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Keeping the Lights on in Japan. Tomoharu Nishino Axelrod Energy Projects, LLC 2012 Energy Conference October 28-30, 2012 Miami Beach, FL. Agenda. Overview of Japanese power The Fukushima accident and developments in 2011–2012 Response Conservation and renewables Thermal Power
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Keeping the Lights on in Japan Tomoharu Nishino Axelrod Energy Projects, LLC 2012 Energy Conference October 28-30, 2012 Miami Beach, FL
Agenda • Overview of Japanese power • The Fukushima accident and developments in 2011–2012 • Response • Conservation and renewables • Thermal Power • Projections (FY2012–2013) • Demand, conservation and renewables • Nuclear Power • Thermal Power (coal, crude oil, fuel oil, and LNG) • Medium-term forecast • Nuclear • Thermal power (coal, crude oil, fuel oil, and LNG)
Overview of Japanese Power • Japanese Power Sector • 10 regional power companies operate as regulated regional monopolies, engaged in both generation and transmission • There are a handful of independent power generators, most notably J-Power (hydro and thermal), and Japan Atomic Power Company (nuclear). • Prior to March 11, 2011 • Approximately 213GW of total generation capacity • 54 commercial nuclear reactors with a total generation capacity of 49GW (or roughly one quarter of the country’s total capacity) • Nuclear used as “base load” power source • National energy policy to be 50% nuclear by mid-century
Past Generation Patterns Power Generation by Energy Source (TWh) Power Generation by Energy Source (TWh, %, FY2010)
Japanese, Nuclear Power Plants Location of Nuclear Reactors
Developments in FY2011 • Immediate consequences of the March 11, 2011 Earthquake • 4 TEPCO reactors at Fukushima Daiichi suffer melt-downs • 10 additional reactors are brought to a safe shutdown • 3 reactors at Chubu Electric’s Hamaoka plant were shut down in the days immediately following • Total capacity immediate shut down: 15,874MW • Subsequent developments • In the ensuing debate over the safety of nuclear power plants, the Japanese government has attempted to placate public concern by establishing new safety regulations, establishing a new regulatory agency and legal framework. • Nevertheless, public support for restarting nuclear power plants has been tepid. • Japan operates its nuclear power plants on a 13 month duty cycle. Every 13 months of operation, plants are shutdown and put through an inspection regime. • Until July of this year, No plant that entered its periodic inspection cycle has been allowed to resume operations.
Nuclear Power in FY2012 • Nuclear shutdowns • On May 7, 2012 the last remaining operating nuclear reactor reached cold shutdown, and entered its inspection cycle. • For the first time in 40 years, there were no operating nuclear reactors in Japan. • Nuclear restarts • Two reactors at the Ohi plant operated by Kansai Electric were allowed to resume operations in July. • Despite the creation of new regulatory agency in August, no other nuclear reactors have been allowed to resume operation. Moreover, the experience of this past summer has blunted the arguments calling for an expeditious restart. • Pushed by popular pressure, the ruling Democratic Party announced (and then partially retracted) an energy policy platform based on eliminating nuclear power altogether by 2050, including a moratorium on construction of new nuclear power plants, and the non-extension of the service life of existing power plants beyond 40 years. • Nuclear will be slow to return. It is unlikely that any other nuclear plants will be allowed to resume operations for this coming winter. Gradual resumption to about half capacity towards summer 2013 is possible.
Response: Conservation • Immediate widespread conservation efforts following the earthquake. • Demand reduction during the winter proves difficult. • For the summer of 2012 power companies asked for a 10% reduction in peak load relative to 2010. Actual reduction in peak load averaged 12.3% for the country as a whole. • Overall demand for FY2012 to-date has been about 95.5% of the comparable period in FY2011. • Demand growth is expected to resume in FY2013.
Response: Renewables • At the end of FY2010, renewable power sources accounted for <1% of total power generation. • In July 2012, the Japanese Ministry of Economy, Trade and Industry (METI) initiated a feed-in-tariff system for renewables. • The target additional capacity for renewables is 2,500MW for FY2012. • As of September, Japan has added 912MW of capacity (mostly solar).
Response: Fossil Fuel Consumption Japan, Fossil Fuels for Power Generation (KB/D FOE)
Response: Thermal Power • Coal • Effectively capacity constrained • Older technology with higher cycle times • Very little movement in response to demand • LNG • LNG is the preferred adjustment mechanism • LNG hits its own capacity constraint at ~1,450 KB/D FOE. • Crude and fuel oil • Serve as the final adjustment mechanism in response to peak seasonal demand. • Fuel Oil: 216 KB/D in August 2011, 360 KB/D in February 2012, 320 KB/D in August 2012. • At no point below 220 KB/D in CY2012 to date. • Domestic production capacity is 100–120 KB/D
Near Term Projections • Power demand growth • Exceptional demand management through aggressive conservation and load shifting efforts averted disaster for summer FY2011. • Aggressive conservation efforts managed to keep demand growth in check for FY2012. Some of the conservation efforts over the last 18 months have permanently reduced power demand. • Conservation was aided by a mild summer. Conservation is less effective during the winter months. • Industrial output is back to pre-quake levels. Economy is growing at a 3.6% annualized rate • The lack of resolution regarding the nuclear power issue, however, keeps grass-roots momentum alive for conservation efforts. • The power situation has prompted a new round of capital investments in green power and demand management technologies. • We expect power demand in FY2013 to be 2–3% above FY2012.
Projections: Renewables and Conservation • Conservation • 4.5% total demand reduction in FY2012 to-date. Particularly impressive considering the economic growth rate for the first half of 2012 was 3.6% • Some conservation investments will have permanent effects, but sustainability in the face of economic growth is questionable. • Market-based conservation measures (such as demand response) has been slow to catch on. • Renewables • Growth of renewables infrastructure will take time. So far this year, Japan has added 912MW of renewable capacity, mostly in the form of solar, with some very high profile “mega-solar” projects. • However, the geography of Japan makes it particularly challenging for renewables • Energy density of solar, and the need for distributed generation and associated infrastructure, will pose a continued challenge. Sparse wind resources • Projections • FY2012 is a good baseline for future power demand, which incorporates the permanent effects of the conservation efforts over the last 18 months. But demand growth will resume in FY2013, and renewables will be slow to contribute to the power infrastructure.
Projections: Nuclear • In mid-June 2012, two nuclear reactors at Kansai Electric Power’s Ohi plant, with a combined capacity of 2.36GW were granted permission to resume operations. Both reactors have been operational since late July. • The remaining reactors in Japan will come under the jurisdiction of a new Nuclear Safety Commission, which will begin the process of evaluating these plants in August. But thus far, no additional plants have been given the green light, and popular resistance to nuclear restarts has remained strong. • After a go-ahead is granted, plants will typically require 30-45 days to reach full output. • It is unlikely that additional nuclear capacity will be available for the coming winter season. • There is the possibility of a gradual ramp up to about half capacity by the end of next year.
Projected fuel requirements • Coal • Demand will remain flat at 770-780KB/D FOE for the remainder of FY2012 and FY2013. • Crude oil • Demand will grow through FY2012, to 250KB/D FOE, then decline to 172 KB/D FOE in FY2013, as some nuclear capacity returns. • All of this demand will be met through imports • Fuel Oil • Demand will grow through FY2012 to 300 KB/D, then decline to 250 KB/D in FY2013, as some nuclear capacity returns. • Domestic production capacity will remain at 100–120KB/D, with the balance coming from imports. • LNG • LNG will continue to supply the bulk of the power void left by the absence of nuclear, averaging 1,345 KB/D FOE in FY2012. • Demand will remain strong as some nuclear capacity returns at 1,295 KB/D FOE, reflecting Japan’s preference for LNG over crude or fuel oil.
Forecasting the medium term • Nuclear • Popular opposition to nuclear power remains strong • The option for “zero nuclear” by mid-century is still on the table. • Moratorium on new construction • No extension of useful life of nuclear plants beyond 40 years. • 15 out of the remaining 50 nuclear reactors, with a total capacity of 10GW, will reach their service limits by 2020. • If no new reactors are constructed, that lost capacity will have to be replaced, most likely with LNG-based thermal plants operating as base load.
Fossil fuel burn trends (KB/D FOE) • LNG • Pre-quake: annual growth rate of 10% per year • Post quake: surge in demand to fill the void left by nuclear, with growth rates up to ~20% per year • Growth will moderate over the medium term, but will remain strong. • Coal • No new coal fired plants • Continues long term decline trend • Crude and fuel oil • Pre-quake: long term decline • Post-quake: surge in demand to fill the void left by nuclear. • No new plants planned. At least one power company Chubu will retire all its oil burning plants in 2013. • Will resume long term decline as nuclear returns, and new LNG plants come online.
Thermal power plants New LNG Power Plants (MW) • 108 LNG generation units with a total capacity of 64GW. • 98 crude fired generation units with a total capacity of 40GW. • 140 fuel oil fired generation units with a total capacity of 47GW. • No new oil fired power plants are planned. • Chubu Electric Power will be retiring all of its oil burning power plants (5GW total capacity) in 2013. • 8 new LNG power plants are in various stages of planning or construction.
Forecast: Medium term fuel requirement trends • Coal • Will continue its long term decline • Crude and Fuel Oil • The surge in demand over the last 18 months should be considered an anomaly. • Demand will moderate once some of the nuclear power plants come back on line, and additional LNG capacity becomes available. • Demand will return to FY2010 levels (with very small import demand) beyond FY2014, and continue its pre-quake trend of long term demand decline. • Japanese refiners are already beginning to reduce its refining capacity in anticipation of declining Fuel Oil (and gasoline) demand over the coming years. • LNG • Significant capacity growth over the next 5 years. • Combined with return of some nuclear power,nuclear and LNG will displace crude and fuel oil based generation. • Japanese oil companies and trading companies are anticipating this with significant investments in shale gas exploration, which are expected to begin production in the 2015 timeframe.
