The Business Risk of New Coal Plants in Japan

Chinese coal plant

Japan is one of the few major OECD countries where there are plans to build lots of new coal power plants. Of course, these plants will largely replace older, dirtier and less efficient coal plants. But still, they will lock Japan into coal-fired power for the next 50+ years, just as many other advanced countries are not building ANY new coal plants, and are shutting down the existing ones as quickly as practical ... and much faster than anticipated only a few years ago.

Japan's Renewable Energy Institute ("REI", not to be confused with REI Corporation, the famous outdoor goods cooperative based in Seattle) has released a Japanese language report entitled, roughly translated, "The Business Risk of Building New Coal Plants in Japan".

The article points out, in some careful detail, what I have been arguing based on rest-of-world knowledge and seat-of-the-pants common sense these past few years: a new coal plant planned in 2017 will be a big money-loser, and may even be a stranded asset shortly after completion.

According to REI, the government already has plans showing that utilization for coal fired power will fall from 80% in 2015 to 69% in 2026. Assuming for 2030 that (1) nuclear restarts result in 10% of Japan's power supply coming from nuclear power (only half of the governments 20-22% target), (2) that solar PV ends up somewhere around 82GW--much lower than likely or possible, and (3) the various coal plants now under development/construction are completed, REI's report indicates that:

• the facility utilization rate of coal-fired power plants will decline considerably below 69%, should be about 56%.

• Coal-fired facility utilization rate will be 62% if the restart of nuclear power plants does not proceed and nuclear is limited to 5% of the electricity supply amount.
• But if energy efficiency has improved resulting in a 5% decline in demand for electricity, coal utilization will be around 49%.

• The new coal plants are all planned around an unrealistic assumption of 70% facility utilization and 40 year operation, which is not feasible. The investments will be unprofitable.

Moreover, coal power production will face stiffer and stiffer headwinds, as many major users (including, recently, some Japanese companies) are adopting 100% renewable targets, and the Paris Agreement has led Japan to adopt, in March 2017, a "long-term low carbon vision" of the country, under which 90% of energy supply is covered by low-carbon power supply in 2050. That vision is not consistent with 40 years of continuing use of coal fired power.

The report (in Japanese) is available here. 
A summary (try Google Translate on it) is available here.

Update: An English summary is NOW available here.
And the full report will be translated into English, so check back here soon.

The Future of Solar Pt 4

It is raining hard this week in Tokyo, and I have not seen the sun clearly once since I got back from a trip to the U.S. nine days ago.  Be that as it may, it is hard not to be optimistic about the future of solar, even in typhoon season. September is the month in Japan when it rains more than in the official "rainy season".

Technology and cost reduction march onward.

1. Last week, Kaneka, a Japanese company, announced a record 26.33% conversion efficiency for a "practical size" crystalline silicon solar PV cell.  Kaneka is targeting an LCOE of 14 yen/kWh in 2020 and 7 yen/kWh in 2030.  Kaneka's is a non-concentrating cell with "heterojunction technology using high-quality amorphous silicon, low resistance electrode technology, and a back-contact structure that captures more solar energy".  Nice to see Kaneka still in the game, since they are mostly known in the global industry for their earlier thin-film modules that faded when undercut dramatically by cost reductions for traditional crystalline PV modules within the past decade.

2. This is only the latest of MANY new records for cell and module efficiency this year.  Indeed, it is hard not to yawn a bit since we are so accustomed to seeing these.  The PV Magazine brief online article about Kaneka's feat also mentions or links to stories about

--Sunpower's module efficiency record of 24.1% set in June using cells from SunPower's X-Series modules.
--ZSW's 22.6% CISG thin film record from June.
--Trina's announcing in July 20.16% average efficiency for Trina's P-type multicrystalline silicon PERC cell under "industrially produced conditions" (as opposed to laboratory tests), allowing a 286w standard 60 cell module (as opposed to the 260 watt modules we were using only a year or two ago).
--Hanwha Q Cells' announcement of a 19.5% efficiency for a 72 cell module using standard multicrystalline silicon technology using its Q.UANTUM technology and four busbars.

3.  Of course, 7 yen/kWh LCOE might not be an aggressive enough target for 2030, even if 50% less than the Kaneka 2020 target.  We now see numerous PPA's in desert areas of the world for projects to be built in the 3~4 cent per kWh range.  (E.g. Peru - Enel Green Power 4.8 cents/kWh for construction in 2017, Coahuila Mexico 3.6 cents/kWh for construction in 2018, Dubai/Masdar 2.99 cents/kWh for construction 2019, and Chile, Solarpack, 2.91 cents/kWh, for construction 2019.)