectives. The largest and most important issue ispositioning of nuclear power in the future energy mix.
Mr. Yukio Edano, Minister of METI, started the meeting by saying “the Fukushima Dai-ichi
accidents have dramatically changed Japanese people's perception of and confidence in nuclear
energy. I would urge you all to produce, through your discussion, what the government must
do and how we proceed to the final target, rather than saying that the current situation leaves
us no other choice but doing this and that” and “I asked a wide variety of experts to participate-9-

in the discussion, but it does not mean I want you to seek out a point of compromise among
different parties. I expect you to review energy policies through substantial discussions basedon facts and evidence.” The 25 committee members freely voiced their views and opinions
following a briefing on the current Basic Energy Plan and ongoing examination of energy
policies at a ministerial-level Energy and Environment Council. The subcommittee's primaryobjective is to identify all views and opinions first as it would not be an easy task to forge aconsensus among members in a short period of time. The committee is scheduled to submit
the first report to the Council by the end of year.
The second meeting was held on October 26, in which most of the committee members
submitted their opinions in writing, and five members presented their opinions before thecommittee. Professor Kikkawa of Hitotsubashi University said “unless we can resolve thebackend issues (reprocessing of spent nuclear fuel), nuclear energy would remain a transitionalenergy option merely available till around 2050 for the entire human race”, while giving a wordof warning, “Japan is a country poor in natural resources and as such, ought not to casually
abandon the nuclear option.” He suggested that, in considering energy structure of Japan for2030, we should first estimate 1) the share of renewable energies, 2) the progress in powersaving through energy conservation, and 3) the progress in emission reduction (zero-emission)technology of coal fired power plants; and then the share of nuclear energy should be derived
by subtracting these potentials. Mr. Tetsunari Iida, Executive Director of the Institute for
Sustainable Energy Policies argued that issues on restart of nuclear power plants and supply
and demand issues should be separated by pointing out that “enhancing demand side
management (DSM) and reinforcing peak power supply capacity will be sufficient to manage
the short-term electric power supply balance.” Ms. Hisa Anan, Director General of Shodanren,
Japan's nationwide network of consumer groups, proposed a zero nuclear society calling for 1)
drastic review of the safety measures and consent of local society as the prerequisites if restartof the existing nuclear reactors was unavoidably required, and 2) decommissioning of aged
nuclear reactors.
The third meeting was held on November 9 and six members made presentations. Professor
Satoshi Tanaka of Tokyo University and President of Atomic Energy Society of Japan argued for
examination of the energy strategy based on a geopolitical viewpoint saying “an energy option
once thrown away would never be taken back.” Mr. Hideyuki Ban, Co-Director of Citizens’
Nuclear Information Center, asserted that nuclear power does not have a national consensus;
Japan should withdraw from nuclear considering the risks of radioactive leakage, severe
accidents and waste disposal. Professor Tatsuo Hatta of Osaka University disclosed his viewthat the energy best mix should be pursued subject to selection by the market, and the role of
the government is to prepare a proper market design.
Mr. Masakazu Toyoda, Chairman of IEEJ, submitted a written opinion with the following
viewpoints, which he is scheduled to speak about at a later date.
1. Due to the Fukushima Dai-ichi accidents, Japanese people now have much less confidence
in nuclear power generation. The government must place the highest priority on firstreassuring the public and implementing safety measures on all types of energy as the basisof energy policies as well as activities of energy industries. Then the government should
endeavor to establish a “safer nuclear power generation,” because each type of energy has
its own merits and demerits and the risk of entirely abandoning nuclear power will besignificant in pursuit of stable energy supply and global environment.
2. Japan has no cure-all solution on energy security as it is a country poor in natural resources
and is isolated in energy supply structure with no international pipeline or electricity
interlink. The government, therefore, must explore all possibilities such as beefing up- 10 -

overseas development of resources, using the dialogue between energy producing andconsuming countries, and maintaining, securing, and enriching technologies for domesticenergy (renewable energy) and quasi-domestic energy (nuclear energy) as well as energy
conservation.
3. The government is forced to reduce nuclear power dependency even while maintaining
the long term target of greenhouse gas (GHG) reduction by 2030 and 2050 as theinternational commitment. To this end, the national technology development plan must
be revised along with a drastic improvement on the support systems. For the post-Kyoto
Protocol negotiations on GHG emissions, Japan should review the reduction target for2020 taking into account the global trend and the reality of increasing emissions after the
Fukushima accidents, and take an initiative in negotiating a realistic framework agreeableby most countries. In addition, “adaptation” measures must also be reinforced to counter
aggravation of global warming in the interim.
4. It is feared that the closure of nuclear reactors will cause power shortage, a steep rise infuel (LNG) costs, increased CO2 emissions, slow-down of GDP growth, and a rise in
unemployment, with no energy option that can replace nuclear energy in the short term.
Therefore, the Japanese government is urged to restart the nuclear power stations on theprecondition of assured safety.
5. For the medium- to long-term aspect, the government must develop several scenarios by
combining 1) more comfortable energy saving, 2) cleaner fossil fuels, 3) lower cost
renewable energy, and 4) safer nuclear energy, and identify the best combination throughquantitative and objective evaluations.
The Subcommittee will meet several times within the year and will deepen discussions fromthe New Year to produce options for best-mix by next spring. The material will be posted fornational debate in Japan, and the revised Basic Energy Plan will be finalized for incorporation
into the “Innovative Energy and Environment Strategy” by the ministerial-level Energy andEnvironment Council. For the time being, however, the subcommittee will spend its time
mostly on qualitative arguments, and discussions on policy options and best-mix scenarios
based on quantitative analyses will have to wait rather long.

Dismantling Fukushima to take three decades
On October 28, the Atomic Energy Commission of the Cabinet Office announced a draft
roadmap for decommissioning and dismantling the Fukushima Dai-ichi Nuclear Power Plant.
The draft plan outlines that it will take at least thirty years to complete dismantling the reactors
and plant buildings. Tokyo EPC will draw up detailed plans based on the final report on theroadmap to be completed by yearend, and will embark on the decommissioning process as soon
as the cold shutdown state is achieved. The revised work schedule to contain the crippled
nuclear reactors at Fukushima Dai-ichi announced by Tokyo EPC on October 17 indicates thatsuch a state of the reactors will be achieved by the end of this year, allowing the initial steps ofthe decommissioning process to start early next year.
A total of 1,496 fuel rods are held in the damaged four reactors, and another 3,108 fuel rods
stored in the spent fuel storage pools. Melted fuel rods are thought to have fallen to thebottom of the pressure vessels causing some leakage into containment vessels at the No. 1, No.2
and No. 3 reactors, which were in operation at the time of the earthquake and tsunami. The
roadmap at this time is developed referring to the decommissioning process at the Three Mile
Island nuclear power plant in the United States following the 1979 accident and other materials.
Decommissioning at Fukushima will begin with decontaminating the interiors of the reactor
buildings, repairing the damaged containment vessels and refilling them with water.

- 11 -

Equipment to suction up the melted fuel rods will be inserted into the reactors and extraction
will start around 2021. Cranes normally used to extract spent fuel rods were destroyed in thehydrogen explosions that ripped through the No. 1, No. 3 and No. 4 reactor buildings. They
will be replaced with new cranes and extraction of stored fuel rods will start around 2014. The
dismantling process is scheduled to be completed sometime after 2041, although unexpecteddevelopments may still crop up as the extent of damage to the nuclear reactors and fuel rods is
yet to be fully assessed.
The draft report emphasizes the importance of all parties, i.e. the government, research
institutions, Tokyo EPC and equipment manufacturers, jointly tackling the challenges by setting
up a headquarters for research and development and collaborating closely with overseas
partners as well. Hajimu Yamana, Professor at Kyoto University who headed the special
committee in drawing up the draft, commented ”we envision the extraction of fuel rods to becompleted in about five years once the decommissioning process is launched. We hope tocomplete the decommissioning process within the usual time frame supposed for normal
nuclear reactors, but it may take longer.”

Energy News in Japan & Asia
Hokkaido EPC
constructs first
LNG power
stationHokkaido Electric Power Co., Inc. announced on October 11 that thecompany will construct its first LNG fired thermal power station near
Sapporo to start operation in 2021. Its LNG receiving facility will belocated at Ishikariwan-Shinko (Ishikari Bay New Port), Ishikari City,
next to the LNG terminal of Hokkaido Gas Co., Ltd. (Kitagas) currently
under construction.

Both companies signed the same day an agreement on joint use of the receiving terminal of
Kitagas; Hokkaido EPC will construct LNG tanks next to the yard of Kitagas, LNG will bereceived at the sea berth of Kitagas, regasified there and then piped to the power station locatedon the opposite side (Otaru City) across a canal. The LNG receiving facility will be operated
by Kitagas under contract.
Construction of the Ishikariwan-Shinko combined cycle gas turbine (CCGT) power station
will start in 2015. The initial generating capacity will be 500 MW to start power supply in
2021; it will be expanded to 1,600 MW eventually. Mr. Osamu Sakai, Managing Director,
explains that the plant site is selected in view of its proximity to the demand center withfavorable port facility, and hopes that the station will contribute to diversification of electricity
sources. Hokkaido EPC currently operates power stations with a total generating capacity of
8,260 MW, consisting of 25% nuclear, 19% hydro, 29% coal, 24% oil, and a small amount ofgeothermal. The new station will increase the company’s generating capacity by 19% when
fully completed.

Tokyo Met-Gov
to promote
introduction ofsmart grid

The Tokyo Metropolitan Government (TMG) has decided to provide
a grant to Mitsubishi Estate Co., Ltd. for its pilot project to introduce asmart grid next year in the business district around the Tokyo Station.
The Tokyo government seeks to develop a next-generation power grid,or “smart grid,” to efficiently manage the power supply and demand ofmajor office building clusters in Tokyo.

The project by Mitsubishi aims to integrate large PV installations at buildings with residual
heat recovery from waste water to achieve minimal dependence on the grid electricity. Tokyo
seeks to employ the know-how obtained in this experiment in the development of smart grids- 12 -

in Shinjuku, Shibuya, Shinagawa and other major business districts in the capital.
In its growth strategy, the TMG aims to invite five hundred or more foreign enterprises every
year to the capital’s major business districts under a promotional campaign of “Asian
Headquarters Special Zone.” After the Great East Japan Earthquake, however, it is consideredessential for a successful campaign to secure reliable lifeline systems that function at the time ofdisasters. In addition to the plan to construct a natural gas-fired power plant in Tokyo Bay tohelp sustain its functions as Japan’s capital even in a major earthquake, the TMG now seeks tobuild a disaster-proof city by establishing a smart grid as a systemic support. The smart grid isexpected to help efficiently control the power supply and demand for office buildings, which
account for 35% of power consumption in Tokyo, to promote introduction of renewable energy,
energy conservation and higher efficiency, and to eventually reduce concentration of demandon the grid power.
A smart grid will substantially reinforce Tokyo’s disaster-response capabilities, i.e. in theevent of power supply disruptions, electronic appliances with lower priority will automaticallybe switched off and minimal power will be secured through efficient interchange of electricity
from city gas-based cogeneration, renewable energy, and distributed power sources including
batteries. As a downside of this concept, while a smart grid promises reduction in the amountof power purchased and consumed, it will consequently require spending on more expensive
energy sources, such as renewables and batteries. The great challenge will be how to balance
the advantages of securing energy supply against disasters and overall economics.

APERC Letter
APERC Presents findings to the APEC Ministerial Conference on
Transportation and Energy
APERC President Kenji Kobayashi was invited to present recent APERC research findings on
urban transportation energy efficiency at the APEC Ministerial Conference on Transportationand Energy in San Francisco on 13 September 2011. The conference brought together for the
first time APEC energy and transportation ministers, as well as many other distinguishedgovernment and business leaders, to discuss cooperative efforts to promote energy efficienttransportation.
Mr. Kobayashi’s presentation drew on APERC’s research for the Cooperative Energy
Efficiency Design for Sustainability (CEEDS) Phase 3 project, which is focused on energy
efficient urban transportation. APERC’s research focuses on energy saving potential in urban
transportation in developing APEC economies. His talk focused in particular on the potentialof better urban planning to achieve long-term improvements in urban transportation energy
efficiency.
It is widely recognized that growing wealth and urban populations in developing economies
will lead to growing demand for urban transport energy. However, the planning of
infrastructure and housing to meet the growth in urban population strongly influences thepatterns of urban transport energy use. In mature cities, urban transportation energy use perperson varies widely from city to city, with the more dense ‘compact’ cities having far lower
transport energy use than low-density ‘sprawling’ cities. Because of their rapid growth, many
developing economy cities are now at an important crossroads, where they can choose to growin a compact, energy-efficient manner, or in a sprawling oil-dependent manner. APERC’s
research indicates that the expected savings in urban transport energy use from better urban- 13 -

planning ranges from 30 to 50% by 2050.
Mr. Kobayashi’s message made clear that the time for action is now, since once thedeveloping economy cities mature, the patterns of urban transport and transport energy use
become very difficult to change. Every city that grows without better urban design is a lost
opportunity for energy savings.

APERC Research Contributes to APEC’s Decision on a Revised Energy
Intensity Improvement Goal
The APEC Leaders have agreed to “aspire to reduce APEC's aggregate energy intensity by 45
percent by 2035”. This goal is one of the steps to promote ‘green growth’ contained in the
Honolulu Declaration of the APEC Economic Leaders dated 13 November 2011. Leadersparticipating in the Honolulu meeting included the Prime Ministers or Presidents of most
APEC economies. Energy intensity is defined as energy demand per unit of GDP.
The goal revises upward the previous APEC-wide goal of at least 25 per cent improvement
by 2030 (with 2005 as the base year) adopted by the leaders at their 2007 meeting in Sydney.
The revision process was initiated after APERC’s 2009 APEC Energy Demand and Supply
Outlook 4th Edition found that the earlier goal was likely to be far surpassed underbusiness-as-usual. In their June 2010 Fukui Declaration, the APEC Energy Ministers called
upon the APEC Energy Working Group (EWG) to assess the potential for reducing the target
beyond the goal already agreed, with assistance from APERC. APERC subsequently provided
research support to the EWG, which recommended the revised goal.

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