Thursday, June 27, 2013

Offshore wind turbines ready for test

The press this week was full of this photo

showing the massive floating turbines being readied for a test off of Fukushima.

A few weeks ago we saw this picture of the massive chains that will be used for moorings.
The project sponsors and government certainly like the symbolism of a big offshore project near the Fukushima reactors.  They have named it "Fukushima Mirai" -- the future of Fukushima.

Let us hope that the project works out from both a technical and a cost/performance standpoint, and maybe even manages to utilize the 500kV transmission lines running between the Fukushima Daiichi reactors and the Tokyo region.

The Fukushima offshore wind project website is now accessible here.

Wednesday, June 19, 2013

Conservation and Efficiency

A big part of the solution to the world's energy problems lies in efficiency.  On this most people can agree.  A shift from incandescent to LED lights cuts direct electricity consumption by 85 percent or more.  7 watts instead of 60 watts.  The same amount of light, but less heat so this shift also reduces the need for air conditioning.  Insulated walls and ceilings, double/triple glazed windows -- can cut heating and cooling usage by 50%.  Fewer big SUVs and more automobiles with hybrid electric or high efficiency diesel engines -- cut gasoline consumption by 20%, 30% or more over 15 years as the auto fleet is replaced.

The U.S. has little to teach the world on these topics, being the biggest consumer of energy by far over the past century.  On the flip side, this means that the U.S. will have easier gains from energy efficiency increases than many other countries.  Japan ... is somewhere in the middle.  It used to be the most miserly developed country in terms of energy consumption, but now my understanding is that much of northern Europe surpasses it in terms of efficiency.  So there is plenty of room for efficiency gains.

How much is really possible to save from increased efficiency and conservation?  The Washington Post reports on e2e,  a new effort at MIT and UC Berkeley that will try to marshall the evidence.  The key is to find areas where investments get the most "bang for the buck."

Japan has a number of very successful efforts -- its electric appliances are extremely high efficiency compared with many in the U.S., and shopping for a TV or refrigerator allows one to compare anticipated electricity consumption easily, figures prominently displayed.  But Japan sometimes seems weak in the "bang for the buck" choices, pursuing ideas that have the most corporate backing, the most interesting technology, or that have caught a powerful individual or lobby's attention.

One area where Japan has "low hanging fruit" available from conservation and efficiency -- building standards.  As I understand it, Japan has none when it comes to energy efficiency.  This is one reason why Japanese houses (and smaller apartment buildings) are notoriously cold in winter and hot in summer.

Another suggestion -- when planning new roads, why not implement roundabouts (traffic circles) instead of traffic lights?  Europe has done so, to the extent you can travel very long distances on secondary roads without ever stopping at a traffic light. ... whereas in Japan one ends up sitting at what seems like empty intersection after empty intersection.

UPDATE:  For a good example of the "low hanging fruit" available in the U.S., which is well behind Japan in the rotation from incandescent to compact flourescent to LED lighting, see this article in the October 6, 2013 CS Monitor.  A factory saves more than 90% of its lighting bill (from over $50,000 to under $5,000 a month) by implementing an LED system with a sophisticated monitoring system that provides light in the right amount where and when needed.  2 year full payback on the investment.

Friday, June 14, 2013

First Electricity Reform Bill To Pass ... after Election

Japan's House of Representatives on June 13 2013 passed the first in a set of legislation intended to reform Japan's electricity system.  The legislation is headed to the House of Councillors, where it is also expected to pass.

The reform is to proceed in 3 arrows (just like the "three arrows" of Prime Minister Abe's economic policy, Abenomics).  I guess the LDP government is made up of archers.  The first "arrow" is as follows:

First, by the beginning of 2015, a new entity will be established that is responsible for the wide-area transmission grid.  This entity will be responsible for balancing demand across the country and will help to resolve the regional balkanization issues.  As I understand it, the existing transmission assets will remain under the ownership of the regional utilities, but the new entity will become the active player in running the grid, and will be tasked to address issues such as increasing the ability to transmit electricity in between east and west Japan (50 and 60 hz regions), as well as from areas such as Hokkaido that can support much greater renewables (wind and solar) generation than local demand requires.

There are lots of details to work out before we know whether this grid operator will be set up so as to function in a truly independent manner, or will just be a captive of the existing utilities, but at least the issues of independence are being highlighted.

Also, the law will place an obligation upon the utilities to provide access to their transmission/distribution grid, at regulated prices, for "self-consumption" of electricity.  This will allow a major industrial or commercial user to generate electricity at one location and consume it at a second, remote location.

Lastly, there is provision in the law for a more flexible system of demand control measures.  Apparently under current law the ministry can only issue "orders" to reduce consumption, violation of which involve serious penalties.  The new structure will allow more flexible arrangements, as companies have complained about the legal risk they face when they try, yet fail, to comply with a demand reduction request.

The second "arrow" is retail electricity competition, with electricity sales to small/residential users to be liberalized by 2016.  The third "arrow" is separation of generation and transmission functions by 2018 to 2020.  These last 2 arrows are not in the current legislation, as I understand it, but will be proposed in 2014 and 2015.  The utilities are still fighting a hard battle against the separation of generation and transmission, given its impact upon their current organization and financial structure.  The utilities hope that by 2015 they will have been able to restart substantial numbers of nuclear plants, there will be a comfortable margin of excess electricity supply and the demand for reform will dissipate.  We shall see.

There will be a difficult fight ahead, and the LDP's dominance if, as expected, they win a landslide in this summer's upper house election, will give the incumbent utilities a somewhat stronger hand politically.  But the utilities have failed to present a credible vision of what Japan's future electricity system would look like, of how it will respond to changes in technology, to a changing energy mix and a changing economic environment.  And like it or not, the utilities will not restart significant number of nuclear reactors over the next 12-18 months, and electricity rates will be going up, not down, the press will occasionally remind us all about problems at Fukushima, and this reform will be difficult to stop.

UPDATE 2013 6 27:

Yesterday, the Upper House of the Diet passed a non-binding censure motion against Prime Minister Abe, promoted by several small opposition parties and, at the last minute joined in by the DPJ, a last "in your face" gesture before the upcoming Upper House election.  The Upper House is still controlled by the DPJ and other opposition parties, and one result of this turn of events is the failure of the Upper House to act on the electricity reform bill.  This and other legislation will need to wait until later in the year, after the election in which the LDP is widely predicted to win in a landslide.

Wednesday, June 12, 2013

Disguised Bailouts – Evidence that Electricity Deregulation (and Re-regulation) is Going to Happen

As recently as March, there were growing concerns about whether the LDP government, heavily influenced by the business community in general and the electric utilities specifically, would follow through on plans to introduce retail electricity competition and, eventually, a degree of separation among electricity generation, transmission and distribution functions needed for an environment that will support the existence of competitive supply and distribution companies.  In other words, would the current system of dominant regional electric utilities fight off attempts at reform, as they did in the late 1990s when similar reforms went forward in Europe, North America, Australia and many other places?

Several announcements last week lead me to conclude that, this time, the system will end up being reformed.  These announcements represent massive potential transfers to the utilities, to help them solve the problems they will face if systemic reform goes ahead.  Thus, in Japan, reform of a powerful industry involves placing the costs of past mistakes upon the ratepayers and the taxpayers, rather than driving the utilities into insolvency, creating distress among their lenders (all major Japanese financial institutions), etc., etc.

First, and perhaps most important, METI has floated plans to revise the utility rate base accounting in order to allow utilities to avoid massive write-downs and instead recover, spread over a number of years (approximately 10 years) in their electricity charges, the cost of decommissioning reactors prior to conclusion of their 40-year planned operating life.  This sets the stage for the utilities to end the “kabuki” play of spending money trying to reopen reactors that, in fact, are very unlikely to meet the new regulatory standards.  Of course, in Japan, these things take time--too much time.  And this is a massive disguised bailout by the ratepayers, and one that does not require any direct pound of flesh, such as a change of utility management.  

That said, it is a necessary and welcome step.  And as between the ratepayers and the taxpayers, it is better that the ratepayers bear the burden, since high and increasing charges by incumbent utilities will actually make it easier for new entrants, for investment in conservation and renewables, etc.

Second, the Nikkei reported that METI is proposing legislation to make it easier to provide governmental aid to a retail electricity provider that faces financial difficulties, adding some “catch all” circumstances to what had been narrowly permitted aid.  This is reported as an effort to help assure continued retail service to customers in the event that retail distribution companies suffer financial difficulties after introduction of competition.  Again, a disguised bailout, on stand-by, which seems intended to assure the incumbent utilities and retail customers.

Third, Chubu Electric and TEPCO have announced plans for a large new thermal plant in the TEPCO service area.  Chubu Electric plans to use its share of the generated power to serve customers in Kanto – TEPCO’s service area.  This is the first sign of mutual competition at the wholesale level.  Of course, the regional utility structure in Japan is akin to the regional "baby bells" in the United States after AT&T was split up, so it is quite unlikely these companies will be the source of real competition in each other's service areas, except for limited large customers with whom they have existing relationships.

Fourth, the latest “Abenomics” announcements of government growth plans clearly mention the introduction of competition in the electricity area as part of Prime Minister Abe’s growth strategy.  This seems a stronger endorsement than anything I have seen in the past.

Lastly, I went to a seminar last month on the future of Japan’s electricity industry.  One of the speakers is an ex-utility executive who now leads a research center at Tokyo University on smart grid implementation in Japan.  He was very clear that while he had once thought the concept unrealistic, he now believes the smart grid is coming, along with distributed generation and separated generation, transmission and distribution functions.  There is no alternative.