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Case Studies on Financing Renewable Energy Development Japan

Case Studies on Financing Renewable Energy Development Japan. 22 nd Meeting of the Expert Group on New and Renewable Energy Technologies 12-13 May 2004 Honolulu, Hawaii, USA. Ms. Yayoi IIJIMA Chief Officer International Projects Dept.

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Case Studies on Financing Renewable Energy Development Japan

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  1. Case Studies onFinancing Renewable Energy DevelopmentJapan 22nd Meeting of the Expert Group on New and Renewable Energy Technologies 12-13 May 2004 Honolulu, Hawaii, USA Ms. Yayoi IIJIMA Chief Officer International Projects Dept. New Energy and Industrial Technology Development Organization (NEDO)

  2. Outline • Principle of Japan’s Energy Policy: 3Es • Japan’s New and Renewable Energy Indicators • Cost Competitiveness of NRE • Creation of Initial Demand • New Energy Budget Trend/Origin/Allocation • Policy Tools for NRE Promotion • Support Measures/System • Wind Power • PV Power • NEDO’s Role in Japan’s New Energy Scheme 2

  3. (1) Principle of Japan’s Energy Policy: 3Es Security of Energy SupplyAlternatives to oil 3Es Harmony with EnvironmentLowering CO2 emission Economic Efficiency Market mechanism *The Basic Plan for Energy Supply and Demand issued in October 2003*Revision of long-term outlook for energy supply and demand is scheduled to be finalized this summer 3

  4. (2.1) Japan’s New and Renewable Energy Indicators Supply Side New Energy Renewable Energy 4

  5. (2.2) Japan’s New and Renewable Energy Indicators Demand Side FY 2001FY 2010 Indicators Clean Energy Vehicles(1)115,000 vehicles 3,480,000 vehicles Natural Gas Cogeneration (2) 1,190,000 kW 4,640,000 kW Fuel cells 12,000 kW 2,200,000 kW (1)Includes electric vehicles, fuel cell vehicles, hybrid vehicles, natural gas vehicles, methanol vehicles, and diesel-alternative LP gas vehicles. (2)Including those powered by fuel cells. 5

  6. (3) Cost Competitiveness of NRE Type Photovoltaic power generation Wind powergeneration Waste power generation Biomass power generation Small- and medium-scale hydro power generation Residential Non-residential Large scale Small- and medium- scale Large scale Small- and medium- scale Power generation cost 46~66 73 9~14 18~24 9~11 11~12 7~21 14 Type Nuclear power LNG-fired Coal-fired Oil-fired Power generation cost 5.9 6.4 6.5 10.2 Power generation cost of new energy (unit: yen/kWh) [Source] Report (July 2001) by the New Energy Subcommittee of the Advisory Committee on Energy and Natural Resources, and others Power generation cost by power source (unit: yen/kWh) [Source] Data of the 70th Nuclear Power Subcommittee (December 1999) of the Advisory Committee for Energy 6

  7. (4) Creation of Initial Demand Market independence Creation of initial demand Technical development Cannot be sold without support ▪ High cost ▪ Competition with existing products ▪ Construction of a total energy system ▪ A lack of social awareness Synergistic effect of mass production and cost reduction This period is important. この時期が重要 ：Market scale Development of new products Period of market creation Period of independence and expansion in the market Period of market maturity 7

  8. (5.1)Japan’s Policy Tools for NRE Promotion - Cost Reduction - Output Stability RD&D Sunshine Project/New Sunshine Program - Support for introduction by business sector - Support for residential PV systems - Support for NPOs promotional activities Support for Introduction Support for Promotion of RE in Regional Governments - Support for Developing Regional New Energy Visions - Support for Promotion of Renewable Energy by Regional Governments Voluntary Action by Private Sector to Purchase Renewable Energy Electricity • - Renewable Certificates • Voluntary Action by Power Companies to purchase • Renewable Energy Electricity Renewable Portfolio Standard System • Obligates electricity retailers to supply • certain amount of electricity generated • by renewables Market Expansion by Synergy of These Measures 8

  9. (5.2) Recent Policy Strengthening to Expand NRE Introduction Collaboration among ministries • The entire Government positioned new energy introduction targets in the Global Warming Measures Promotion Outline decided in March 2002. • Especially in the biomass field, systematic collaboration among ministries is important. Ministry of Agriculture, Forestry and Fisheries Ministry of Land, Infrastructure and Transportation Ministry of Economy, Trade and Industry Ministry of the Environment Measures related to construction waste material and sewage sludge Biomass measures related to agriculture, forestry, and fisheries New energy measures Waste measures Support for technological development and experimental testing, and appropriate collaboration in support for individual projects Legal aspect Jan. 2002Added two new energy sources:“biomass” and “snow ice,” to the new energy sources stipulated in the Law concerning Promotion of the Use of New Energy (in fiscal 2002, the Government began supporting projects to introduce these energies). May 2002Establishment of the “Special Measures Law concerning the Use of New Energy, etc., by Electric Retailers”.This Law made it obligatory, starting in April 2003, for electricity retailers to increase their ratio of power generated by new energy sources, such as photovoltaic power, wind power, and biomass.) Collaboration among ministries 9

  10. (6.1) New and Renewable Energy Budget Trend ※ 1 US$ ＝ \106 10

  11. (6.2) Overview of NRE Budget Origin (FY 2004) Petroleum-related Measures Special A/C for Petroleum and Sophisticated Structure of Energy Supply/Demand (Petro: \2,040/kl; LPG: \800/t; LNG: \849/t; Coal: \230/t; etc.) Energy Conservation NatGas Utilization Promotion Environmentally Friendly Utilization of Coal Etc. \87.6B New Energy Utilization \63.5B Regional Power Source Development Special A/C for Electric Power Development Acceleration Measures (Electricity sales: \0.425/kWh) Nuclear Energy Utilization Promotion Hydro/Thermal Energy Utilization Etc. 11

  12. (6.3) NRE Budget Allocation Ⅰ．Technological Development Ⅱ．Demonstrative Testing • Budget for FY2004: • about \42.4 billion ≒ US$400 million • Fundamental investigation • Development for practical application • Budget for FY2004: • about \26.5 billion ≒ US$250 million • Field tests • Demonstrative research Ⅲ. Introduction Promotion (full utilization of market mechanism) • Budget for FY2004: about \92.4 billion ≒ US$872 million • Creation of initial demand for inducing market independency • Creation of environment hospitable to introducing leading-edge new energy systems • Financial support (tax system, fiscal investment and loans) • The Green Purchase Law • Enlightenment and public information activities • Renewable Portfolio Standard ※ 1 US$ ＝ \106 12

  13. (7.1) New and Renewable Energy Introduction Support Measures By offering opportunities to create initial demand, these measures aim to improve the cost effectiveness of new and renewable energy, with costs expected to be reduced in the future through economies of scale. １．Subsidy Program for Residential PV Systems ２．Project for Promoting the Local Introduction of New Energies ３．Project for Supporting New Energy Enterprises ４．Project for Promoting the Local Deployment of New Energies ５．Project for Promotion of Non-Profit Activities on New Energy and Energy Conservation ６．Project for Supporting Regional Activities for Prevention of Global Warming ７．Project for Establishing New Energy Visions at the Local Level 13

  14. (7.2) Support System to Expand New and Renewable Energy Use General introduction flow Main support systems • Establishment of regional new energy plans • Comprehension and analysis of regional characteristics • Establishment of individual project plans, etc. Projects, such as establishment of regional new energy visions(for local public bodies) FY2003 budget: 1,320 million yen → FY2004 budget: 1,180 million yen Support • Study on project introduction and project implementation • Introduction planning • Study on financial source • Project method • Experimental testing, etc. Field Test Project(for enterprises and local public bodies) FY2003 budget: 6,900 million yen → FY2004 budget: 8,290 million yen（ＮＥＤＯ） Support Regional New Energy Introduction Promotion Project (for local public bodies) FY2003 budget: 12,710 million yen → FY2004 budget: 11,030 million yen Judgment on project implementation Support Coordination with related agencies, establishment of implementation plan, designing, Installation construction New Energy Enterprise Support Project (for enterprises) FY2003 budget: 38,820 million yen → FY2004 budget: 48,260 million yen Start of service of new energy 14

  15. (7.3) Japan Bank for International Cooperation (JBIC) Supporting the Dissemination of Japanese New Energy/Energy Efficiency Equipment and Technologies Examination Stage by Developing Economies’ Gov’t (Support for Master Plan Preparation, Model Projects, etc.) Implementation Stage by Developing Economies’ Gov’t (Supported by JBIC’s Untied Loans/ODA) Private Sector Activity Stage (Supported by JBIC’s Export Loans, Overseas Investment Loans, F/S Preparation) METI, NEDO, JICA JBIC 15

  16. (7.4) JBIC-Financial Support • Export Loans ⇒Support for the Export of New Energy/Energy Efficiency Equipment and Technologies (e.g. Wind Power Plant, Solar Power Plant, etc.) to Developing Economies (Support for Private Sector Business) • Overseas Investment Loans ⇒Support for the Overseas Investment by Japanese Private Companies of New Energy/Energy Efficiency Projects in Developing Economies (incl. CDM/JI, ESCO) (Support for Private Sector Business) • Untied Loans / ODA ⇒Support for the Introduction of New Energy/Energy Efficiency Projects by Developing Economies’ Government or Public Corporation (Support for Public Sector) 16

  17. (7.5) JBIC Support—Three Examples Mexico- Geothermal Power Generation Project (BOT, 25MW×4)(Export Loan, 2000) Philippines- Geothermal Power Generation Project by Philippine National Oil Company (Untied Loan & Guarantee, 1994/1999) Purchase of Solar Power Battery Maker by Japanese Firms (Overseas Investment Loan, 1994) 17

  18. (8.1) Wind Power Generation Capacity in Japan Number of Turbines Introduction Volume [MW] End of FY2003 68.4MW, 738Turbines (Preliminary) Fiscal Year Source: NEDO research data 18

  19. (8.2) International Comparisons—Installed Wind Capacity (MW) Note 1: US and European data are from AWEA and EWEA Note 2: The data of Japan is from NEDO (preliminary value) 19

  20. (9.1) Residential PV System Subsidy Scheme *The incentive was reduced to 180,000 yen/kW for the second half according to subscriber interest and the price of PV systems. There was a need to reduce it to 150,000 yen/kW during the second half. 20

  21. (9.2) PV Power Generation Capacity in Japan 21

  22. (9.3) International Comparisons—Installed PV Capacity (MW) Source: IEA/PVPS (end of 2002) 22

  23. Project to establish a foundation for introducing residential photovoltaic power generation Photovoltaic power generation field test project (9.4) Scenario on Introduction/Expansion of PV Power Generation ２０２０ ２０１０ ２０３０ ２００５ ２００２ Stage of experimental testing and introduction Diffusion stage Research and development / technological development Implementation of technological development for further cost reduction and efficiency improvement Development of diffusion promotion-type technology Establishment of essential technology Development of advanced solar battery technology Development of revolutionary next-generation technology (Medium- and long-term technological development) Establishment of essential technology Research and development, and investigation, on common basic technology (Research and development on common basic technology to meet new needs) Integrated linkage-type experimental testing Measures toward introduction and diffusion Support for experiment-al testing and introduction 2010 introduction target: photovoltaic power generation 4.82 million kW Project to aid promotion of regional new energy introduction Establishment of infrastructure in the software aspect (systems) Review of related systems and regulations (construction of certification systems, etc.) Special Measures Law on Use of New Energy, etc., by Electric Enterprises (from 2003) International cooperation International joint experimental development on photovoltaic power generation systems, etc. Module cost 140 yen/W　→ 100 yen /W　　　→　　 75 yen /W　　　　→　　　 　 50 yen /W　　　　　→　　 　30 yen /W (technological level) Economic target Residential system sales price370,000 yen/kW300,000 yen/kW200,000 yen/kW120,000 yen/kW Private companies’ efforts Power generation cost 30 yen/kW25 yen/kW 10～15 yen/kW 5～10 yen/kW(introduction level) Market expansion through surplus electricity purchase scheme Electric companies Support by a green power system 23 Makers, etc. Maintenance of international superiority by using results of technological development and improving productivity

  24. (10) NEDO’s Role in Japan’s New Energy Scheme 24

  25. Thank You!! The End

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