Friday, December 14, 2012

200MW of Geothermal projects

Today's lead energy news in the Nikkei Shinbun is that there are now pending applications for 200MW of new geothermal projects in Japan, following a 12+ year period in which none have been constructed.  Apparently the projects are attempting to qualify for development subsidies in addition to the feed-in-tariff.

JX Kinzoku (part of the JX Group) is planning a 40MW project in Hokkaido (southern part of Sapporo City), while Tohoku Electric Power, an incumbent utility, is planning a 50MW project in Akita Prefecture.  A government-affiliated oil exploration company is also planning a project in Eastern Hokkaido.  While the projects will take up to 10 years to complete (ouch), they apparently already have support from the local governments and, more important, from any potentially affected owners and operators of hot spring hotels (onsen ryokan) in the vicinity.   

METI is planning to offer 20 billion yen (almost $250 million) of subsidies for the development phase of these projects, and further applications could be received by December-end.

These projects do not yet show up on METI's list of FIT certifications, which has a "0" first year target for geothermal, given the long lead times involved.

Tuesday, December 11, 2012

Trouble on the Nuclear Ginza

The only nuclear plants to reopen in Japan since the March 11, 2011 disasters are Kansai Electric's Oi #3 and #4 plants in Fukui Prefecture, two of the more modern, larger plants in Japan.

Various other plants are now under inspection as one step to reopening.  One of the next in line is the Tsuruga #2 plant, only a short distance to the east in Fukui Prefecture from Oi, on a peninsula along the Japan Sea Coast.  The Tsuruga #1 and #2 plants are located near the older and smaller, somewhat accident prone, Mihama plants, which I suspect will never reopen.  The Tsuruga operator, Japan Atomic Energy, had planned to build Tsuruga #3 and #4 reactors as well over the next 5-7 years.  This area also hosts the accident-prone Monju experimental fast breeder reactor, and is known in Japan as the "nuclear Ginza", because of the crowded real estate and the massive subsidies that Fukui Prefecture has gotten over the years.
Sunset over the Tsuruga Peninsula.  The nuclear facilities are on the far side, out of sight.
The new regulatory agency in charge of nuclear safety, the Nuclear Regulation Authority ("NRA") has been examining claims from some seismologists that a "crush zone" of rock under the Tsuruga #2 Plant (the "D-1 Fault" which is said to branch off of the nearby, active "Urasoko Fault") is an active earthquake fault.  Under pre-existing Japanese rules, "active" means something like "has moved in the past 120,000-130,000 years".  (It would not be surprising to me if any place in Japan is not considered on or near an "active" fault, under that definition, which really gets to the heart of the unique problems with siting reactors in this country).  Based on inspections to date, it seems all members of the relevant commission believe the D-1 Fault is likely an "active" fault, and the commission is considering next steps.  Most likely, they will conclude that the plant should never have been sited at its location ... and will not be permitted to reopen.  This is the lead story in the Japanese press today, and English reports can be found on AP and NHK websites.

Tsuruga Plant #1 was completed in 1970, shut down in March 2011, and was never a likely prospect to reopen, being over 40 years old and relatively small.  Tsuruga Plant #2, however, was completed in 1987 and, when operating, provides baseload power of over 1100MW to the Kansai area.

There is also a pending investigation of "crush zones" beneath the Oi #3 and #4 reactors, and a divided opinion over whether or not they represent an "active" fault.

UPDATE May 2013:  The NRA has completed its process and formally concluded that the "cursh zone" under the Tsuruga #2 reactor is an active fault ... making it virtually impossible that this reactor will reopen.

Meanwhile, efforts to restart the experimental Monju fast breeder reactor (nearby Tsuruga) have been dealt a severe blow, as the operator has been found to have failed to conduct regular equipment inspections over the lengthy period it has been inoperable.

Sunday, December 9, 2012

More LNG Imports On the Way

We have heard that it will take a decade or more for Japan to modify its LNG import pricing structures, diversify supply, and deal with the issues raised by the current shut down of its nuclear plants, which seems likely to drag on, and on.  Well, maybe things can happen a bit faster than that.

1.  Jiji Press (via Yomiuri) reported this week the first shipment ever of LNG to Japan by Russia's Gazprom, via the Arctic Ocean.  The tanker left Norway on November 7 and arrived in KitaKyushu on December 5.  With global warning, a new, shorter shipping route is opened.  Of course, LNG losses during shipment can be cut significantly by a shorter routes, and by shipping in colder temperatures.  Also, if the LNG plant is in a cold location, there is a significant cost saving in the liquefaction process, if memory serves.

2.  Osaka Gas announced plans gradually to increase its LNG imports by 25% (to 10 million metric tons annually) over the next 7-8 years, primarily for use in electricity generation.  Sources are expected to include new gas supply from west Africa, and also U.S. supply made possible by the shale gas boom.

3.  Friday December 7's Nikkei reports various plans by Japanese companies to import LNG from the U.S., based on a new U.S. DOE report that LNG exports would be economically beneficial to the U.S. -- an issue that remains controversial.  U.S. natural gas production has increased by approximately 30% from 2005 through 2011, mostly as a result of new shale gas production, and prices are through the floor.  The Washington Post had has a series of articles about these developments, caused by the shale gas boom, including one featuring the DOE report and plans to build export facilities at Cove Point, Maryland, based upon demand from Japan.

Specific potential export sites and Japanese companies involved by Nikkei include:

1.  Freeport LNG (Texas).  4.4 million metric tons per year.  Osaka Gas and Chubu Electric.
2.  Cameron LNG (Louisiana).  8 million metric tons per year.  Mitsubishi Corporation and Mitsui & Co., Ltd.
3.  Cove Point LNG Project (Maryland).  2.3 million metric tons per year.  Tokyo Gas, Sumitomo Corporation.

Of course, note that these projects are at existing re-gasification import terminals, require construction of major infrastructure to support liquefaction for export, and that they are all on the Atlantic side of the U.S.  ...   

But as I understand it, this business can involve swapping cargoes, so that, for example, a Japanese trading house that has rights to gas from Louisiana, could enter into a long term swap with a customer who wants to ship it to somewhere on the Atlantic basin, in exchange for a Pacific cargo close to Japan (maybe from Norway via the Arctic, or from Chile, Malaysia, Indonesia, or NW Shelf Australia, and even eventually Alaska).

More on Dynamic Pricing

A short article in the December 7, 2012 Nikkei reports that IBM Japan, Fuji Electric and Yaskawa Electric are teaming up to develop and implement a system for true dynamic pricing at the retail/residential level in Japan, in anticipation of deregulation by 2015.

The system would permit "real time" notification of demand/supply based price shifts, so that users can modify usage in response and promote conservation.

METI Proposes Gradual Implementation of Residential Retail Electricity Competition

At the conclusion of Japan's late-1990s effort to deregulate the electricity generation and distribution businesses, when many other countries had recently done so, Japan was left with a system still dominated by regional monopoly utilities, though competitive electricity supply is permitted to larger users.  The monopoly is enshrined in law for smaller commercial and residential users (anyone under 50kW).   The late-1990s deregulatory effort was first stalled then cut-off completely by the electric utilities and other powers that be, citing the negative examples of the bankruptcy of Enron, manipulation in the California market, etc.

Post-Fukushima, in rebuilding an electricity system that will rely upon diverse supply sources (including renewables), and where massive investment is needed to implement smart-grid metering, dynamic pricing and other innovations, as well as to encourage conservation, there is widespread acknowledgement that market-based competition of some type will be needed.

The debate is about how quickly such competition should be implemented, how much regulation shoul be retained, and how competition can be layered onto the heavily strained current system.  All of the existing transmission and distribution infrastructure, and 90%+ of the generation, is within the monopoly utilities.  There is no independent grid operator.  And the utilities already suffer from huge imported fuel costs, potentially massive asset write-downs if they cannot get their existing nuclear plants back into operation, and, of course, for TEPCO, the actual clean-up and decommissioning costs of Fukushima Dai Ichi.

METI's advisory committee on power system reform (headed by Prof Motoshige Ito of Tokyo University) last week rolled out a proposal for transition to full liberalization and retail competition.

The proposal would:

--first end the legal monopoly on distribution to sub-50kW users, but would maintain regulated rates for some transition period.

--set a period for continued provision of power at regulated rates for users who request it.

--promote competition by a separation of generation and distribution/grid assets to permit eventual removal of regulated rates.

--include a system for widely borne surcharges to support subsidies that achieve reasonable rates on delivery to users in remote areas.

--permit METI to retain authority to police unfairly high rates.

Based on press reports, the proposal does not make a decision about one of the most important steps, of how to go about separation of the generation and distribution businesses of the electric utilities.  Current proposals would involve either true "legal" division into separate companies, or mere "functional" separation.

And electricity deregulation is one area where the upcoming election (December 16) could have an impact on future course of debate.

Sharp To Join Toshiba and "Outsource some Module Production" to SunPower; SolarWorld Enters Japan

Sharp Corporation has been suffering from widely reported financial distress this past year or two, as its core LCD screen and TV business has been in difficulty, together with many of its smaller businesses.

And, of course, Sharp is one of the major Japanese manufacturers of solar PV cells/modules and related equipment (together with Kyocera and Panasonic/Sanyo and others).

One of the more interesting arrangements in the Japanese PV market has been SunPower's supply to Toshiba.  Toshiba made the (financially wise) decision not to manufacture solar PV modules, and instead has purchased the product from third party suppliers.  At last year's PV Japan exhibition (December 2011), the Toshiba booth could advertise Toshiba-branded modules with the "world highest module-level conversion ratio" -- above 19%.   At PV Japan this year (December 5-7 2012), they again could promote a residential product with the "world highest" conversion ratio, at just over 20%.  According to Bloomberg and other sources, SunPower and Toshiba have now extended their module supply agreement through 2018, at 100MW per year.

So I was interested to read in the Yomiuri a story that Sharp will buy modules from SunPower as well, as it shuts down unprofitable production at several domestic Japanese module factories (but maintains others, and continues its "BlackSolar" residential product).  The Yomiuri story suggests that Sharp is taking these steps in an attempt to cost losses AND increase its share of the PV module market in Japan in response to this year's rapid growth under the feed-in tariff.  No confirmation from the companies themselves.

Lastly, I should note that SunPower is now in the Japanese market directly, targeting the commercial rooftop market.  They had a big booth at PV Japan 2012 last week -- just next to the Toshiba booth, and hosted a marketing seminar on why their product makes economic sense (probably not a difficult case to make in Japan given expensive rooftop space, a high feed-in tariff, high installation costs and premium pricing of Japanese competitors' products).

For anyone not familiar with it, SunPower is a U.S. based and listed company with a long history of innovation and development in the PV business ... but now with majority French ownership (Total) and its modules produced at factories in the Philippines.

If you want an actual "made in the U.S." module, then note that SolarWorld, a large German-based module manufacturer, also now has an exclusive distributor in Japan and had a major exhibit at PV Japan.  In contrast to SunPower, its product does not stand out particularly from a performance/specification perspective, but it does have very modern, large scale, highly automated production sites in the developed world, including the U.S. (just outside my hometown of Portland, Oregon).  And it has been the only named plaintiff in the U.S. (and EU?) cases pursuing trade remedies against the Chinese manufacturers for unfair government subsidies/dumping, etc.

JX Energy Announces Condominium Electricity Supply System with Natural Gas Fuel Cells

The Nikkei Shimbun today (Dec 9, 2012) has a lead story that suggests competitive electricity supply is about to get more interesting in Japan.

JX Energy (the largest oil importer/distributor in Japan -- a combination of Nippon Oil and Japan Energy), has announced a new product line to provide electric power to newly constructed condominiums, reducing the building's need to purchase from the grid by 80-90 percent.  The product is being tested on several JX company housing facilities near Tokyo and will be rolled out to the market by 2014.

The product includes a combination of

(1) a new, more efficient and less expensive natural gas-powered fuel cell generator.  (These have been part of the mix in Japan for some years now, with outrageously expensive natural gas-fired fuel cells for residential use, snapped up quickly to the extent of massive per-unit subsidies);

(2) rooftop solar PV;

(3) battery storage; and

(4) for the remaining 10-20% of electricity needs, a contract with JX Energy's competitive energy supplier subsidiary, which owns an 847MW gas-fired plant in Kawasaki, and will deliver over the existing grid.  (This electricity predicted to be available at 5-10% less than the TEPCO rates).

The article notes that the overall energy cost for the building/residents will be less than buying from TEPCO.  Of course, if natural gas prices can be brought down in Japan in coming years, then the difference could be substantial.

Apparently several other large companies (NTT Group, Daikyo) are also starting to offer discount electricity supply for multi-family housing in Japan, at some savings to the existing utilities.

Finally, the article notes that JX Group has completed development of new, more efficient and less expensive natural gas-powered fuel cell for residential use.  The initial price is expected to be more than 2 million yen, but they are targeting further development to bring the price down to the range of 500,000 yen ($6500) by the year 2015.