Japan Energy Brief

No.15:
September 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. Japan rode over summer with nationwide power saving
2. Renewable Energy Act introduces new system next year
3. Green power certification on steady increase
4. Phil Owen says a lot of work should be done toward COP-17
5. Energy committee highlights- Government approved interim report for energy strategy

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

Japan rode over summer with nationwide power saving
In eastern Japan, Order on Electricity Use Restrictions was enforced from July 1 to cope withthe loss of power sources caused by the March earthquake and tsunami. The Order was lifted
on September 9th, on schedule in the service areas of Tohoku Electric, and almost two weeks
earlier than the scheduled date of September 22 in the service areas of Tokyo Electric. The
government had set out an electricity saving target of 15% for this summer in eastern Japan,
mandated compliance by large power users,
Table-1 2011 Peak Electricity Demand
and requested that small and medium size
(Cmpared with the same weekday of 2010)
Giga Wattcustomers work hard to achieve the target. In 70.0
addition to the conservation efforts by 60.0
Tokyo
consumers, helped by temperatures lower than 50.0
an average year, peak electricity demand was 40.0
Kansailower than last year by 16.5% (10.1 MW) for
30.0
Chubu
Tokyo Electric and by 19.8% (3.1 MW) for
20.0
Tohoku Electric. As a result, the summer peak
10.0
demand season ended without any planned
Tohoku.0
outages envisaged under the electricity
7/1
7/15
7/29
8/12
8/26
9/9
9/23
restriction order.
However, the power supply balance of this summer was not maintained eventless. The No.
1 reactor (1.175 GW) at the Oh-i Nuclear Power Plant of Kansai Electric and the No. 1 unit (1.1
GW) at the Misumi Coal-thermal Plant of Chugoku Electric encountered mechanical troubles in
July and were shut down. Several old thermal plants and other facilities that had beenbrought online to compensate for the loss of power supply also encountered troubles and wereshut down. In addition, a total of 24 hydro power plants of Tohoku Electric were damaged(total capacity approx. 1.0 GW) by the intense rainfall which struck the Tohoku Region in lateAugust, and were withdrawn from the supply line. At Tohoku Electric, in addition to the
nuclear and thermal power plants on the Pacific coast damaged by the March tsunami, there
was a series of problems with other thermal and hydro power plants. However, thanks to-1-

relief supplies from Tokyo and Hokkaido Electrics and to the reduced demand through thesaving effort, the company managed to make it through the peak summer period. Meanwhile,by the beginning of September, Tokyo Electric completed installation of all seven generators it
urgently ordered, and acquired a total of 1.5 GW of additional supply capacity. Although
Tokyo Electric originally anticipated a shortage of generation capacity, it was able to secure areserve margin roughly exceeding 10%, which enabled relief supplies to Tohoku and Chubu
Electrics, both short on supply. However, the prospect of restarting nuclear power plants after
periodic inspection is nowhere in sight. Apart from the formal approval by the Governor of
Hokkaido in August for commercial operation of the No. 3 Unit (0.91 GW) at the Tomari
Nuclear Power Station of Hokkaido Electric, which had been running in operation phase after
periodic inspection, no other nuclear plants are likely to restart as yet.
The previous administration of Prime Minister Naoto Kan established a policy of introducing"stress tests" as a means of determining whether nuclear plants can be restarted. The policy
assumes a procedure whereby the results of evaluating the plants' margin of resistance toanticipated disasters are verified by the Nuclear and Industrial Safety Agency (NISA) of METI,
to be further checked by the Nuclear Safety Commission under direct control of the Cabinet
Office to see if the reactor in question could be restarted.
However, at present, the final decision on resumption of a nuclear power station is delegatedto the local governments of jurisdiction. Fukui Prefecture, where the majority of nuclear
power plants of western Japan are located, requested the national government to provide itwith "provisional safety standards" for determining whether currently suspended plants could
be restarted, but it reportedly has not received any response that satisfies it. If the current
situation continues, only six out of Japan's 54 nuclear power plants will be operating at the endof the year, of which five plants other than Tomari No. 3 will all be stopped before June 2012.
Japan somehow made it through the summer peak electricity demand season this year, but now
faces the question whether it can ride out the coming winter demand. Fuel procurement costs
are expected to increase further beyond the previous estimate by the IEEJ (¥3.5 trillion), andincreases in electricity rates are now being mentioned as a realistic possibility.

15% reduction from last year in peak electricity demand
Because of abundant rainfall and the lower-than-usual temperatures in the summer of 2011 ,it is difficult to determine the effectiveness of efforts by Japanese users to save electricity
consumption. Yu Nagatomi (Researcher, EDMC, IEEJ) has estimated the net electricity saving
rates based on an analysis which corrects this year's electricity demand in the Tokyo Electric
and Tohoku Electric service areas for the differences in temperatures.
Based on a regression
analysis of the differences in temperature and the differences in electricity demand between lastyear and this year, the temperature sensitivity of electricity demand during the peak period wasestimated to be 1.17% per one degree C for June, 2.50% for July and 2.53% for August in theTokyo Electric service area. As the temperature in July and August is generally higher thanthat in June and air-conditioning is widely used, the temperature sensitivity tends to be higher
in these months. In the Tohoku Electric service area, which is located north of Tokyo and hasintermountain regions with fairly low temperatures, the temperature sensitivity was estimatedto be roughly half that in the Tokyo Electric service area, i.e., 0.49% in June, 1.39% in July and1.27% in August.
The electricity demand net of the temperature effect applying this method is graphed below,
which indicates that the initial target is mostly achieved through the efforts of public relations
by government agencies and utilities. In the calculation results, the electricity saving rates-2-during the peak period in the Tokyo Electric service area, after correcting for temperature, were
13.5% in June, 13.9% in July and 14.6% in August. The rates in the Tohoku Electric service area
were 14.0% in June, 13.4% in July and 17.6% in August. The government's electricity use
restrictions were put into effect on July 1, and the electricity saving rates increased in and after
July due to private companies proactively taking measures such as rotational plant operation.
In addition, the electricity saving rate is even higher in the Tohoku Electric service area due tomeasures such as extended holidays, primarily in the “Obon” Buddhist festival season in
August.
Table 2 Net Electricity Saving after Deducting Temparature Effect
Tokyo EPC

20.0%

Reduction Rate (%)

Electricty Saving

Temparature Effect

10.0%

10.0%

0.0%

0.0%

▲10.0%▲10.0%‐15%‐15%▲20.0%▲20.0%▲30.0%▲30.0%

Total Saving▲40.0%▲50.0%

Tohoku EPC

20.0%▲40.0%▲50.0%June

July

AugustJune

July

AugustHowever, it is evident that electricity saving slackens on days when there is a significant risein temperature, despite the electricity saving measures in effect. There is also a tendency forthe electricity saving rate to slacken when temperatures rise on a holiday. Compared with thetrend on weekdays, when electricity savings at offices and factories are generally rigorous, it isdifficult to achieve the same degree of rigor at home. It is presumed that many companies willcontinue the electricity saving measures they implemented this summer, but the degree towhich society will accept measures such as shifting work hours and holidays, which were
implemented as a means to avoid an emergency, remains to be seen. On the other hand,electricity demand in July was minus 10.5% for Tohoku Electric and minus 10.0% for Tokyo
Electric year-on-year, showing that there was a significant curtailing effect on peak electricity
demand. If the 15% reduction in peak electricity demand continues to next year and beyond,the capacity ratio will improve and there will be a significant rationalization of the power
supply structure in Japan.

The generating cost of nuclear power plants is ¥7-12/kWh
The costs of nuclear generation are being widely debated in the wake of the recent nuclear
accident. In the estimates released in 2004, the Electricity Industry Committee of the Advisory
Committee for Natural Resources and Energy calculated the cost of nuclear generation to be¥5.3/kWh, which was considered comparable to the cost of coal-fired thermal generation at¥5.7/kWh and that of LNG-fired thermal at ¥6.2/kWh. Also, the IEA estimation of power
generating cost by source for Japan (the 2010 version) was roughly on a par with the above
estimates. Assuming the discount rate for capital costs to be between 5% and 10%, costs ofnuclear power generation are estimated between 5.0 to 7.5 U.S. cents/kWh, whereas natural
gas-fired generating will cost 9.5 to 10.5 U.S. cents/kWh. Against the foregoing findings, at a
meeting of the Japan Atomic Energy Commission (JAEC) in September 2010, Professor Kenichi
Oshima of Ritsumeikan University sparked a debate by announcing that he had conducted an-3-analysis based on annual securities reports of power companies, and estimated that if the costsof pumped hydro generation needed to maintain the high operation factor of nuclear power
plants is included, nuclear generating costs in the past (1970-2007) were ¥12.2/kWh, far higher
than the thermal generating costs of ¥9.90 for the same period.
Prompted by this situation, Mr. Yuji Matsuo (Senior Researcher, EDMC, IEEJ) and Mr. Keigo
Akimoto (System Research Group Leader, Research Institute of Innovative Technology for the
Earth (RITE)), reported on nuclear generating costs at a meeting of the JAEC on September 13.
Mr. Matsuo reported that: “Two approaches are widely used to evaluate the cost of power bygeneration method, i.e. one is an estimate using theoretical models and the other is based on
annual securities reports. Although the latter method has certain limitations coming from themethodology itself, it can draw out useful information in comparing the costs of thermal power
versus nuclear power based on the historical record.” He then presented estimates based on
annual securities reports of 12 power companies over the last five years.1
According to the analysis, the average generating costs of the 12 companies over five years
were estimated to be ¥10.2/kWh for thermal, ¥7.2/kWh for nuclear, and ¥8.9/kWh forgeothermal and others (alternative energy), concluding that thermal generation has the highest
cost. At ¥7.5/kWh, the fuel portion accounted for 74% of thermal power generation costs,
evidently reflecting the impact of high fuel prices in recent years.
The ¥7.2/kWh generating costs for
Table-3 Generating Costs by Source
nuclear are comprised of ¥1.9/kWh Yen/kWh
capital costs, ¥0.6/kWh fuel costs, 12.0
Demolishing¥2.7/kWh operating and administration 10.0
costs, ¥1.8/kWh backend costs, andBackend Cost
8.0
¥0.3/kWh demolishing costs.
Fuel
OPEX
6.0
costs are extremely low compared to
4.0
Fuel Cost
thermal power generation, but the
2.0
backend costs (costs incurred for
Capextransport, storage, reprocessing and
0.0
Geothermal &Hydro
ThermalNucleardisposal of spent fuel) make a
Otherssubstantial cost element. Although the
IEA estimates that backend costs are 0.23 U.S. cents/kWh, this may be too low based on the
track record in Japan. On the other hand, electric companies may have not fully appropriatedthose funds in their past annual reports to cover the backend and demolishing costs to be
incurred in the future. There may be differences between the costs calculated on annual
reports and the actual costs to be incurred.
Compared with the Oshima analysis, the above estimates for thermal generating costs areabout the same, but there is a major difference in nuclear generating costs. Since Oshima’s
estimates include capital costs incurred in the high interest era when nuclear power plants were
initially introduced to Japan (1970-1985), there is a considerable deviation from the actual
record of capital costs in the last five years. Oshima’s estimates have also assigned
disproportionately high costs of project development and site acquisition to nuclear power.
Therefore, the differences with Oshima’s estimation are ¥1.7 for capital costs, ¥1.2 fordevelopment, and ¥0.5 for site acquisition, and the cost for pumped hydro also amounts to ¥1.2
to make up a total difference of about ¥5 (¥12.2 vs. ¥7.2)/kWh.

1 The Japanese version of the report is available at the IEEJ website (members only). http://eneken.ieej.or.jp/data/4043.pdf-4-Mr. Matsuo summarized the above analysis by saying, “There are items which are impossible
to evaluate accurately now using the data appearing on the past annual reports. For example,
once a serious accident occurs beyond a hypothetical level, it may incur significantly higher
costs for reinforcing safety measures, compensation for damages, and backend treatment anddemolishing. As these costs are yet to be appropriated in reviewing the Fukushima Daiichi
accident, their impact should never be ignored. Nevertheless, Oshima’s estimation is regarded
to be excessive because all of the reported costs for pumped hydro, project development, siting
and other like activities are ascribed solely to nuclear power generation. While it is true that
nuclear power incurs these costs to a certain extent, we must develop accurate cost assessments
allocating these costs among various power sources on a fair and rational basis.”Meanwhile, Mr. Keigo Akimoto of RITE reported that if the plant operation factor for nuclear
power plants is assumed to be 60-85% (while the government had aimed to raise it to 90%),
generating costs are estimated to be ¥5.1-7.4/kWh, and if power transmission costs are also
included, the figures will become ¥8.1-12.5/kWh. He pointed out, “As an inordinate rise inelectricity costs hurts international competitiveness of industry and causes flights of Japaneseindustry to foreign countries, it is important to analyze Japan’s energy situation prudently
based on accurate cost information.”
Previously, costs of nuclear power have been calculated assuming high plant operating
factors as the base load power. On the other hand, the government has mandated that nuclear
power plants be periodically inspected and serviced every 13 months. Under the current
regulation, the theoretical capacity factor excluding test operations can never be higher than
81%. The Fukushima Daiichi accident occurred following the Great East Japan Earthquake,just when a governmental review had begun to ease the existing checkup procedures. The
question of what framework to use in calculating the costs of nuclear power generation will
likely involve considerable debate, including examination of the role of nuclear power in abalance with other power sources, as well as its costs and regulatory systems. The debate
regarding the generating costs of different sources is expected to continue at the Energy andEnvironment Council.

Renewable Energy Act introduces new system next year
On August 26, the Japanese Diet approved the “Act on Purchase of Renewable Energy
Sourced Electricity by Electric Utilities” (the “Act”) to take effect from July 1, 2012. The Act
obligates Japanese electric utilities to purchase electricity generated from renewable energy
sources including solar photovoltaic (PV), wind power, hydro power, geothermal and biomass
at fixed Feed-in-Tariff (FIT) prices, which are higher than normal contractual prices, andapplicable for a fixed period of 10 years for residential PV power and for 15 to 20 years in thecase of commercial photovoltaic power or other renewable energy power generators. The
extra costs incurred by electric utilities in the purchase of renewable electricity will be recouped
through a surcharge added on top of the normal electricity bill to end users. Concerning thepricing, the existing rates of 42 yen/kWh will be applied for sellers of excess power fromresidential PV systems only, and 34 yen/kWh for double generation users with a combinationof fuel cells and PV. Purchase prices of 15-20 yen/kWh are expected on other types ofrenewable electricity. The sum of the surcharges will amount to 0.5 yen/kWh on average
according to METI.
The type of scheme such as above is considered as one of the most positive measures toaccelerate introduction of renewable energy and is already adopted by dozens of countries in
the world. Japan introduced a surplus power buyback program on solar energy in 2009 to-5-

successfully reactivate the stagnant domestic solar energy market. The Act substantiallyexpands the scope in terms of energy sources to include all renewables such as wind, hydro,
geothermal and biomass, and designates all of generated electricity as purchaseable.
Japan used to lead the world in the development of solar and other renewable energies after
the oil crises of 1970s, but it has recently been lagging behind for a number of reasons. The
Japanese government is pinning its hopes on the Act to make a comeback on the setbacks.
There are, however, some issues to be resolved if the new scheme is to promote renewableenergies in Japan. First of all, reasonable and definitive introduction targets must be
established for each of the renewable energy sources as the theoretical basis for purchase prices
and other configurations of the scheme. The Japanese government will have to specify thetargets along with a timetable for the implementation of the Act by next July when it will takeeffect.
The prices and other terms and conditions for power purchase agreements will be notified by
the Minister of METI on the basis of opinion by the "Procurement Price Calculation Committee"
an advisory body to be newly established under the Agency for Natural Resources and Energy,
METI, consisting of five members appointed by METI with the approval of the Diet, and it willsubmit recommendation on the purchase scheme to METI. The scheme it recommends will be
the key to the success of the new power purchase program. It must provide incentives to enter
the market, but at the same time avoid detrimental effects on electricity prices as well as
excessive profits for renewable energy power suppliers. Hitting the right balance on thisrequirement could be difficult, and a certain amount of trial and error may be required aspracticed by leading European countries in a frequent review of their schemes. While the FIT
scheme has failed in Spain, Germany is known for an elaborate pricing structure and otherconditions indicating difficulties in designing appropriate schemes.
There is another hitch as well. Although the program obligates electric utilities to accept
renewable energy power generation systems to be connected to the grid, they are exemptedfrom such obligations when "it is deemed to impede undisturbed supply of electricity." In fact,
renewable energy power generation capacities in Hokkaido and Tohoku areas, where large
potentials on wind and other resources exist, have already hit the ceiling that regional electricutilities have set for undisturbed supply of electricity, rendering the Act ineffective to accelerate
introduction of renewable energies. Consensus building through open discussions is requiredon the definition of "difficulties" that will have significant impacts on newly emerging
businesses. In addition, a variety of undertaking is required to relax the receiving limits
including structural reform of the electric industry, upgrading of grid infrastructure, anddevelopment of devices and systems that can transform intermittent power into a stable sourceof electricity supply. The Act allows a reduced rate of surcharge for electric-furnace steel
producers and other heavy industrial users of electricity, while many have voiced theirconcerns over the fairness of the program. Careful design is required in this regard as well.
It must take into account costs as well as quality of products and services to be provided byrenewable energy power generation. There is surely much to be done in the ten months before
the enforcement of the Act.

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Green power certification on steady increase
The Green Energy Certification Center (GECC), an affiliated organization of IEEJ, serves as
the official body for certification of green power generation and heat use as assessed by anindependent committee formed with third party experts. Green power and green heatcertificates represent added environmental values accounting for the use ofenvironment-friendly renewable energies. Energy users can purchase them to take partindirectly in the promotion of green electricity and green heat. GECC was established in 2008
at the occasion of G8 Toyako Summit, expanding the scope of the former Green Electricity
Certification Center, to cover heat in addition to
Record of Green Electricity Certified
electricity aiming at wider use of green energies.
In fiscal 2010, GECC certified a total of 270 million
kWh of green power, recording a historical high.
More green electricity facilities were certified in 2010
in comparison with the previous fiscal year, in termsof both capacity and the number of projects; theformer was a result of increased photovoltaic andbiomass power generation, and the latter owed tosubsidies introduced last year by the national andlocal governments which boosted the number of new
installations of residential photovoltaic systems.
The number of green power certificate issuers rose to
51 organizations in 2010.

Facilities
Amount of Electricity
Fiscal Year Project Capacity Project
AmountkW
million kWh
2001
2
15900
3
1158
2002
1
7650
9
29112
2003
2
3295
12
32801
2004
9
28,21520
39,2162005
22
53,641
34
50,4802006
20
22,851
71
114,263
2007
30
94,972120
87,3712008
50 161,633
205
238,1132009
264
50,698343
233,3962010
498
103,844473
270,545

Note: The largest capacity increase was recorded in 2008 as
a big biomass electricity generation project was registered,
while PV has increased significantly in 2010 reflecting theenhanced incentives.

The green thermal energy certification previously Source: IEEJ
addressed only solar thermal use by way of solar hot water supply systems with circulation
control and solar central heating cum hot water systems. In 2010, its scope was expanded toinclude snow and ice energy and woody biomass thermal energy, resulting in an increased levelof the society’s interest in green certificates. While only three solar thermal projects were
granted green certificates in 2009 covering a total heat collection area of 163m2, seven projects
obtained certificates in 2010 for a heat collection area of 1,819m2. In addition, four biomass
projects received certificates amounting to a total boiler capacity of 82,734kW.
IEEJ has worked to set out application procedures and certification rules for green energies
with a perspective that it is essential to support promotion of renewables in the long run,
although the program is yet to make financial contributions to IEEJ’s books. In Japan, theaccident at the Fukushima nuclear power plant seems to have triggered an increased
momentum among private firms and individual consumers toward introducing renewableenergies. The number of application for green certificates is increasing much more rapidly thisyear. Longstanding efforts by IEEJ to lay down the groundwork now appear to flourish into asystem supporting public actions.

Phil Owen says a lot of work should be done toward COP-17
At the IEEJ Energy Seminar held on September 16 in Tokyo, Mr. Phil Wynn Owen, Director
General, International Climate Change & Energy Efficiency, Department of Energy & Climate
Change, UK, explained the UK strategy for climate change and energy. Before his presentation,
the British Ambassador to Japan H.E. Mr. David Warren introduced Mr. Owen to the audienceand stated that there were plenty of possibilities Japan and Britain could jointly develop intechnologies and businesses toward realization of a low carbon world. He hoped that Japan-7-

would recover from the recent tragedy soon and combat the climate change hand in hand with
the UK.
Mr. Owen presented the energy outlook of the UK up to2050, with strong initiatives to target reducing the GHG
emissions by 80% from the 1990 level. The electricity sector
will play a central role in reducing emissions; the corepolicies for the power sector comprise promotion ofrenewable energies, support of CCS and construction of
nuclear power stations on the supply side and improved
energy efficiencies and demand management through smart
meters on the demand side. He said that, as 25% of thegenerating capacity will become obsolete and close in the next decade while investment cycles
on energy equipment are long, a decision made now is critically important for the global
temperature of 2050. We need to make a massive effort on all fronts if we are to achieve thetwin goals of decarbonisation and energy security. The UK government is additionallyproviding tailored support programs through various measures such as Renewable Obligations,Green Investment Bank, Green Deal for funding, etc.
He emphasized that, to combat the climate change, it is critical that the international
community agree on the Kyoto Protocol 2 at the COP-17 to be held on November 28 throughDecember 9 in Durban, South Africa. A single global rule should be pursued, on the condition
that large emitters such as China and the US should join. A lot of work needs to be done
within the few months left to make progress for implementation of the agreements previously
made at Cancun.

Energy Committee Highlights
Government approves interim report for energy strategy
The second meeting of the Energy-Environment Council, chaired by Koichiro Gemba, thenState Minister for National Policy, was held on July 29. The meeting discussed and adopted“Immediate Energy Supply-Demand Stabilization Measures”, as well as an interim compilationof discussion points for the formulation of “Innovative Strategy for Energy and theEnvironment”, both of which were subsequently approved by the Cabinet on August 15.2 The
paper for immediate measures sets out a three year time table for mobilizing almost 50 specificpolicies to address near-term energy supply issues by employing such measures as enhanced
utilization of private power generation plants, promotion of co-generation, review and reformof the present electricity supply systems, etc., along with a list of regulatory and system reforms
on energy administration accordingly required. The specific timetable and policy lists are to
be fleshed out and finalized within this autumn, which will then be reflected into the FY 2011
third supplementary budget and the FY 2012 budget.
The paper on Immediate Measures warns that, if no nuclear unit is allowed to restart after therespective shutdown for regular inspection, there are risks of a 10% power shortage and a 20%
cost increase incurred by additional procurement of fossil fuels in the summer of 2012. To

2 These papers in English are available at the website of NPU at http://www.npu.go.jp/policy/policy09/pdf/20110908/20110908_en.pdf andhttp://www.npu.go.jp/policy/policy09/pdf/20110908/20110908_02_en.pdf.

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avoid planned power outages and to prevent facile cost pass-along by the power utilities, thegovernment needs to implement various policy measures immediately, beginning from as earlyas this autumn, to improve the structure and diversify the sources of power supply. To thisend, the government intends to prioritize policies; from transforming the demand structure to
cut-down the peak electricity requirement, multiplication of power sources by employing every
available entity, review of regulations and institutions on the electricity administration systemwith a view to rationalizing the demand structure and diversifying the electricity supply, and to
the implementation of comprehensive measures for nuclear safety. The three year policy
timetable includes, for example, relaxation of conditions on back-up power supply contracts forprivate power plants, rules for power transmission service (wheeling), promotion ofco-generation and fuel cell systems, development of regional gas pipeline networks, accelerated
introduction of smart meters, preparation for heat transaction systems, and so on.
According to the interim compilation, the basic concept of the Innovative Energy andEnvironment Strategy needs to be laid out by the end of this year and the strategy itself beestablished within next year, which comprises the new Basic Energy Plan, the Green Innovation
Strategy, and the Energy-environment Industry Strategy. It places the concept of shifting to a
distributed energy system as the driver for economic growth by stimulating private investment.
Missions and priority issues will be discussed on the six important sectors as reported in theJuly edition of the Japan Energy Brief. The present Basic Energy Plan needs to be reviewed
from scratch to establish a new energy best mix, including formulation of scenarios toward
reduced nuclear dependence and thorough examination of past nuclear policies. The Green
Innovation Strategy will also be reinforced and advanced.
For examination of electricity supply cost by source, the government will create a
sub-committee under the Energy-Environment Council of the National Policy Unit. The
sub-committee will study total costs including cost for policies and accident responses. For
this purpose, the Nuclear Sub-committee of the Council heard from two experts on September
13 as explained in the preceding article. Based on the study, the Council will comprehensively
review possible nuclear policies, and develop scenarios toward lowering the nuclear
dependency and pathways for policy implementation, to finalize the plan after nationwide
debates. The Council will set up a plan to create a desirable electricity industry system
including unbundling of power generation and transmission, and prepare an institution tostrictly separate the utility sector (power transmission/distribution and nuclear power) and thecompetitive business sector (power generation and retail marketing) by around 2020.
The new Basic Energy Plan will be formulated jointly by the Council and the Advisory
Committee for Natural Resources and Energy (ACNRE) under METI. The Green Innovation
Plan for research and development of innovative technologies on renewable energies, energy
efficiency and conservation, cleaner fossil fuels, electricity supply systems, etc., will be
developed under the Council. The nuclear power policy will be developed, based on thestrategies set out as above, by the Minister in charge of nuclear power.

Energy News in Japan & Asia
Gasoline Importincreases fast
since theearthquake

Japan’s gasoline import has been increasing markedly since theMarch earthquake. It was running relatively slowly before theearthquake at about a half of the previous year’s pace. It has
increased significantly after the earthquake, up to more than double thepreceding year for the period of March through April. It has jumped
to 325,100 KL or five-fold compared with the previous year in July.

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The major cause of the increase is theearthquake and tsunami, which disabled several
refineries in the eastern Japan. In particular, theSendai Refinery of JX Energy was seriously
damaged. Since it is the only refinery located in
the Tohoku region, other oil companies also reliedon it to supply gasoline for the quake-hit region.
Although the refinery restarted product shippingin May, it is expected to resume refining
operations only in the next year; currently it isoperating just as a large oil depot. Other oilcompanies have reopend their oil depots in theregion one after another, but have to obtaingasoline supplies from sources elsewhere.

Thousand KL Export and Import of Gasoline

400
300

Export200
100

Import0
2010/14

7

10

2011/1

4

7

Source: Ministry of FinanceYen/liter

160
150
140
130
120

Retail Price of Regular Gasoline

1/5
5/5
9/5
1/5
5/5
9/5
Furthermore, the extraordnary appreciation of
2011
the Yen of late has helped the trend. Compared Source: IEEJ
with the price for imported gasoline, the domestic spot market prices were running high by
about five Yen per liter. The gap has since widened to ten Yen per liter in August,encouraging traders to sharply increase gasoline imports. The above circumstance is having astrong impact on the market, and the retail gasoline price has recorded five consecutive weeks
of decline by the middle of September, according to IEEJ’s market survey unit.

IHI and K-Lineannounce LNG
driven freighter
ships

Kawasaki Kisen Kaisha, Ltd. (K-Line) on July 25 announced that thecompany was in the process of developing vehicle carriers using LNG
as its fuel jointly with Kawasaki Heavy Industries, Ltd (KHI) and Det
Norske Veritas AS (DNV), the leading ship classification society
based in Norway. Compared with conventional heavy-fuel driven
ships, the new ship can reduce emissions of CO2 by 40%, NOx by 90%
and SOx by 100%. K-Line plans to put the ship into operation in 2016
in the European waters such as the North Sea and Baltic Sea.

The ship is designed to carry 2,000 vehicles, with two 5,000kW
engines modified from the KHI’s own gas engine series andtwo 300m3 LNG tanks. The introduction of LNG driven ships
is urged by stricter regulations being introduced on marine fuelquality to reduce air pollution. The sulfur content of themaritime fuel is to be restricted to below 0.1% from 2012 on the
US coasts and from 2015 in Europe. The NOx emission limit
is also being reduced by 80% from the present level,
enforceable from 2016 in the same waters. To accommodate these regulations, various
measures have been developed in Europe, in particular in Scandinavian countries.
In
Norway, about 30 small LNG supply bases were developed and began fuel supply forferryboats since 2008. In Sweden, an LNG supply facility is under construction for operation
within this year, and six domestic freighters are being modified to use this new fuel.
In the meantime, IHI Marine United, the shipbuilding arm of the IHI Corporation, alsoannounced on August 31 that the company had completed a basic design of an ocean going
container carrier equipped with dual fuel engines to use LNG and heavy fuel oil. As theregulated areas on SOx emission is going to be expanded in the coastal waters from 2016, theship is designed to use LNG when sailing in such waters. The ship will be equipped with a- 10 -

pair of the proprietary, slosh-free IHI-SPB type LNG tanks. The tank size will be limited toless than 2,000m3 to minimize the reduction of the container carrying capacity, while allowing
the voyage on LNG for as far as 2,000 nautical miles.

Tokyo Met-gov’t
to build one
giga-Wattgas-fired powerplant

On August 2, the Tokyo Metropolitan Government held its firstmeeting of the Conference on “Tokyo Natural Gas-Fired Thermal Plant
Project” after an announcement of its plan to construct a one giga-Wattgas-fired power plant in the Tokyo Bay area. The project team will
make proposals to the national government, at the same time, withregard to regulations on, and reform of, the power industry based on
their study on the project formation and site selection for the project.

After the meeting, Vice Governor Naoki Inose commented, “Our aim is to construct thepower plant in world record time,” and explained the scheme as follows:
The accident at the Fukushima Daiichi Nuclear Power Plant led to a major power loss, which
revealed absence of a firm government policy for stable energy supply, arousing concerns overthe flight of domestic enterprises to overseas. It is important that the Tokyo Metropolitan
Government extends a strong message towards industry to assure electricity supply byproactively pushing ahead its power plant construction plan.
To this end, it is necessary to establish a power supply system based on the local production
for local consumption principle. While constructing the one giga-Watt class power plant,
Tokyo will also enhance distributed energy systems at large hospitals and public facilities by
way of district combined heat (hot/cool) and power (CHP), which are similar to the system
adopted at the Roppongi Hills office/hotel complex.
Thanks to the shale gas revolution, global natural gas supply is on a remarkable increasing
trend. A natural gas-fired plant emits significantly less amount of carbon dioxide (CO2), sulfur
oxide (SOX) and nitrogen oxide (NOX), and can be sited on a relatively limited space.
Therefore, a combined cycle gas turbine (CCGT) power system is the most advantageous
immediate option. The energy shift to natural energy sources such as solar and wind power isdesirable but can not happen overnight, while incurring the problem of unstable supply which
is not easy to resolve.
At the second meeting of the project team held on September 14, five candidate sites along
the Tokyo Bay were proposed, having taken into account the power grid connection, fuelprocurement and surrounding environment. Vice Governor Inose insisted on three objectivesof the project, which are; 1) establishing an energy supply system based on the principle of local
production for local consumption; 2) replacing aged thermal plants that impose a highenvironmental burden; and 3) deregulating new entries to the electricity market andestablishing a model electricity market with increased elasticity. The Tokyo Metropolitan
Government will provide the land for the power plant but will not allocate any public funds forconstruction. Instead, it plans to finance the project through investment funds from and to
consign operations to the private sector. The generated electricity will be used to powersubway trains and public facilities owned by the Municipal Government (consuming
approximately 800,000 kW), as well as sold in the market. Due to the limited availability ofland, fuel gas will be supplied via pipelines owned by Tokyo Gas. Meanwhile, preliminary
studies have been launched to survey the world LNG market and other aspects of fuelprocurement. Details of the fuel procurement scheme are yet to be formulated.

- 11 -

APERC Letter
37th EGNRET Meeting held in Chinese Taipei
The 37th EGNRET (Expert Group on New and Renewable Energy Technology) meeting washeld for August 22~23, 2011 in Taipei. Mr. Jin-Sheng Su, Director, Energy Technology
Division, Bureau of Energy, Ministry of Economic Affairs (MOEA), Chinese Taipei, mentioned
in his opening address that the Japanese Tohoku earthquake and tsunami had caused serious
nuclear accidents, having significant impacts on
the energy policy/strategy throughout the world.
He mentioned that developing new andrenewable energy technologies is likely to be oneof the best solutions to overcome the energy
shortage, as expansion of nuclear power may
slowdown worldwide. Dr. Hom-Ti Lee, the chair,also emphasized the mission of the EGNRET tofacilitate increased use of new and renewableenergy technologies in the APEC region.
Mr. Kenji Kobayashi, President of APERC, explained progress in APEC economies of the Peer
Review on Energy Efficiency (PREE) and the Peer Review on Low Carbon Energy Supply(PRLCE). He invited remaining economies to positively participate in the projects for sharing
experiences and knowledge and learning “high–performance” strategies from their peer
reviews, which illustrate the method of setting goals, formulating action plans, and improving
effectiveness of existing policies for promotion of energy efficiencies and development of low
carbon energy supply.
Professor S.Y. Wu from Feng Chia University, Chinese Taipei, made a presentation on “APEC
Research Network for Advanced Bio-hydrogen Technology”: the project is supported by APEC
and funded by Chinese Taipei. It aims to develop advanced technologies for bio-hydrogenproduction, also providing an exchange platform for APEC experts. The program includes (1)setting up a website (http://www.apec-bioH2.org), (2) organizing a symposium (11thInternational Conference on Clean Energy, http://www.icce2011.org.tw), and (3) setting up a
non-food feedstock bio-hydrogen pilot plant for research and training courses at Feng Chia
University.
Seven economies reported on their new and renewable energies activities, including
Canada, Japan, Korea, Singapore, Thailand, the USA, and Chinese Taipei. On the two
EGNRET projects, the USA reported on “Using Smart Grids to Enhance Use of Energy
Efficiency and Renewable Energy Technologies” and Chinese Taipei on “Addressing
Challenges of Advanced Metering Infrastructure (AMI) Deployment in APEC”.
The USA project pointed out, having surveyed 16 member economies, importance ofidentifying benefits of smart grids, which also found challenges broadly in technological,
societal, business and financial aspects. It proposes five areas of potential activities for priority
consideration, which are policy goals, education, interoperability, methods and workshops, androadmaps. It concludes that, incorporating the observed best practices of smart grid in theelectricity supply/demand infrastructure, individual APEC economies as well as the APEC
whole region will be able to enjoy economic and environmental benefits in the long run.
The Chinese Taipei project aims to; (1) investigate and confer the development strategies andcurrent status of AMI in APEC economies, (2) indentify effective AMI polices and best practices,- 12 -

(3) offer guidelines to economies and industry for AMI deployment, (4) provide
recommendations for power network upgrading and smart grid integration, and (5) increaseawareness and effectiveness of AMI. A workshop on the project was held subsequently on
August 24~25.
Reviewing the general progress of ongoing projects and their sub-effects, it is recognized thatprovision of more detailed information is desired to promote further cooperation either for
developing projects or upgrading activities.

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