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.