Wednesday, December 24, 2014

U.S. Nuclear -- Shrinking of Natural Causes?

In Japan, there is a fierce debate below the surface over whether to attempt restart of nuclear power plants after they finish their initial 40-year license terms.  Kansai Electric (KEPCO) is the Japanese utility most reliant on nuclear, traditionally, and it has recently announced an intention to seek a license extension for 2 plants that will soon reach the end of their initial 40 years.

What about in the U.S.?  Well, not so long ago there was talk of a nuclear revival.  New smaller, cheaper and safer plants would allow nuclear power to play a key role in helping the U.S. meet its greenhouse gas emission reduction targets.  But the nuclear industry is shrinking again.  Why?

Pure economics.  The nuclear industry has a long history of cost overruns.  The massive investments required place a huge financial lever on any hiccups or surprises, and these are very complex, complicated operations.

The New York Times reports that Vermont Yankee, a 42-year old plant, will shut down at the end of this year (next week).  Vermont Yankee recently had its license extended until 2032 -- 60 years from start.  And there is nothing "wrong" at the plant.  There are not massive earthquakes, nor tsunami, in Vermont.

It simply cannot compete with cheap natural gas-fired electricity generation.

Will we ever get to the next generation of small, cheap nuclear reactors with lots of "passive safety" features that make them, literally, accident proof?  Maybe.  But the odds do not look so good in the near future, with oil and gas prices now lower globally than at any time since the short dip after the 2008 financial crisis, and the price drops being driven by factors that seem sustainable, at least over the next few years.

E.On Spin Off -- An Important Crossroads

This month began with some exciting news for renewables in Germany.

E.On, one of the largest utilities in Europe, announced a corporate split.  The company will divide into (1) traditional generation (coal, nuclear, natural gas), and (2) the rest of the company -- including renewables and both electric and gas distribution.  E.On's announcement was lauded by investors and analysts.  No doubt the investors are focused on E.On's 5.2 billion Euro of write-downs this year, mostly for the now "risky" generating assets, and are delighted to see a separation into a "good" business of stable, low risk cash flows and a "bad" business of risky, mostly fossil fuel generation.

Interestingly, it is the traditional generation business that is seen as extremely risky.  As renewables cut into demand, who is to say whether a new coal plant will ever pay back its cost?  As nuclear is regulated out of existence in Germany, it will become a pure decommissioning operation.  E.On and other utilities say that their traditional business models no longer work.

How long before Japan gets to this point?  Will the "internal" separations of generation and distribution businesses now being mapped out for Japan get anywhere close to this? ... when the businesses remain under holding companies?  How long will these changes be held at bay?

Why are there plans being announced for massive investments into coal-fired generation in Japan?  Yes, the economics are different in Japan than Europe, but as these plans go forward it will put enormous pressure on regulators over future decades to sustain traditional business models.

Fukushima Decommissioning reaches important milestone

Over 3.5 years after the Fukushima accident, one of the most worrying problems has now been resolved, as TEPCO has completed removal of fuel rods from the pool in Reactor Building No. 4.  These 1500 rods contained a far greater volume of nuclear material than the reactors themselves, and experts had cited a risk that, if the pool lost its water, the rods might melt or explode, spewing waste that would make the original accident look, well, rather small.

The decommissioning and related efforts will continue for decades (or even centuries), and lingering effects will need to be managed for millenia.  But at least we can stop worrying that the next earthquake or typhoon will trigger this particular disaster.

Sunday, November 16, 2014

Future Japan Electricity Demand Will Decline -- the Komatsu Example (Manufacturing)

Komatsu is a great example of a Japanese company that plays on the world stage.  In recent years over 80% of its sales are outside Japan.  But it is still a Japanese company, and still makes many of its core products -- such as the engines that go in most of its machines -- within Japan.  So it was subject to impact from high electricity costs and limited supply following the 2011 Fukushima accident and reactor shutdown.  Indeed, it must be companies like this that are the reason Japan needs to restart its nuclear fleet and build new coal generation plants.  It must be companies like this that are complaining about the high cost renewables, right?

Well, not exactly.

Komatsu is taking control of its own destiny, just as are many other large users.

In 2011, after the Fukushima accident, the then-President of Komatsu, Mr. Noji, set a goal for the company to reduce its electricity purchasing in Japan by 50% over 5 years.  And the idea was not to do so by shuttering facilities and shifting production overseas -- an obvious big corporate reaction when faced with such a challenge.  It also was NOT to conserve energy by "gaman" -- suffering through sweltering summer workplaces and freezing cold winter offices -- but if anything to improve comfort while conserving.

In March 2014, the company opened a renovated facility at its plant in Azawa, Ishikawa Prefecture. The plant's energy conservation features are shown at pages 29-33 of the current Komatsu English language annual report, downloadable here.

How much did the plant cut its electricity purchases as compared with the prior facility?

90%.  That is right, NINETY PERCENT.  Not 9% or 19%.  90%.

This was done by a combination of
(1) building and production facility design and layout improvements,
(2) better (insulating) building materials,
(3) cooling via ground water circulation,
(4) more efficient machinery (including recapture of energy in the same way that some autos now include regenerative braking),
(4) waste heat recovery, and
(5) a new, adjacent biomass plant that generates 40% of the facility's power needs.

Of course, Item (5) is not a conservation method, just distributed generation.  But it does shift the demand away from the utilities and big generation.  And it helps create a market for local forestry resources.

I heard Mr. Noji, now the Chairman of Komatsu, speak about this at an event last week.  A senior executive from Toshiba spoke up soon after, noting that Toshiba semiconductor fabs consume a huge amount of electricity, and that Toshiba had managed to cut use "only" 36% at its new major domestic fab.

These major Japanese corporations compete globally.  They will find a way.  And that way will NOT pay a huge markup over the costs their competitors face for power generated by the utilities in Japan.

If Japan's corporate sector can do this, who will buy the extra electricity generated once new coal plants are built and nuclear plants are restarted?

Now if only Japan would capture the "low hanging fruit" in its residential and commercial building sector -- higher standards (and consumer incentives) for insulation and double/triple glazed windows, for example.

According to the June 2014 BP Statistical Review of World Energy, Japan's primary energy consumption fell from 531.4 million tonnes of oil equivalent in 2005 to 474 million tonnes of oil equivalent in 2013.  Down 11% over 8 years.  Given demographic trends, and actions of the corporate sector, the smart money would be on further future declines in consumption.

(Note:  Large manufacturing facilities are already subject to exemption from the FIT surcharge.  So this energy conservation drive is not part of some effort to avoid the costs of solar and its FIT surcharges).

Friday, November 14, 2014

Final Nuclear Storage -- U.S. and Japanese Switch Policy Approaches

One of the long standing questions with nuclear power generation is -- where will the waste be stored for the tens of hundreds of thousands of years until it becomes harmless?

This policy issue has both a technical and a political aspect.

USA OLD POLICY.  In the U.S., the long-preferred site was Yucca Mountain, Nevada, where the geological features apparently give an excellent prospect for the required very-long-term stability.  The Federal government long ago began promoting the site for these reasons, as reflected in many U.S. policies.  Unfortunately, the State of Nevada and its residents were not asked first, and they have not been particularly welcoming.  And then the senior Senator from Nevada, Harry Reid, became Senate Majority Leader, and following the election of President Obama in 2008 he obtained the appointment of one of his Nevada proteges as head of the U.S. Nuclear Regulatory Commission.  All this was not so positive for the idea of using Yucca Mountain as a permanent waste depository. Another decade or more of delay and back to the drawing board.
Yucca Mountain -- The Outside
JAPAN OLD POLICY.  In Japan, the government also has been looking for a permanent waste depository.  (Actually, not permanent, assuming human beings are still around in the very, very distant future.  Just very, very long term).  In Japan, the approach to siting nuclear projects has typically involved more carrots than sticks.  So the Japanese government long followed a strategy of waiting for someplace to "raise its hand" and volunteer to serve as a waste disposal.  After all, the waste will be buried so deep that no one will need to worry about it for hundreds or thousands of years.  But no community in Japan has raised its hand.

USA NEW POLICY.  In the U.S., the government realized its mistake in trying to force Nevada to accept Yucca Mountain, and inspiring the mobilization of a vocal and effective opposition.  So the U.S. is now switching to a policy of looking for someplace to "raise its hand" -- someplace that wants the investment, jobs, stability and "carrots" that will come with this role.
Yucca Mountain -- The Inside
JAPAN NEW POLICY.  In Japan, the government realized that if it kept waiting for a community to "raise its hand", this might never happen.  The lack of a final waste depository hurts the nuclear restart campaign, so the government will now go ahead and study the question from a technical/geological perspective, and try to identify the best site or sites for the depository based on technical grounds.

So Japan has pretty much adopted the former U.S. approach.
And the U.S. has pretty much adopted the former Japanese approach.

And despite this issue floating around (at least in the U.S.) for the past 40 years or more ... it is still not resolved.  The problem is not, primarily, technical, though the technological questions are complex.  It is a political challenge.  Can a representative democracy actually do this?  When?  And what will it take to get it done?

Tuesday, November 11, 2014

Stop the Bullying, Please!

Japanese media from time to time turns its focus inward and looks at the phenomenon of "ijime" in Japanese society.   Ijime is usually translated as "bullying" and most commonly thought of as a middle/high school phenomenon.  Sometimes a more granular approach identifies types of "harassment" such as "power harassment" (boss to subordinate) or "pregnancy harassment" (company to female employee) in the workplace, or bullying/hazing type tactics by athletic team coaches.  I guess this type of thing, common in almost any society in some or another form, comes with the territory in a society like Japan that is full of hierarchical/vertical relationships.

Last week, I was talking with a prominent Japanese lawyer who handles many project financings, including solar power projects.  He asked me (in Japanese) "why is the Nikkei Shimbun bullying solar power developers"?

Indeed, the past year there has been a massive campaign in the Nikkei and some other outlets (Yomiuri, and presumably also Sankei commentators and other more conservative outlets I do not usually read), to demonize solar power.  It is clearly driven by the utilities, their supporters in the LDP and the government and industry, and it is transparent.  I have not commented before, but it struck me that this lawyer had it right.  What is going on a type of "ijime" or bullying.

Upon passage of the FIT legislation in August 2011 - happy faces on Kan and Son.
Solar PV is never mentioned in the Nikkei or Yomiuri without the adjectives "expensive, unreliable".  Okay, to be completely fair, maybe they substitute "unstable" or "intermittent" for "unreliable" but always include "expensive." And the media continues to repeat, ad nauseum, the allegation by someone (never named) that developers are "sitting on" approvals waiting for module prices to go down before building projects -- in fact, as the yen has plunged (again down more than 5% the past few weeks), module prices have increased in local currency terms and as a percentage of project income.

Recently there was an article in Nikkei about the relevant METI study committee wanting to reform the system to prevent 不当利益 -- illicit profits.  There was another one about how METI wants to block sellers of retail power from marketing to consumers as "100% green" or "all renewable" when their generation is sold (with subsidies) under the FIT.  Of course, if it turned out consumers all want, and are willing to pay more for, "all renewable" power, then that would not be a good result for the existing utility industry or other suppliers.

This whole campaign reached its low point, for me, in a large article on page 2 of the Nov 4, 2014 Nikkei entitled 「蹉跌再生エネルギー」("Failure of Renewable Energy, Part 1") -- apparently the first in a series.

The large headline, in the middle of the page, was 「国民に6.5兆円の請求書」, which translates roughtly as a "6.5 trillion yen bill for the Japanese people!"  That is over $50 billion a year.  Except the headline was more like this:
A business newspaper, Nikkei is not known for inflammatory headlines.  I do not see in Nikkei a similar headline about the "20, 30 or 40 trillion yen bill for the Japanese people!" from the Fukushima accident and related cleanup, decommissioning and retrofitting of nuclear reactors.  How much is Japan's total cost of electricity in a year?

Nor does Nikkei "call a spade a spade" when one of the utilities refuses to decommission a reactor that has a less than 1% chance it will ever reopen ... just to keep the asset on a balance sheet and avoid, or at least delay, potential insolvency.  And when METI and other regulators get together to change the electricity ratebase accounting calculations so that operators can recover costs from their ratepayers and amortize even non-functioning or prematurely decommissioned reactors, I see only a polite article discussing the idea, not really anything to indicate the painful numbers involved -- a trillion yen?  10 trillion yen?, and certainly not in 30 point typeface.

How did the Nikkei writer arrive at the 6.5 trillion yen figure?   What is the basis?  The Nikkei article does not say.

It is actually very difficult to know the cost of the FIT, as compared to an alternate world where the FIT had not been adopted.  This is even more so in a country where there are not transparent, liquid markets in electric power.  In Germany, solar looks expensive, but it actually pushes WAY down the cost of wholesale power during peak periods (daytime).  If a user gets cheaper power, but pays a bit renewable surcharge, the user is no better or worse off economically than before, but solar looks "expensive", and the competing coal generator is extremely unhappy at the low prices it gets for its output.

But in Japan, one key assumption is how much of the approximately 70GW of "METI certified" solar projects will actually be built.

METI produced some materials for the committee now considering the future of the FIT on this very subject, dated September 30, 2014.  You can find them here.  (Materials #8).

What the METI submission to the committee says is that the annual "surcharge" amount for the projects operating under the FIT as of June 30 2014 is around 650 billion yen, or just under US$600 million.  The anticipated figure if ALL METI-certified projects were to start operations?  Around 4 times that amount, or 2.7 trillion yen per year.  But of course, the very same METI chart warns that THIS WILL NOT HAPPEN.  METI realizes that no one expects this, as projects will NOT go forward for any number of reasons, some of which are listed in the chart.

In fact, Japan implemented 7GW of solar in 2013, will implement around 10GW in 2014.  My guess is that there will be similar numbers next year and perhaps a bit less in 2016 (to the extent we can know).  These will be a mix of 40-yen, 36-yen and 32-yen approved projects.   The total that will be built from the 69GW that has been certified?  Probably around half, or less.  The short term economic burden on consumers will be real (as compared with coal or even gas-fired generation), but very manageable.  A few hundred yen per month for the average consumer ... much of whose bill is going to pay the cost of other, opaque mistakes and errors by the suppliers over past decades.  And many of these facilities will continue to produce electricity, selling at and pushing down market rates, for 5, 10 or even 15 years after the FIT purchase obligation ends.

But this is a very scary world for the utilities.  Each GW of solar means a loss of peak electric sales for them, and more trouble justifying their existing generation expansion plans.  Each household that implements solar with storage in the future ... means a permanent lost customer.  They will either embrace these changes and preserve an interesting, if very different, business, or will go the way of the dinosaurs.

When I first started to work on solar PV projects in Japan, I can remember several meetings with a major Japanese institution when I would explain what we were trying to do -- bring the best of the world's experience to Japan and accelerate implementation of solar PV here, including the Moore's Law-like cost reductions seen elsewhere in the world.  The counterparties would warmly thank us for our efforts to develop such a business to help expand renewables in Japan.

That was before the change in government, and the utilities realizing that solar PV and other renewables under the feed-in tariff is an existential threat to their business models.  That was before the nuclear restart fell 12-18 months behind its initial schedule.   Indeed, now as Japan heads into its winter peak electricity use period having survived a second consecutive zero nuclear power summer, and with no specific government conservation targets for large users, AND as oil and gas prices plunge to their lowest levels in many years, the utilities and government might be worried about people starting to ask questions such as "is there really a crisis that requires the nuclear restart?"

Do we really need new large coal-fired plants ... or won't we have access in the future to cheaper LNG?   Shouldn't we plan future electric capacity based upon the "Moore's Law" characteristics of technology-driven renewables like solar and storage?

Friday, November 7, 2014

Floating LNG

One of the main challenges of LNG has been the massive related infrastructure.  First, you need a natural gas field that can deliver enough gas to justify building pipelines, ports, liquefaction and storage facilities, etc., etc.  These projects cost not billions of dollars, but tens of billions of dollars "all in".

What if you could do the liquefaction on a ship?  Then you could locate the ship near an offshore LNG field, load the cargoes directly onto LNG tankers, and when the gas field is tapped out, move the plant. 

I attended part of METI's annual LNG Producer-Consumer Conference yesterday, November 6, 2014.  In the "new technology" panel, I was expecting a lot of discussion about gas-powered fuel cell generators, compressed gas vehicles, etc.  The head of Tokyo Gas did discuss these things, at a very high level, but others focused on upstream developments.  Someone from Anadarko just talked up their Mozambique project -- a sale pitch and not much about technology.  The President of Chiyoda gave a general corporate presentation on their track record in LNG.

But representatives of both Shell and JGC did at least spend most of their presentations on new technology -- in this case, floating LNG.
An image of Shell's floating LNG concept
Shell's Prelude LNG facility, whose hull launched in 2013, will weigh five times as much as a U.S. nuclear-powered aircraft carrier when in operation, and be almost 500 meters long.  The cost?  Guesstimated to be over US$10 billion.
The hull of its first FLNG, launched and in the water.
JGC and Samsung Heavy Industries have been selected to build another floating plant, for Petronas, (the national oil company of Malaysia).

These facilities could significantly reduce the cost of opening up new gas fields for LNG shipment, and could allow LNG to flow from fields that otherwise would not justify the investment for pipelines and an onshore plant ...  Of course, this will increase already intense competition among producers for support from major LNG consumers in Japan, Korea, China and India.

Of course, just as with Enron's infamous barge-mounted power plants (infamous because they were the assets involved in a dodgy asset sale/buy back at the end of a financial year that resulted in several investment bankers going off to prison, if memory serves), a floating LNG liquefaction plant also helps with political risk.  In case of war or threat of expropriation ...just sail away and moor at some other gas field. 

Tuesday, November 4, 2014

The (Near) Future of Solar -- Part 3

Module prices will continue to drop rapidly in coming years.  A few examples:

1.  Sun Edison announcement in October of a $0.40 per watt cost 400 watt module from 2016.  See report of the announcement here.

2.  1366 technologies' kerfless wafer promises more than 50% reduction in wafer costs for polysilicon modules, or overall 20% module cost reduction.  Scaling now to 250MW production facility.  See reports here and here.

3.  Martin Green, the "father of solar" in Australia, conservatively estimates that the cost of producing modules will fall by at least 50% over the next decade, reaching less than 30 cents per watt before 2025 ... a price at which coal (+ sequestration OR recapture OR carbon tax), nuclear and other sources will not be able to compete.  If he is talking in Australia cents (not clear, but likely), then that would be around US$0.26 per watt. ...

4. And it is widely reported that even today large, utility scale solar has a lower levelized cost of energy (LCOE) in many places now for new installations than competing fossil fuels.

5. Now this -- residential solar plus storage is now competitive in Australia among other places.

6. And next this -- an industry report indicates that even in that rain-swept island of Great Britain, the levelized cost of energy (LCOE) of large scale solar should fall below that of LNG around 2020.  The LCOE will fall 30% from 2014 to 2020.  Of course, this number -- LCOE -- is the overall cost of providing a kWh, and is not limited to cells/modules, the true the "Moore's Law" components of solar.  As the report notes, solar has a history of beating these kinds of predictions ... unlike some other forms of energy.

Friday, October 17, 2014

Lockheed Martin Fusion Power Breakthrough! ... Maybe

Yesterday Lockheed Martin announced that it believes it has made a breakthrough in research that could lead -- in only 10 years -- to a practical nuclear fusion reactor.  Infinite energy from seawater!

You can read good coverage at Reuters, Aviation Week and Scientific American.  Some popularized discussion of competing research here.

Of course, many are skeptical given the lack of publication of detailed results ... as fusion is always "30 years away" from commercialization.  That is why the "10 year" timeline is interesting.  It is short enough so the individual involved will actually be around, and at reputational and career risk, if they should be wrong.

And no discussions of cost.  If the commercialized 100MW reactor costs billions of dollars ... this technology will lose out to solar PV/wind + storage.

Friday, October 10, 2014

Solar Power ... on the Rise ... in the U.S. of A.

When people think about aggressive renewables programs and the rapid growth of solar or wind, they typically expect mention of northern European countries such as Denmark and Germany.

But the U.S. is making huge strides in introducing renewables, as cost comes down, way way down.

An excellent report by the highly respected Union of Concerned Scientists about solar power's growth and potential in the U.S. can be found here.

In contrast to Japan, where solar power = solar PV, the report also discusses concentrating solar power (CSP), those huge collections of mirrors in the desert aimed at a tower, where heat is used for electricity generation.  CSP has the benefit of being less "intermittent" than PV.  These installations can continue to provide power well into the evening, covering the entire peak demand period without additional storage.

Thursday, October 2, 2014

The Future of Solar Pt 2

The Future of Solar (Part 2) -- Leapfrog

As the Japanese government struggles with trying to figure out just how much solar PV will actually be built under the feed-in-tariff (FIT), it becomes clearer and clearer that solar PV will be a huge part of Japan's energy future, whatever METI and the current government decide to do with the FIT.

Why?  Solar PV modules are now 80% cheaper than in 2008.  And the trend will continue, with some dramatic improvements just a few years from commercialization.  Two announcements in PV Magazine's daily newsletter this week drew my eye.

First, PV Magazine reported that Oxford PV (formed by Oxford University-affiliated scientists) appears to be making swift progress with its plans for PV based upon a cheap "thin film perovskite" technology.  In two years they have moved from cell-level conversion efficiencies of 5% to 17%.  If this is dramatically cheaper than traditional crystalline technology, that will be a huge improvement.  

But more importantly, Oxford PV announced that it plans much more quickly to commercialize another use of the technology -- adding a cheap perovskite "tandem layer" to traditional crystalline modules.  By doing so, they plan to increase the conversion efficiency of traditional modules by 20%.  They plan to have "prototype modules" by 2015.  If this is in the market by 2018 or 2019, wow.  A cheap add-on technology that could boost basic PV module effiency by 20%.  So a 16% conversion efficiency module becomes a 20% conversion efficiency module.

Separately, an Australian research organization, CSIRO, announces it is near commercializing a cheap "printable" solar PV technology.  The technology for "spray on" solar ink, using a modified commercial printer, would allow just about any plastic surface to be converted into a solar cell.  Current conversion efficiencies are in the 10% range, but are improving.   The cost of the ink is "negligible".  Several Australian printing companies are reportedly studying the possibility of working with CSIRO to commercialize products.  With this, it is possible to imagine a cheap solar "tent", solar "mats", cheap BIPV windows with a solar layer, and on and on.  (Australian researchers have held a number of records for highest conversion efficiencies in various solar PV technologies over the past 20-30 years and the country continues to "punch above its weight" in this technology).

Of course, these are just two of many different efforts.  Any one of these could offer quantum leap in cost-performance of solar PV.  Japan will be waiting.


So even if the legacy participants in Japan's electric power industry face a relatively bleak future -- with trillions of yen of stranded assets, decades of decommissioning costs and a clean up at Fukushima that will take the rest of my lifetime and beyond, it is difficult not to be optimistic about the energy transformation that can and should occur over the next decade or two.

Monday, September 29, 2014

Japan Mega Solar -- Tochigi Examples

As some of the first projects we started developing back in late 2012/early 2013 are now finished, here are some visuals.

First, an aerial video of the project Deneb Renewable Energy developed together with partners at Sakura City, Tochigi Prefecture.  The main investor, and project final design, procurement and supervision was done by IBC Solar AG, together with Japanese construction partner Yokohama Kankyo Design.  The project is now ready to start operation and should be selling electricity in October, 2014.

And a screen shot of the same project:

Below are a few photos of a second project developed by Deneb Renewable Energy, at Kami-Ishigami, Otawara City, Tochigi, which started operation on September 24, 2014.  The project's main investor is Square, a Tokyo-based real estate investment company.  The design, procurement and supervision was also handled by IBC Solar AG.  TTK, a local Tochigi-based construction company, was the main construction contractor.

Both projects used racking provided by Schletter Japan, which was installed by Kyoto-based Asia Machinery Solutions Co., Ltd.  Both projects also use inverters, transformers and grid connection-related equipment provided by ABB KK.  And both projects will sell power to Tokyo Electric Power Co., Ltd. (TEPCO).
Midday view toward East
Sunset in the west.
Members of the core team gather to celebrate the project commissioning.
The grid connection point on the plant's NE edge.
The project is barely visible behind blooming Cosmos flowers from the nearby temple.

Monday, September 15, 2014

Leaving Utilities Behind

A New York Times article on September 13, 2014, points to a trend we have mentioned before:  the increasing competitive strength of solar and wind power are now an existential threat to the legacy utilities and their business models.

Electric utility executives all over the world are watching nervously as technologies they once dismissed as irrelevant begin to threaten their long-established business plans. 

On the impact of Germany's Feed-in-Tariff:

By creating huge demand for wind turbines and especially for solar panels, it has helped lure big Chinese manufacturers into the market, and that combination is driving down costs faster than almost anyone thought possible just a few years ago.

The transition creates new businesses, not only in renewable generation.  It requires huge new investments in the power grid ... to be funded how?  It requires highly sophisticated demand response programs, supported by flexible regulation and IT investments.  It requires on grid storage and suppliers of balancing power.

The "energy transition" creates disruption and problems.  The utilities hate it. Big business dislikes it.  The politicians in Germany now are listening to the utilities and big business ... and want to slow down what they have started.

But the public likes it.  The public is willing to pay a renewable surcharge (some of the cost of which is offset by LOWER wholesale peak electricity prices, for which, sadly, there is no visible "discount" on electricity bills).

The transition is here.  And those who ignore it will eventually find themselves left behind.  In some countries, these left-behind players will swiftly be acquired, restructure, or file for bankruptcy protection; creditors will take their lumps, debt be restructured, assets mothballed, and things will move on.  In Japan?  If not handled with extreme care, we may see decades of a "zombie" electric power sector.  We already seem to have a "zombie" electric power sector.


Update:  Interestingly, but Citigroup and UBS have recently issued research to their clients that highlights the trends mentioned above, and the issues they present for existing electric utilities.  UBS actually sees the changes as a "net positive" for the well-positioned utilities that know how to deal with end-customers and have good distribution systems and plans for how to cope with the new realities.  For generation-heavy utilities ... not so positive.

Saturday, September 13, 2014

Energy Options for Japan -- Alaskan LNG

Is the glass half full, or is it half empty?

When the GOJ began pushing for a nuclear restart in late 2012/early 2013, Japan's energy options looked fairly bleak.  A real glass half empty situation.

Imported oil and gas had pushed Japan into its first trade deficit in many years. Anticipated summer/winter peak electricity demand could only be met with "command and control" efforts to shift factory production, combined with the restart old oil-fired generation online, deferral of maintenance on other plants, and a significant boost in consumer electricity rates (again).  The renewables feed-in-tariff was resulting in lots of applications for "expensive, unreliable" (according to the powers that be) solar PV, but almost no baseload geothermal or biomass on the horizon.

Now, one cannot help but feel better about the situation.  Let me again highlight one (of many) areas.

Alaska LNG

The main bright spot is LNG.  New LNG sources have come online, and will continue to come online.  

The Exxon-led Papua New Guinea (or "PNG") project's first LNG train started producing this Spring, almost a half year ahead of schedule, and pushed down prices in the (relatively thin) spot market dramatically.  There are plans to ship LNG from Russia part of the year via the Arctic Ocean within the next 3-4 years.  U.S. LNG exports will begin in 2017 or 2018, and the amount of exported LNG -- even if most of it ends up going into the Atlantic rather than Pacific basin -- should have a big impact on pricing.  Japan's total annual LNG imports run at around 90 million tonnes.  US export permits have been approved for something in the range of 70 million tonnes annually. The price moderating impact is especially large since the U.S. "lower 48" gas and LNG businesses are less vertically integrated than elsewhere, so we will see gas cargo destinations shifting based upon price and demand factors.

Now, this week, some focus on another exciting potential source.  Alaska!  That's right, Alaska has a huge, cheaply accessible gas resource in the same Prudhoe Bay area as the oil reservoir that has fed the oil pipeline over the past 30-35 years.  This does not require building in a wilderness reserve such as ANWR.  Rather, it just involves taking gas out of the existing area where oil is being extracted, instead of re-inserting the gas.  And a new gas pipeline would be built adjacent to the existing oil pipeline along much of its route, to minimize environmental impact.  

The project has been on the drawing board in one form or another since the 1990s, and was making good progress toward being realized (in a different form--primarily for distribution via pipeline into the Lower 48 states via Canada) when the shale gas boom set it back.  Indeed, in 2004, just before the shale gas boom, Congress had established a special coordinating agency to ease the permitting process for the project.  Now the project is back and making real progress.
Map of the potential pipeline route, from website of thOffice of the Federal Coordinator for Alaska Natural Gas Transportation Projects
The State of Alaska and companies involved -- 3 oil "majors" and a pipeline company (Exxon, BP, Conoco-Phillips and Trans-Canada) signed an MOU in July to do the front-end engineering and other preparatory work on this project.  Earlier this month they filed FERC applications (and according to press reports FERC will "fast track" the project given its limited impact on domestic U.S. gas markets).  JBIC is studying the project for potential financing.  And this week METI's Energy and Natural Resources Agency signed an MOU with Alaska's Department of Natural Resources to cooperate in various preliminary activities -- information exchange, potential financing and subsidy arrangements for participation by Japanese entities, etc.  Not coincidentally, BP arranged a trip to Japan and Korea this week together with State of Alaska officials to meet with potential LNG buyers.

The project, which would take more than a decade to realize, could supply over 20% of Japan's current LNG requirements, provide a huge economic boost to Alaska, diversify Japanese LNG supply with LNG from a political ally and stable source -- thus dramatically increase Japan's economic security. This LNG could help fuel new, extremely efficient gas-driven generation methods (including fuel cell generation such as Bloom Energy's current/future products and GE's potential "hybrid fuel cell" generator) and ease Japan in its transition from imported fossil fuels to a future driven by renewable energy and a "hydrogen-based economy".

A description by the project sponsors can be found here.


So even if the legacy participants in Japan's electric power industry face a relatively bleak future -- with trillions of yen of stranded assets, decades of decommissioning costs and a clean up at Fukushima that will take the rest of my lifetime and beyond, it is difficult not to be optimistic about the energy transformation that can and should occur over the next decade or two.

Saturday, September 6, 2014

Reality-Based Electric Power Policy

One of the fictions supporting the Japanese utilities was the idea that some of them might restart ALL their nuclear reactors, other than the TEPCO reactors at Fukushima Dai-ichi and Dai-ni complexes.  In fact, the restart effort has dragged on.   Three and a half years after the Fukushima disaster, NONE of the reactors are operating, even though the DPJ begrudgingly promoted plans for a limited restart, and the LDP/Abe Administration has actively promoted the restarts since it regained power almost two years ago.

The two Sendai reactors in Kyushu are essentially cleared to restart by the NRA, but even that has not happened yet, months after initial timelines would have predicted.

Of course, it has been widely known that a large number of reactors can never meet the new NRA safety standards, many because they are just plain old -- old design, old equipment.  Thus, out of 55 reactors operating (sometimes) pre-Fukushima disaster, at best 15-20 are plausible candidates to restart.

But the utilities cannot afford the financial hit they would incur if they were to admit that the assets are impaired.  In response, Japanese accounting rules were changed in 2013  to permit asset impairments from reactor closings to be spread over a number of years (and included in the utility rate-base).  Even so, the economic impact on the utilities will be an ongoing drain they can ill-afford.

It was reported on September 5, 2014 that the government has asked utilities to consider decommissioning plans for reactors that entered service before 1970 -- and thus will reach the end of their 40-year license term within the next 5 years.  It is unlikely that these reactors will ever meet the NRA standards for a license extension.  As seen in the chart published by Nikkei in its version of the story, there are 12 of these pre-1970 reactors (excluding Fukushima Dai-ichi).

It seems that getting the utilities to acknowledge some of the reactors that will never restart is part of the campaign to try to win some degree of public acceptance that others will restart.  Makes sense. Why would the public accept restart of the reactors that might actually clear the NRA's new safety standards, if the utility is taking the view that next year it will apply for restart of all its reactors, if the utility always challenges the NRA conclusion that an earthquake fault under a reactor is "active", that safety equipment is inadequate, etc., or if the utility says it will spend trillions of yen to retrofit an aging reactor.

According to the press reports, the utilities will get to make their own decisions on whether or not to go ahead with decommissioning, but Kansai Electric has already said it will "study" decommissioning its Mihama 1 and 2 plants, which are 42/43 years old.  Kansai Electric, in particular, has 7 of the old reactors.

Japan Atomic Power (Nihon Gen Den) has two reactors on the list, Tokai #2 and Tsuruga #1.  But its Tsuruga #2 plant also is built on an earthquake fault (according to the NRA expert panel).  If these are all decommissioned, the company will have no remaining business and need to be liquidated.  90% of its shares are held by the utilities, and of course any value must be written off, plus additional funds provided over many years to support a decommissioning effort.

TEPCO also had a number of older reactors, but they were located at the Fukushima Dai-ichi plant. Fukushima Dai-ichi's 6 reactors are now the object of a major clean up effort after the 2011 disaster, and Dai-ni's 4 units (all dating to the 1980s) will never be restarted.  TEPCO's other seven nuclear units are in Niigata at Kashiwazaki-Kariwa, which suffered damage in a 2007 earthquake.  While TEPCO has initiated the application process to restart units 6 and 7, and adding filtered vents, building huge, expanded anti-tsunami seawalls and doing other retrofits to try to clear the NRA standards, it is not clear whether these actions will be sufficient, or whether inherent geologic features (earthquake faults) and political opposition will be overcome.  In any event, the prospects for restart of units 1 to 5 seem remote.

So if one assumes that 15 out of TEPCO's 17 units will never restart, adds the 12 units in Nikkei's chart, that already eliminates half of Japan's pre-2011 nuclear reactors.

How much will it cost to decommission these reactors?  How long will it take?  A lot, and a long time.

UPDATE November 17 2014:  It was reported on November 13 that Kansai Electric is considering a filing with the Japan NRC for the "special inspection" required to restart its Takahama 1 & 2 reactors and extend their lives beyond 40 years.  The current ages are 38 and 39 years, respectively.

Monday, September 1, 2014

Kyocera and Tokyo Century Lease Announce Floating Solar Projects

On Friday August 29, 2014, Kyocera and Tokyo Century Lease announced a plan to build and own floating solar projects, teaming with Ciel Terre Japan.  Ciel Terre's proprietary float system is the only system with installations in operation in Japan at anything larger than experimental size.

As we have mentioned previously, these projects are a great solution in Japan, as they allow irrigation and rainwater control ponds, even drinking water reservoirs, to continue to serve their existing functions while also forming the base for a solar PV project, avoiding the land use debates that face many other installations.

As Ciel et Terre notes, the water surface has a cooling effect on modules on hot summer days which allows these projects to perform somewhat better than adjacent land-based installations.  How much better?  Let's wait a few years and then we should have great comparative data.

The first two Kyocera TCL projects are based in Takaoka, Kato-shi, Hyogo.

For English language reports, see Bloomberg, and Nikkei BP Tech-on.

Separately, in early August West Holdings announced it is developing a competing float system.  We shall see.

Thursday, July 24, 2014

Orix Announces "Small Geothermal" Initiative

Orix, a major Japanese leasing group, has announced that it plans to develop and own up to 15 small geothermal plants in Japan.  Each plant would have around 2MW of capacity (typically available 24 hours x 7 days).  This was reported in Nikkei Shimbun and Bloomberg on July 23, 2014.

Apparently the projects would take overall 2-3 years each to develop, much faster than larger geothermal plants that (in Japan) can take up to 10 years, if they get done at all.  Plants under 7.5MW apparently do not require environmental assessments which typically require 3 to 4 years.

Japan is said to be the #3 country in the world in terms of geothermal resources, with over 23GW of potential, but actual operating geothermal plants cumulate to only 500MW, according to Nikkei.  In constrast, the U.S. as 3.4GW of geothermal in operation, Philippines 1.9GW, Indonesia 1.3GW.  Even small countries such as New Zealand and Iceland generate more geothermal power than Japan.

Siting is notoriously difficult given Japanese concerns (well-founded or not) that geothermal power may damage hot spring water resources.  Of course, there is a history of depletion of resources in some older geothermal fields in other countries, but there appear to be mitigation strategies as well.

One benefit of smaller projects is that they are often designed as "hot spring geothermal" -- teaming with the owners of hot springs (in Japanese "onsen") and using the same near- or at-surface resources, coopting any opposition that would otherwise arise.  The challenge is that many hot springs (onsen) use resources that are not sufficiently hot for geothermal.  Of course, larger geothermal plants typically use steam; but these new, smaller plants often use "binary" generators that function with water, at temperatures as low as 60-70 degrees celsius.

Orix has a large "mega solar" development business, with ambitious goals, hundreds of megawatts of solar PV projects built or under construction in Japan, and it also is entering the retail electricity sale and other related sectors.

Saturday, July 5, 2014

Japan LNG spot market prices drop like a rock

Nikkei reported this morning, July 5, that LNG spot market prices have fallen rapidly over the past 3 months and are now lower than any time since 2011 before the Fukushima accident, around US$11 per MMBTU, down 40% from their peak in February.

Why the drop?  First, LNG inventories of the Japanese utilities and of KOGAS (Korea's public gas utility) are now at high levels, with Japanese utilities inventories 13% higher than last year at 2.44 million metric tonnes.  Second, gas demand in Japan this March-May was lower than last year, supposedly reflecting warmer than usual late winter/early spring weather, and the start up of a large new TEPCO coal-fired plant.

But most important, the first "train" of a new LNG source came online in Papua New Guinea in May, a few months earlier than expected.  The new LNG infrastructure was developed with Exxon Mobil in the lead (and Japanese participation, of course) at a cost of US$19 billion.  Eventually, it will more than double the GDP (and export volume) of Papua New Guinea.  There are apparently has spot cargoes available, at least for now.

How much does this lower gas price help Japan?  Not a lot yet.  Currently 80% of Japanese LNG is imported under 10-20 year long term contracts priced off of middle Eastern crude oil.  Gas under those contracts is at around $15-16 per MMBTU, only down slightly from its peak.

But over the medium term, this can be a huge positive. Almost no Japan LNG imports were done via spot or shorter-term purchases prior to the Fukushima accident, and the fact that 20% of purchases are now under short-term contracts (defined as less than 4 years) is helping to develop a market.  The existence of functional, deep and broad wholesale markets is an essential step to creating competition in not only the gas and LNG business but also downstream electricity generation in Japan.

Wednesday, June 25, 2014

Another Non-Nuclear Summer ... and Autumn ... and Winter

As previously reported, the Nuclear Regulatory Agency (NRA) is checking whether 19 reactors (out of the 55 reactor pre-Fukushima nationwide reactor fleet) at 12 facilities meet its new safety standards.   Kyushu Electric's Sendai reactors 1 and 2 in Kagoshima Prefecture are the first in line for review.

It has been widely reported that these are "good" reactors which are well-positioned to satisfy the NRA standards -- these are the MOST likely reactors in Japan to satisfy the NRA.  No reports of suspicious earthquake faults under or near them.  They are relatively new -- having started operations in 1984/1985.  No record of major problems in operations.  And they are pressurized water reactors, which have the iconic large concrete containment structures covering the entire reactor building -- different from Fukushima.  Under the NRA new standards, PWRs did not need to do as much retrofitting as the boiling water reactors (BWRs) such as were at Fukushima Dai-ichi.

Yesterday, there was an update from Kyushu Electric (Kyuden) on the review status.  Apparently, the earliest a restart could be expected is this autumn.  According to Kyuden, the NRA has given them comments on their filing and identified a number of "misses".  (In this case a "miss" could be a serious issue, a simple typo, or a location where the NRA wants something to be rephrased or further developed.  Pesky paperwork!) 

Kyuden had hoped to get comments and respond by the end of May, but it has now just resubmitted one of three required documents and does not expect to have them all filed until mid July.  The total length of the filings will expand from 7200 pages to 8600 pages, according to Kyuden.

The NRA will take at least a month to respond, and the earliest for restart permission would be September, possibly October.  It seems likely the restart will come until after the three and a half year anniversary of the March 11, 2011 disasters.

So it will be another hot summer in west Japan, with maximum efforts at conservation and supply limited.  We may get a chance to see if the solar PV implemented over the past two years makes a discernable difference.

UPDATE (July 5):  Nikkei reports this morning that the Sendai 1 & 2 reactors are now on track to clear the NRA procedures bySeptember.  The NRA is reported to plan to propose the re-open in late July, with a period for public comment over the month of August, then a final decision.

UPDATE (August 6):  NOT SO FAST!  Nikkei now reprints a Kyodo wire service report that the Sendai nuclear plant will not be open until "winter or later".  Apparently the utility and regulator need more time to prepare and have checked the construction plan (工事計画) for the work that permits reopening, as well as new safety rules (保安規定).   Kyushu Electric initially had hoped to file at end of May, but the filings will not be made until September at best, and could slip more.

UPDATE (November 10):  Things have gone relatively smoothly with the Sendai plant restart process, to the point that last week the governor of Kagoshima Prefecture signed off on the restart, even though a number of communities within the plant's evacuation zone had not given a green light. ... but the plant will still not be up and running for several months, until after the winter electricity usage peak.  Absent surprises, it should be available for the summer 2015 peak.  The utilities and regulator will now push to accelerate the process for the rest of the reactors in the "first wave" of restart applications -- those facing the fewest apparent technical and regulatory issues.

Monday, June 23, 2014

Ready for Fuel Cell Automobiles - Toyota to roll out model in current FY

Toyota and Honda have both announced plans to introduce hydrogen fuel-cell powered electric vehicles (FCVs).

The government wants them introduced by next year.  Toyota has said it will do so with the current year.  For more details, Toyota is scheduled to provide to update its plans at 2PM Wednesday this week.

In the meantime, the government is moving to get the regulatory environment in shape.

1.  Current regulations would prevent fuel cell electric vehicles from supplying electricity to the home.  METI has proposed a modification to permit such power supply.

2.  Nikkei reported last week that the government (METI)  is planning to support sales of the vehicles with subsidies of between 2 and 3 million per vehicle.  Without subsidies the cost would be as much as 10 million yen per vehicle.

According to Nikkei, the government hopes to bring the cost of fuel cell powered cars down to that of gas-electric hybrids over the next ... 20 years.

20 years?  It would not be surprising if the private sector auto industry has a faster long-term goal, just as it has a faster short-term goal.


UPDATE:  Toyota held its press announcement on June 25.  Yes, the model will come out this fiscal year.  The price?  Expected to be around $70,000 (or JPY 7 million) per vehicle.  Toyota is trying to persuade the government to offer a $20,000 (JPY 2 million) subsidy to bring the net consumer price down to JPY 5 million.  That would be at least 40% less than the net JPY 7-8 million Nikkei was reporting.

That seems low enough to drive real consumer interest, to present a real challenge to the others planning models in coming years (Honda and Nissan).  And it perhaps vindicates Toyota's decision not to put a huge degree of effort into plug-in hybrids.

While Toyota seems ahead in the FCV race, US, European and other (Hyundai) manufacturers are moving forward as well.  See these articles:

FURTHER UPDATE:  On July 16, 2014, Nikkei lead story is that JX (oil company; operator of Eneos and other gasoline stands) plans 100 hydrogen fueling stations by 2018.  The locations of 41 stations have been set and others continue to be added.  Each will cost between 300 and 500 million yen, but the government plans to make available subsidies of up to 280 million yen per station, easing the cost dramatically.

Saturday, June 21, 2014

Global Coal Use at Record High in 2013

This story reports a disappointing statistic.  Coal use globally continues to soar, reaching a record high last year (again).

The source is BP's June 2014 Statistical Review of Global Energy, downloadable here.

70% of global coal consumption is in the Asia/Pacific -- 50% in China and the remaining 20% spread around -- India, Japan, South Korea, Indonesia etc.  And all the growth is in the Asia-Pacific region. So as goes China CO2 so goes the globe.

On the other hand, renewables are booming.  Global wind power generation grew 21% in 2013, and solar grew 33%, from a smaller base.  Renewables in 2013 provided 5.3% of global power generation needs -- starting to make a real difference not just in places like Denmark, but globally.   Here is a chart from the BP report showing renewables growth -- though I highly recommend you click on the link above and download the entire report:

The report has a lot of useful information.  Want to see where Japan gets its LNG, and what percent of global LNG imports go to Japan, South Korea, China, or elsewhere?  Just see P 31 of 48 -- major trade movements in natural gas.

Gas prices in 2013?  Japan LNG CIF price -- $16.17.  German imports and UK prices -- around $10.70.  US Henry Hub -- $3.71.  P 29 of 48.

And there is a great index for conversion among equivalents, a definition section, and links to other resources.

(BP kindly notes that publishers are welcome to quote from the review provided that they attribute the source to BP Statistical Review of World Energy 2014. However, where extensive reproduction of tables and/or charts is planned, permission must first be obtained first from the editor.  Let us hope that ONE chart is not "extensive".)

Friday, June 20, 2014

Solar to be Cheaper than Coal in 3-4 years?

Japan's new "strategic energy plan" adopted in April 2014 is notable for its relative lack of discussion of the role for large-scale solar power.  

According to METI Japan implemented over 7GW of new solar power generation during the fiscal year from April 2013 to March 2014 -- with 5.73GW of large scale and over 1.35GW of residential installations.  This is a massive boost from 1.66GW total installations the first 9 months of the feed-in tariff during the prior year, and a demonstration of the success of the feed-in tariff regime at transforming Japan's solar market.  

This is a huge success story.

But instead of trumpeting the success, the government seems almost embarrassed.  METI worries that this "high cost", "intermittent" energy source will saddle Japan's consumers with high electricity rates in future years.  

They look at Germany where a massive installation of solar and wind (at this point well over 30GWp each of solar and wind), most of it at high feed-in tariff rates based upon much higher historical equipment costs, and a lack of grid capacity and storage, have resulted in too much capacity during sunny or windy days.  And instead of shutting down the older, dirtier coal plants, utilities have shut down higher cost, but lower CO2 producing gas fired generation.

The strategic energy plan notes that additional measures are needed for wind and geothermal.  Solar is mentioned only in the section on distributed generation, noting that PV can be useful for medium/small scale distributed installations, "of small burden on grids and of capability for usage as emergency power source.  The popularization of photovltaic generation proceeds in regions as such as idle lands, roofs of schools and factories, and the government continues to support such measures."

So in Japan solar will be supported, but it is not a focus of the national strategy.

Contrast this with the policies in the U.S. and China.  To quote an article in a trade press online publication,

"Both the U.S. and China have a stated goal of reducing the cost of solar generated electricity to [the level of coal-generated electricity], and quickly."

The U.S. has its DOE "sunshot" R&D initiative, with an express goal of "grid parity" for solar this decade in large parts of the USA.

In contrast, and given its different economic structure and vestiges of central planning, and its more urgent energy and environmental needs, China has thrown massive amounts of funds at the solar industry to double capacity again and again, and has driven down the price of equipment as a result -- a semi-conductor industry-like cost curve that any MBA student should recognize.  Double production and cost goes down 20%.  Do it again, and again.  And by 2016-17, solar is predicted to be as cheap as coal generation!   The result has been massive trade friction and Chinese dominance of the solar panel industry.  But also an incredible "gift" to the world in terms of lower cost renewables on the horizon.

In both cases, however, there is a clear national policy to reach grid parity, and a path to do so.  

In Japan, what is the predicted cost of solar PV in 5 years?  In 10 years?  Is there an expectation for future cost decreases?  And how would this lower cost compete with nuclear?  With coal?  With imported LNG (which also could come WAY down in price if Japan plays its cards right over the next decade)?

Of course, all the cheaper Chinese and other US (First Solar) and Asian (Sunpower, REC, LG, even Panasonic Malaysia and Sharp OEM etc.) modules and other equipment need to go somewhere, and Japan's FIT (and massive solar installations in the U.S.) has allowed it to join China and the U.S. as one the top 3 solar PV markets in the world.

 If equipment prices continue to come down over the next 5 years, we could be entering a golden age of solar PV and clean energy generally.   Let us hope that Japan leads this wave, rather than being dragged along kicking and screaming, a captive of legacy investment and interests.

Thursday, June 19, 2014

Bloom Boxes Seen at Keio University Shonan Fujisawa Campus

I currently am a guest professor at Keio University Shonan Fujisawa Campus' faculty of Public Policy Management, and teach a course there every Wednesday afternoon.  I was delighted when my teaching assistant yesterday mentioned to me that Keio SFC's new Bloom Energy fuel cell generator is now finished and in operation!

Indeed, the new installation was announced this week by Keio and Bloom Energy Japan (a 50/50 JV between Bloom and Masayoshi Son's Softbank).  The English press release is available here.

Bloom boxes are a solid oxide fuel cell powered by natural gas, with over 60% efficiency (better than a gas turbine, even with co-gen).  Not a completely "green" or "low carbon" technology, but one form of distributed generation.

With high electricity prices, and deregulation/liberalization of natural gas markets, this kind of installation should grow in popularity in Japan in coming years.  Does the greater efficiency over traditional gas generation justify a higher cost?  Were there subsidies?  I do not know.

The installation generates 200kW and will provide almost all the electricity for the "Delta" building at Keio SFC.

Sunday, June 15, 2014

Denjiren Personnel Moves and Hope Still for Deregulation

Denjiren, the "Federation of Electric Power Companies of Japan" or in Japanese the 電力事業連合会, is the organization through which the incumbent electric power regional monopolies cooperate on numerous fronts, including regulatory matters and lobbying, as well as public relations and education.

The organization traditionally included strong representation from Tokyo Electric (TEPCO), given TEPCO's status as the largest utility by far.  But in new leadership announced last week, there are NO TEPCO representatives among the board-level or top management, down from 3 previously.

Since TEPCO's quasi-nationalization after the Fukushima accident, TEPCO management has been replaced, and the company has been effectively under METI-led conservatorship.  TEPCO has not been in a position, as a company, to defend the utilities' regional monopolies, or to oppose efforts to infuse the industry with competition and lower costs.  The press has reported previously on Denjiren meetings where the "real" meeting starts after TEPCO leaves the room.  Since TEPCO's bailout, its representatives have been seen as mere proxies for METI.

And on the TEPCO side, the Vice Chair of Denjiren has been Mr. Shigeru Kimura.  He was forced out of his TEPCO position in 2012, but to the surprise of many held on to the position as Vice Chair of Denjiren.

According to Nikkei (June 14), the utilities fiercely fight to maintain their prerogatives.  Indeed, Nikkei indicates that the reason Denjiren has never formed a legal entity is to avoid any governmental leverage from a tax audit.  And Denjiren managed to completely shred METI's effort at electric industry reform in the 1990s.

Needless to say, the utilities continue to take a cautious (in Japanese "shincho") attitude toward deregulation and structural changes such as the separation of generation and transmission.  For a conservative organization like this to say it is "shincho" about a government initiative is just polite Japanese for "we will fight it to the death"!  And the utilities have significant influence within the LDP, even without TEPCO at the head.

Of course, the utilities also have some very serious needs from the government.  They continue to be in poor financial condition, even if some have moved back into the black temporarily -- beneficiaries of favorable accounting changes so they can continue to include nuclear assets in the rate base, even if the assets are not operating and, under the new standards of the NRA, many of them will never reopen.

One idea that seems to be surfacing -- shift the entire nuclear industry to government ownership.  This would lift a huge burden from the utilities (and onto the taxpayer ... but away from the ratepayers, who are pretty much the same -- everyone in Japan -- but who will bear the costs in very different proportions).

The nuclear restart is still not happening, even though the utilities (of course) and the LDP have been promoting it actively for a year and a half, and the NRA now is considering applications for 19 reactors in 12 facilities.  The utilities at this point might be delighted if the government would take the nuclear "assets" and liabilities off their hands.  It would be a huge bailout -- especially for entities such as Japan Atomic Power Company and its utility shareholders, whose assets are likely worthless under the NRA standards, and for the banks and other financial institution creditors of the industry.  This might be a decent trade for all concerned in exchange for utility (i.e. Denjiren) support of thorough deregulation, including a real, not just cosmetic, separation of generation and transmission assets and a host of other reforms -- not to mention aggressive support for introduction of renewables and other distributed generation.

Mark Ramseyer of Harvard Law School argues that the fact that the cost of accidents are ultimately borne by taxpayers, with a few paying a great deal, whereas the benefits of cheaper, stable electric power supply are shared by many  (voters) explains why public ownership of nuclear power assets does not necessarily improve decision-making about safety.

Prime Minister Abe has taken to saying, at the Davos World Economic Forum in January, among other venues, that no vested interests will be exempt from his deregulatory "drill" over the next two years. The Government of Japan's official public relations materials list the electric utility industry as one area "under the drill".  Time will tell.

Google to provide software tools for the electricity business? Nest thermostats, Demand Response Comes to the Home (in the USA)

Companies such as Apple and Google have demonstrated an ability to kill entire industries.  Well, actually, the industries survive and prosper, just the historical players fade away as a new entrant does something much better, for a tiny fraction of the cost, than had been the case before.

Apple first took over the music distribution business as the iPod and iTunes spread.  And it has wiped out many giants in the mobile phone business such as Nokia and Motorola.  Google dominates "search" and related advertising, maps, and email.  Now it has put the fear of God into the auto industry with its plans for driverless cars (which, as collateral damage, would destroy the auto insurance business over the next 20-30 years).

So some members of the utility business might sit up and pay attention to a Bloomberg story this week that Google is going to enter the business of developing software for the electric power-related business.  According to Bloomberg:

"Google, a big consumer of electricity for the computer servers that power its services, is looking at ways to transform the century-old utility industry, which has been struggling to adapt to changing demands for power management and production. As solar, wind and other renewable energy sources come online, the power grids that transmit electricity will need to be more flexible and efficient."

Of course, if Google does this well and quickly, it will help push forward a revolution in the U.S. electric grid, and if this happens in the U.S., it will shame Japan into action.  The article cites as some evidence:

"Earlier this year, it spent $3.2 billion to acquire Nest Labs, a digital-thermostat company, and is an investor in Atlantic Grid Development LLC, a project designed to help deliver electricity in New Jersey."
Of course, Google is hardly the only company that sees a huge consumer opportunity in managing the "smart grid".  This article, also Bloomberg, from a few weeks ago, discusses other entrants as well.  The common theme -- the existing utilities are unable to take advantage of, or even see, this opportunity, as they view customers as "load", and do not know how to sell.  They are toast.

On the other hand, this month's Wired magazine offers an amusing look at the super connected home of the 2030s, dominated by Microsoft/Samsung (Samsoft) products, the merged entity having beaten out Google/Android and Apple.

Of course, Japan has its own host of "smart city" and "smart grid" initiatives.  But these initiatives seem to be going on in typical Japanese "Galapagos" style, largely apart from the rest of the world.  It seems likely that the Japanese smart city will have its own standards and pecularities, with little likelihood it can be exported (or that foreign-developed software tools can be used in Japan).

Wednesday, June 11, 2014

Solar and Wind -- $15 billion more of investment coming from Warren Buffett/Berkshire Hathaway

This announcement from the Sage of Omaha got a lot of press today.  If Berkshire Hathaway has $15 billion in solar/wind investments, and plans to double that amount ... at some point this is no longer just a CSR exercise for an operator of coal and gas-fired plants?

Of course, Buffett is campaigning for renewal of U.S. tax incentives for such investments, and he emphasizes the importance of those incentives.  But Berkshire's activities help to explain how the numbers add up to more solar and wind added than any other type of generating capacity in the U.S. last year.

Tuesday, June 10, 2014

How Expensive IS Electricity in Japan?

As a TEPCO consumer, I get a large bill each month.  It seems very large compared with what I was charged for a larger house in the Washington DC suburbs before I moved here in 2004.  But the fee includes various charges, base connection costs, fuel costs, etc., so it is difficult to discern a straight cost per kWh.

A few weeks back Nikkei reported an IEA study comparing international rates.  This shows that for commercial/industrial customers the average rate in Japan is now 250% that in the U.S., and has increased 25% since the March 2011 disasters.

Nikkei indicates that the electricity cost for industrial/commercial customers in 2013 in Japan was 17 yen per kWh, while that for residential customers was 23.63 yen per kWh.  These are 25% and 16% increases over 2010.  The same article indicates the 2013 U.S. "corporate" (i.e. industrial and commercial) rate was 6.64 yen per kWh.

IEA notes that the U.S. benefits from cheap shale gas, while Japan suffers from long-term high cost contracts for imported LNG (priced off of Middle Eastern crude oil benchmarks).

Also, transmission/distribution fees are extremely high in Japan.  METI indicates (according to Nikkei) that grid repair/maintenance costs in Japan are more than 7 times those in California (and 3 times those in Korea) ... perhaps as a result of the regional utility monopolies?

Interestingly, the article includes a chart showing that during the same period France -- which relies more than any other country on nuclear power -- has also suffered a big pricing increase.  In fact, from 2007 to 2013 French "corporate" electricity prices have increased more than Japan on a percentage basis, though remaining far lower in absolute terms (around 12 yen per kWh).

Of course, if calculated in Japanese yen, another reason Japanese electricity costs are higher now than in 2010 is exchange rates.  All of Japan's oil, coal and gas are imported.  The yen-dollar rate the last weeks of CY 2010 and 2011, respectively, were 81.48 and 77.66.  The last week of 2013 the yen-dollar rate was 104.83.  So even if fuel costs had remained constant in dollar terms, they would be up over 30% in yen terms.  Ouch.

Monday, June 9, 2014

More Strain on the Utilities

TEPCO and a number of the other utilities reported better financial results for the most recent ended fiscal year.  But the pressure is still on, big time.

-Both Kyushu Electric and Hokkaido Electric are in the process of applying for/taking equity from the Development Bank of Japan, in order to avoid risk of technical insolvency as they continue to lose money. The interesting question will be whether this equity comes with significant strings attached, in terms of a commitment to cooperate fully with the government's regulatory/restructuring initiatives.

-Japan is still a zero nuclear country, with many utility applications pending with the Japan NRA for reactor restarts, but none yet approved.  The nation appears headed to a no-nuke summer again.  Supply will be especially tight in western Japan, where Kansai Electric has made it through the last 2 summers with the Oi reactors 3 and 4 operating, and where Kyushu Electric faces an outage at a major J-Power plant in Matsuura, Nagasaki from which it has taken supply in the past.  

-Even worse for the utilities and their business plans, a Fukui-based district court issued an injunction against the restart of Oi Reactors 3 and 4, on May 21.  KEPCO has appealed the decision, but it could take months or years before the upper court hears the appeal and issues a ruling.  The decision gave legal standing to persons without a broad area (250 kms) of a reactor to pursue litigation in court, undercutting government efforts to limit restart consents to communities within the host prefecture.  The nuclear restart is now a critical part of the government's energy policy, and it is far behind schedule.

-There are now something over 200 companies registered to sell electricity to small, retail end-users as the market liberalizes.  We will probably see a slow but continuous chipping away at both the generation and distribution/sales part of the utilities businesses.

A Nikkei opinion piece on June 3, 2014 notes that the historical environment for the electric utilities has collapsed.  No longer can they be assured of recovering costs and earning a profit if they just follow national policy -- which has included the promotion of nuclear power.  The electricity market may become competitive, and in such case the utilities cannot support or promote a risky endeavor such as nuclear power, where reactor closures can push a utility into sustained losses or even insolvency.   In order for the utilities to be reborn as "normal" private sector enterprises, the article suggests a need to transfer the nuclear power assets to a public corporation that can handle the burdens, the risks and rewards.

Monday, April 28, 2014

How Much Renewables can the Grid Support?

This interesting article from MIT Technology Review series "Ten Breakthrough Technologies 2014" suggests that, using information technology to generate sophisticated predictive models of how much wind and solar will be generated in 15-minute increments, electricity grids will be able to support MUCH MORE "intermittent" renewable energy than previously thought.

The (US) National Center for Atmospheric Research (NCAR) in Boulder, Colorado has a pilot project, whereby Xcel, one of the US' largest utilities and the main power distributor in Colorado, is able to avoid the need for back-up fossil fuel generation, taking data from every wind turbine feeding into its system and using the NCAR models.  Based on the new models, Xcel supports a mandate for utilities to get 30% of their electricity from intermittent, renewable sources.

And NCAR is now working on a similar model for solar, to match the wind models.  The main challenge is the lack of data from residential rooftop systems.

And the MIT article mentions one of my favorite ideas -- the use of electric car battery storage to offset dips in the grid from use of renewables.

These types of developments are among the reasons why U.S. technology thinkers now see renewables as no longer expensive or impractical, and why the largest share of U.S. new generation added last year was renewable wind/solar.

Tuesday, April 8, 2014

Innovation Blindness

Should we make massive investments in new "clean coal" or nuclear generation today?

Leaving aside the environmental debates, this post notes eloquently that blindness to technological innovation can severely hinder policymaking.  The post takes issue with an analysis showing the iphone today incorporates technologies that cost over $3000 in 1991.  Instead, the post argues, an iphone in 2014 incorporates over $3.5 million in 1991 technology. The 32GB memory alone would have been over $1.5 million in 1991.  Of course, the form factor is an entirely different matter.

We see the same thing in terms of energy policy.  Renewables are deemed "unreliable" and "expensive" based upon historical technologies and cost.  Instead just look at the cost curve for solar, wind, fuel cells and other renewable or environmentally-friendly technologies.  And think about the likely cost of storage technologies that will be available in 10 or 20 years, and the IT and communications advances to support demand management.  If you take such things into account, you will come up with entirely different answers to energy policy questions than if you look at historical costs.

Monday, March 17, 2014

Citizen Radiation Monitoring

In early March I attended an interesting presentation by several of the leaders of Safecast is a group  formed in the aftermath of March 11, 2011 to conduct independent radiation monitoring, and to make the resulting data available to all in an easy to visualize format.  The leaders are neither pro- nor anti-nuclear.  Rather the group's purpose is simply to make available reliable, accurate data.  It filled a gap in the aftermath of the nuclear accident, when there was too little data made available in too difficult a manner to understand.

They have accomplished a lot, to the point where the Japan Post attached Safecast radiation monitors to all the postal delivery motorbikes in several Fukushima cities for a year.

They show that, in fact, radiation levels have declined quite quickly in much of the area affected by the Fukushima accident.  On the other hand, the government fixed monitoring stations overstate some of the reduction, since they have been placed in locations such as schoolyards, parks and in front of train stations that were the highest priority for clean up.  You can see the Safecast maps here.

In the wake of the tsunami and nuclear disaster, the first issue was lack of availability of monitoring equipment.  So Safecast designed its own monitors, which log data including GPS and timestamp information, and which is uploaded to their database.  They now have over 15 million monitoring data points.

They have gone through several iterations/generations of monitors and the latest, the Nano bGeigie, won the Japanese "Good Design Award" in 2013.  It is available only as a kit, so I attended their workshop on Sunday and built one.   My first electrical soldering experience since ... high school?  Middle school?  In any event, it works!

One of the great things about building a kit is that you actually have a great sense of what the components are and now they work together.