japan electricity market and the role of renewables · energy transparency, tokyo, 20 june 2013 1...
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Energy Transparency, Tokyo, 20 June 2013 1 / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /
JAPAN ELECTRICITY
MARKET AND THE ROLE OF
RENEWABLES
ENERGY TRANSPARENCY 2013
20 JUNE 2013
ALI IZADI
Energy Transparency, Tokyo, 20 June 2013 2 / / / /
JAPAN ELECTRICITY CONSUMPTION INTENSITY
(MWh/PERSON)
Source: The Federation of Electric Power Companies of Japan, IMF Note: Japanese fiscal year runs from April to March
0
1
2
3
4
5
6
7
8198
9
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
Energy Transparency, Tokyo, 20 June 2013 3 / / / /
JAPAN (MAXIMUM) PEAK DEMAND INTENSITY
(kW/PERSON)
Source: The Federation of Electric Power Companies of Japan, IMF Note: Japanese fiscal year runs from April to March
0
5
10
15
20
25198
9
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
Energy Transparency, Tokyo, 20 June 2013 4 / / / /
JAPAN MONTHLY ELECTRICITY CONSUMPTION
(TWh)
Source: The Federation of Electric Power Companies of Japan
0
10
20
30
40
50
60
70
80
90
Jan09
May09
Sep09
Nov09
Mar10
Jul10
Nov10
Mar11
Jul11
Nov11
Mar12
Jul12
Nov12
Mar13
Hydro Renewables Nuclear Thermal
March 2011 Tohoku earthquake/tsunami
Energy Transparency, Tokyo, 20 June 2013 5 / / / /
• Provide predictable revenue stream for
specified tenure
• Rates revised annually; the programme will
be reviewed at least once in three years
• Financed by electricity consumers through a
surcharge on their monthly bill
KEY GOVERNMENT SUPPORT PROGRAMMES
FEED-IN TARIFFS INSTALLATION SUBSIDIES
TAX INCENTIVES OTHERS
• Residential PV: up to JPY 35/W
• Residential/commercial PV: 3-5% of lease
payments
• RE projects in Tohoku: 10% of CAPEX (up
to JPY 500m/year for 4 years)
• Choice of:
• Superbonus depreciation (100% in year one) for
FiT approved projects
• Accelerated depreciation of up to 30% of
original book value
• Tax deduction of up to 7% of investment (SME)
• Ministries/local governments offer various
other programmes that developers could
enjoy on top of feed-in tariffs
Energy Transparency, Tokyo, 20 June 2013 6 / / / /
FEED-IN TARIFF LEGISLATION
1 July 2012 START DATE
SECTOR
TARIFF RATES
COST
COVERAGE
Biomass, geothermal, small hydro, solar and wind
Set by Ministry of Economy Trade and Industry
Adjusted annually or mid year if the minister
deems it necessary
Surcharge (per kWh): charged on monthly
electricity bill
Energy Transparency, Tokyo, 20 June 2013 7 / / / /
FEED-IN TARIFF RATES FOR APRIL 2013 - MARCH 2014
Sector Capacity threshold
Rates
(/kWh)
Term
(year)
Capex assumption
(/W)
Opex
assumption
(/W per yr)
Project IRR
assumption
Geothermal 15MW+ JPY 26 ($0.27) 15 JPY 790 ($8.32) JPY 33 ($0.35) 13.0%
<15MW JPY 40 ($0.42) 15 JPY 1,230 ($12.95) JPY 48 ($0.50) 13.0%
Hydro 1 - 30MW JPY 24 ($0.25) 20 JPY 850 ($8.95) JPY 9.5 ($0.10) 7.0%
0.2 - 1MW JPY 29 ($0.31) 20 JPY 800 ($8.42) JPY 69 ($0.73) 7.0%
<0.2MW JPY 34 ($0.36) 20 JPY 1,000 ($10.53) JPY 75 ($0.79) 7.0%
Solar 10kW+ JPY 36 ($0.38) 20 JPY 280 ($2.94) JPY 10 ($0.11) 6.0%
(surplus buyback)
<10kW
JPY 38 ($0.40) 10 JPY 427 ($4.49) JPY 4.7 ($0.05) 3.2%
Wind 20kW+ JPY 22 ($0.23) 20 JPY 300 ($3.16) JPY 6 ($0.06) 8.0%
<20kW JPY 55 ($0.58) 20 JPY 1,250 ($13.16) - 1.8%
Source: METI
Note: Changes from inaugural assumptions are highlighted in orange. Rates exclude consumption tax (5%).
Consumption tax is not applicable for residential. Residential sector enjoys installation subsidy. JPY 95/$;
capex, capital expenditure; opex, operational expenditure (fuel cost excluded), IRR=internal rate of return.
Energy Transparency, Tokyo, 20 June 2013 8 / / / /
PROJECTS APPROVED UNDER FEED-IN TARIFF
(MW)
Source: Ministry of Economy Trade and Industry
445 586 449 733 1,049 1,4412,004
5,551
8,306
567 732 480778
1,0911,586
2,135
5,690
8,649
Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13
Solar Other renewables
Energy Transparency, Tokyo, 20 June 2013 9 / / / /
TOP 15 COUNTRIES FOR NEW INVESTMENT IN CLEAN
ENERGY IN 2012 AND % CHANGE ON 2011 ($BN)
Source: Bloomberg New Energy Finance Note: Excludes corporate and government R&D
2.95
3.42
4.05
4.31
4.41
5.34
5.46
6.19
6.85
8.34
14.71
16.28
22.80
35.58
65.13
-68%
179%
11%
-34%
-23%
-32%
20563%
40%
-45%
-17%
-51%
75%
-27%
-37%
20%
Spain
Greece
Belgium
France
Canada
Brazil
South Africa
Australia
India
United Kingdom
Italy
Japan
Germany
United States
China
Energy Transparency, Tokyo, 20 June 2013 10 / / / /
CAPACITY CONVERTED FROM RPS SCHEME TO FEED-IN
TARIFF (MW)
Source: NEDO
2,520
1,124
640
1,229
185
3,160
2,353
221 109 18
Wind Biomass Hydro Solar Other
Switched from RPS to FiT Unchanged
Energy Transparency, Tokyo, 20 June 2013 11 / / / /
JAPAN CUMULATIVE WIND INSTALLATIONS (MW) AND
AVERAGE CAPACITY FACTOR (%)
Source: Japan Wind Power Association
673921 1,075
1,5531,816
2,0432,314 2,452 2,559
17%18%
20%
16%17% 17%
18% 19%21%
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
FY
20
03
FY
20
04
FY
20
05
FY
20
06
FY
20
07
FY
20
08
FY
20
09
FY
201
0
FY
20
11
Energy Transparency, Tokyo, 20 June 2013 12 / / / /
WIND FARMS IN JAPAN
Note: Projects less than 1MW are excluded
BY NUMBER OF PROJECT BY CAPACITY
1-10MW65%
10-20MW18%
20-30MW9%
30-40MW4%
40-50MW1%
50-60MW2%
60MW and larger1%
261
projects
1-10MW18%
10-20MW27%
20-30MW21%
30-40MW15%
40-50MW5%
50-60MW8%
60MW and larger6%
2.5GW
Source: Bloomberg New Energy Finance
Energy Transparency, Tokyo, 20 June 2013 13 / / / /
ESTIMATED TIME REQUIRED BY FOR 10MW AND LARGER
PROJECTS (YEARS)
Source: Bloomberg New Energy Finance
-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10
Geothermal
Wind
Solar1.7-2.7yrs
5.5-9.0yrs
9.0-13.0yrs
Step 1: Project planning and design
Step 4-6: Contracting, EIA and construction
Typical
Step 2-3: FiT process
Fast Fastconstruction
Typicalconstruction
METIapproval
EIAGrid agreement
Note: EIA stands for Environmental Impact Assesment
Energy Transparency, Tokyo, 20 June 2013 14 / / / /
INTER-REGIONAL GRID ENHANCEMENT PLAN
Source: METI
60MWh battery
@ substation
Energy Transparency, Tokyo, 20 June 2013 15 / / / /
US LNG COST BUILD-UP (TO JAPAN)
($/MMBTU)
Source: Bloomberg New Energy Finance
Note: Short-run costs do not include the fixed charge, which must be paid on full
contract volumes regardless of whether the buyer actually takes them. Regas &
blending accounts for LPG reinjection to get US lean LNG (~1,020Btu/scf) to a HHV of
closer to 1,090Btu/scf.
4.00
8.25
11.25
0.60
3.00
0.65
3.00
Henry Hub 15%premium
Shipping Regas &blending
Total short-run cost
Fixedcharge
Total long-run cost
Energy Transparency, Tokyo, 20 June 2013 16 / / / /
0 100 200 300 400 500
Coal firedCHP
CCGT - GlobalCCGT - Japan
NuclearSmall hydroLarge hydro
Biomass - anaerobic digestionLandfill gas
Geothermal - flash plantBiomass - incinerationMunicipal solid waste
Wind - onshoreGeothermal - binary plant
PV - c-SiBiomass - gasification
PV - c-Si trackingPV - thin film
STEG - tower & heliostat …STEG - parabolic trough
Wind - offshoreFuel cells
STEG - parabolic trough + …STEG - tower & heliostat
STEG - LFRMarine - tidal
Marine - wave
Global LCOE range Q2 2013 central scenario
1059
861
531
$11/
mmbtu
Henry hub
price
forecast
Japan LNG
import
forecast, IEA
GLOBAL LEVELISED COST OF ELECTRICITY RANGES VS.
JAPAN CCGT SCENARIOS ($/MWh)
Source: Bloomberg New Energy Finance, IEA, Japan
National Policy Unit
Note: Data represents global ranges except for Japan CCGT scenario. Central scenario is
representative of a typical developed market such as Western Europe and the US.
Energy Transparency, Tokyo, 20 June 2013 17 / / / /
AVERAGE LEVELISED COST OF ONSHORE WIND, 1984-
2012 (€/MWH)
Source: Bloomberg New Energy Finance, ExTool Note: Learning curve (blue line) is least square regression: R2 = 0.88 and 14% learning rate.
14%
1984
1990
20002004
2012
10
50
100
500
100 1,000 10,000 100,000 1,000,000
MW
WIND TURBINE PRICES
HAVE FALLEN 29% SINCE
2008
Energy Transparency, Tokyo, 20 June 2013 18 / / / /
GRID-COMPETITIVE CLEAN ENERGY
=
Natural Gas
at $6/MMBtu
=
New
coal
Best Wind
Source: Bloomberg New Energy Finance
Energy Transparency, Tokyo, 20 June 2013 19 / / / /
SCHEDULE OF KEY EVENTS FOR ELECTRICITY MARKET
REFORM
Source: METI, Bloomberg New Energy Finance
Note: Schedules are soft targets and could turn to be hard targets after relevant bills
pass the Diet.
Energy Transparency, Tokyo, 20 June 2013 20 / / / /
SUMMARY
Japan’s FiT has been successful in spurring investment in
renewables: 21.7GW worth of applications approved by April 2013,
however 90% of approvals are for solar PV (only 798MW of wind).
There is substantial uncertainty in how much electricity generation
contribution the FiT-approved projects will make due to grid
connection and curtailment rules for utility-scale projects.
For renewable resources to make a significant contribution to
Japan’s electricity mix, significant restructuring of both the electricity
market rules and the physical grid structure is needed.
Energy Transparency, Tokyo, 20 June 2013 21 / / / /
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JAPAN ELECTRICITY MARKET
AND THE ROLE OF RENEWABLES
ALI IZADI, [email protected]