Electric power and renewable energy outlook and challenges ...eneken.ieej.or.jp/data/5913.pdf · to cold summer.) Winter 2014 Hokkaido Electric Power General energy-conservation request

IEEJ: Published in January 2014 All rights reserved

Electric power and renewable energy

outlook and challenges for 2015

December 19, 2014

Jyunichi OGASAWARA

The Institute of Energy Economics, Japan (IEEJ)

Fossil Fuels & Electric Power Industry Unit

The 418th Forum on Research Work


This report covers:

1. Electric power system reform and tight supply-demand

ratio

2. Energy feed-in tariff system

3. Future Work

1


1. Electric power system reform and tight supply-demand ratio

(1) Current status

2

①The Organization for

Cross-regional Coordination

of Transmission Operators

(OCCTO) established

(maintains long-term supply-

demand balance/system

planning, regional

emergency operation)

First phase

2015 target

Second phase

2016 target

Founded in November

2013

②Full liberalization of electricity

retail business

(retail tariff continues until the

third phase)

Founded in June 2014

③Legal unbundling of

transmission/distribution sector

(neutrality/transparency of

network sector)

Third phase

2018-2020 target

Provisions for partial revision to

pass at a Ordinary Diet session in

2015

④ Review on regulatory

bodies

(wheeling service fee

regulation, market

monitoring, emergency

response)

Nuclear power station

shutdown/policy change,

funding for power companies

/financial market concerns

[Cabinet Decision document]

⑤Others

a. New framework to secure

supply capacity (obligation to ensure supply

capacity, creation of capacity

markets)

b. Creation of hour-ahead

market, etc.

Re

po

rt b

y t

he

Exp

ert

Co

mm

itte

e o

n

Ele

ctr

icity S

yste

m R

efo

rm

February 2013

Syste

m D

esig

n W

ork

ing

Gro

up

Delay in resuming operation at nuclear power stations, aging

nuclear power stations’ extension of operation, business

stability related to electricity charges



(2) Agenda for FY 2015

3

First phase of the Policy on Electricity

System Reform takes effect from April

More companies leaving the TEPCO grid to

PPS

Prior to the second phase, General Electricity Utilities (GEU)

maintains unilateral obligations for stable supply

New supply-demand plan in effect, to be

submitted by Power Producer and

Suppliers (PPS) and Specified Electricity

Utilities

OCCTO is established in preparation for its

full-scale cross-regional coordination

system operation scheduled to launch in

FY 2016.

Who will conduct the short-term reliability evaluation

that the Electricity Supply-Demand Verification

Subcommittee performed in the past?

(Energy-conservation request/power usage

restriction order, etc.)

Work in 2015 prepares for

full-liberalization of retail

business, full-operation by

OCCTO in 2016.

Short-term reliability evaluation

Cross-sectional operational reliability evaluation



(3) Responsibility of OCCTO

4

The Organization for Cross-regional Coordination of Transmission Operators (OCCTO), which is scheduled to launch in April 2015, will

handle the following: (1)cross-regional supply-demand planning/evaluation, (2) planning for system grid connection and cross-regional

power transmission lines, (3) cross-regional operation of supply-demand and systems (as soon as a system is ready), and (4) balancing

the supply-demand ratio under a tight supply-demand situation. Incorporating the working mechanism of the current Electric Power

System Council of Japan (ESCJ), which will establish an organizational structure to accomplish the above-mentioned responsibilities. It

will also handle rule-making on a) how to utilize interconnecting grids, b) best formation of grid connecting facilities, c) best way to

connect systems, d) procedures necessary for emergency response under disaster. A new management system for system grid

connection will also be constructed.

(1)Cross-regional supply-demand

planning/evaluation

(2) Planning for system grid

connection and cross-regional

power transmission lines

(3) Cross-regional operation of

supply-demand and systems (as

soon as a system is ready)

(4) Balancing the supply-demand

ratio under a tight supply-demand

situation.

Each power company will submit a

supply-demand plan, though possibly not

in time for the 2015 summer supply-

demand verification

Satisfactory response may not be

feasible if a tight supply-demand

situation occurs.

((4) becomes enforceable after (3) is

established.)

It will require governmental

involvement such as through the

use of the Electricity Supply-

Demand Verification

Subcommittee under the

Strategic Policy Committee to

secure stable supply in the

transitional period in 2015.



(4) PPS demand and reserve capacity within the TEPCO grid

5

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

0% 5% 10% 15% 20% 25% 30%

系統3%予備率維持に必要な東電予備率

新電力シェア

Note) PPS power supply capacity is set based on TEPCO’s reserve

margins at zero.

Note) Max PPS power is determined from the difference between ESCJ’s regional

max power and the daily max power in TEPCO’s “Electricity Forecast,”

represented as the maximum value for the relevant months.

Source) ESCJ Electricity Supply-Demand Review and TEPCO Electricity Forecast

Maximum PPS power and estimated

withdrawal rate

PPS share and TEPCO’s reserve

margins

Within the current

withdrawal rate

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

0

50

100

150

200

250

300

350

400

450

500

20

10

/01

20

10

/06

20

10

/11

20

11

/04

20

11

/09

20

12

/02

20

12

/07

20

12

/12

20

13

/05

2013/1

0

20

14

/03

20

14

/08

Maximum PPS power PPS share

新電力最大電力（万kW）新電力シェア PPS share Maximum PPS power (10MW) TEPCO reserve margins required to

maintain 3% system reserve capacity

PPS share



(5) Post-disaster countermeasures for summer/winter months

Coverage area Energy-conservation request Events

Summer 2011 Tokyo Electric Power,

Tohoku Electric Power

Electricity usage restriction Tohoku Electric Power experienced a tight supply-demand ratio

due to the operation shutdown of hydropower which generated 1

GW, after heavy rainfall in Niigata and Fukushima on 8/8.

Winter 2011 Kansai Electric Power,

Kyushu Electric Power

Energy-conservation request with a target

figure

Kyushu Electric Power experienced a tight supply-demand ratio

due to a 2.295 GW interruption from the Shin-oita thermal power

station accident on 2/3.

Shikoku Electric Power experienced a tight supply-demand ratio

due to a record-breaking cold wave on 2/2.

Summer 2012 Hokkaido Electric Power,

mid-western Japan

Energy-conservation request with a target

figure

Hokkaido Electric Power experienced a tight supply-demand ratio

due to a record-breaking late-summer heat waves on 9/17 and

9/18.

Winter 2012 Hokkaido Electric Power Energy-conservation request with a target

figure

Unplanned thermal station shutdown at Hokkaido Electric Power

reduced its reserve margins.

Summer 2013 Whole area General energy-conservation request Reserve margins decline due to heat wave at Kyushu Electric

Power

Winter 2013 Hokkaido Electric Power General energy-conservation request Tomato-atsuma power station Unit 4 shutdown at Hokkaido

Electric Power reduced its reserve margins.

Summer 2014 Whole area General energy-conservation request (target

figure was not established while there was

concern that the reserve margin in mid-

western Japan would be under 3%)

(Mid-western Japan saved from a tight supply-demand ratio thanks

to cold summer.)

Winter 2014 Hokkaido Electric Power General energy-conservation request 6

While an unplanned shutdown of thermal power stations in the summer of 2014 led to concern that the reserve margins

would dip below 3%, a cool summer avoided a supply shortage. Ongoing situations that are susceptible to a tighter

supply-demand ratio if an unplanned interruption occurs at thermal power stations need to be noted, along with

concerns regarding lower consumer awareness of energy-saving, since main the measures recently focus on suppliers

meeting the demand rather than on energy conservation efforts by consumers.



(6) Supply-demand ratio of Hokkaido Electric Power

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

100

200

300

400

500

600

700

Supply reserve capacity Max power

Supply capacity Max unit

Supply reserve margins

万kW

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

100

200

300

400

500

600

700

11/01 11/08 11/15 11/22 11/29

Supply reserve capacity Max power

Supply capacity Max unit

Supply reserve margins

10 MW

7

Tomato-atsuma power station Unit 4 (0.7 GW) shutdown

Supply-demand in winter 2013 Up-to-date supply-demand in winter 2014

Source) Hokkaido Electric Power Electricity Forecast

Its 0.7 GW thermal power station shutdown in winter 2013 brought a challenging supply-demand balance. There

are concerns that a similar challenge would arise if any unexpected shutdown of large-scale thermal power

facilities occur during the 2014 winter season.

10 MW



(1) Changes in FIT facility approval/operation startup capacity

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2012/7 2012/11 2013/3 2013/7 2013/11 2014/3 2014/7

Biomass Geothermal

Hydropower Windpower

Solar power (10kW or higher) Solar power (10kW or less)

運転開始容量（万kW）

0

100

200

300

400

500

600

700

800

900

1,000

2014/04 2014/05 2014/06 2014/07

Biomass Geothermal



移行容量（万kW）

8

0

200

400

600

800

1,000

1,200

1,400

2012/8 2012/11 2013/2 2013/5 2013/8 2013/11 2014/2 2014/5

Biomass Geothermal



運転開始容量（万kW）

Capacity of approved-transfers

Newly-operating capacity

Newly-approved capacity

72.21 GW in July

8.81 GW in July

11.86 GW in July As of July 2014, including the amount switched from the

previous RPS system, the FIT power source in operation

totals 20.66 GW, with an approved capacity of 81.01 GW.

Especially, approved capacity reached close to the total

maximum daily power from 9 power companies during the

Golden Week holiday (88.25 GW on 5/4/2014)

Monthly increase

of approx. 0.6 GW

Source) Information disclosure website on Energy FIT system, Agency for Natural Resources and Energy

Operation startup

capacity (10 MW)

Operation startup

capacity (10MW)

Transferred capacity

(10 MW)



(2)Approved/in-operation capacity by region (as of July 2014)

9

0

500

1,000

1,500

2,000

2,500

Hokkaid

o

Tohoku

Tokyo

Chubu

Hokuriku

Kansai

Chugoku

Shik

oku

Kyushu

Okin

aw

a

Solar power (10kW or less) Solar power (10kW or higher)

Windpower Hydropower

Geothermal Biomass

Daytime minimum load

認定容量（万kW）

0

200

400

600

800

1,000

1,200

Hokkaid

o

Tohoku

Tokyo

Chubu

Hokuriku

Kansai

Chugoku

Shik

oku

Kyushu

Okin

aw

a

Biomass Geothermal



Daytime minimum load

運転開始済容量（万kW）


Approved capacity Operating capacity

Both capacities for approved and in-operation facilities show significant regional disparities.

Kyushu Electric Power reported approvals that substantially exceed minimum daytime load.

Approved capacity (10 MW) Operating capacity (10 MW)



(3) Changes in approved FIT capacity in the Kyushu Electric Power grid

0

500

1,000

1,500

2,000

2012/07 2012/11 2013/03 2013/07 2013/11 2014/03 2014/07

Biomass Geothermal



万kW

10

0

500

1,000

1,500

2,000

2,500

Biomass Geothermal



Daytime minimum load Solar power × 0.6

万kW

Newly-approved capacity

Newly-approved capacity +

Transferred(from RPS to FIT) capacity

Equivalent to 66% of the

past approval amount was

processed within the month.

0

1

2

3

4

5

6

7

2012/07 2012/11 2013/03 2013/07 2013/11 2014/03 2014/07

Biomass Geothermal



万件

一月で6万件の認定が発生

Newly-approved cases


A massive amount of last-minute approval applications

were submitted before the purchase price change in

March 2014.

10 MW

10 MW

10,000 cases

60,000 cases were

approved within the month.



(4) Changes in FIT purchase power volume and price

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

0.0

5.0

10.0

15.0

20.0

25.0

30.0

20

12

/7

20

12

/8

20

12

/9

20

12

/10

20

12

/11

20

12

/12

20

13

/1

20

13

/2

20

13

/3

20

13

/4

20

13

/5

20

13

/6

20

13

/7

20

13

/8

20

13

/9

20

13

/10

20

13

/11

20

13

/12

20

14

/1

20

14

/2

20

14

/3

20

14

/4

20

14

/5

20

14

/6

20

14

/7

Au

g-1

4

Biomass power generation

Geothermal power generation facility

Hydropower generation facility

Windpower generation facility

Solar power generation (10kW or higher)

Solar power generation (10kW or less)

Compared with the electricity consumption

買取電力量（億kWh）電力消費量比

11

0

5

10

15

20

25

30

35

40

45

50

0

200

400

600

800

1,000

1,200

20

12

/7

20

12

/8

20

12

/9

20

12

/10

20

12

/11

20

12

/12

20

13

/1

20

13

/2

20

13

/3

20

13

/4

20

13

/5

20

13

/6

20

13

/7

20

13

/8

20

13

/9

20

13

/10

20

13

/11

20

13

/12

20

14

/1

20

14

/2

20

14

/3

20

14

/4

20

14

/5

20

14

/6

20

14

/7

Au

g-1

4

Biomass power generation

Geothermal power generation facility

Hydropower generation facility

Windpower generation facility

Solar power generation (10kW or higher)

Solar power generation (10kW or less)

Average purchase price

買取額（億円）平均買取額（円/kWh）

Changes in FIT-purchase power volume Changes in FIT-purchase power price


178.2 billion yen 579.1 billion yen 432.3 billion yen 5.59 TWh 18.12 TWh

11.91 TWh

Following the start of the new program, FIT-purchased power drastically increased. The total purchase price in

fiscal 2013 was 579.1 billion yen, with a projected total for 2014 that is almost certainly to exceed 1 trillion yen.

Purchased power volume (100 GWh) Compared with electricity consumption Purchase price (100 million yen) Average purchase price (yen/kWh)


3. Future Work

(1) Immediate challenges related to an energy FIT system

[Future challenges]

Verification of renewable energy power generation connectible volume (WG on Grid Connection of

Renewable Energy)

Positioning a FIT-power source in the electric system reform (WG on System Design)

FIT system operation review (New and Renewable Energy Subcommittee)

Best mix search for 2030 (connectible volume + additional measures) (Strategic Policy Committee)

12

New and Renewable Energy

Subcommittee

WG on Grid Connection of

Renewable Energy

WG on System Design

• Improving FIT system operation

• Bidding system adopted for

enhancing electricity

transmission/distribution facilities

• Understanding procurement and

avoidable costs

• Promotional policy based on each

renewable energy feature

• Basic concept in calculating

connectible volume (short-term)

• Basic concept in calculating

connectible volume (mid-to-long

term)

• Special provisions in the transition

to an electricity balancing program

with full liberalization of the

electricity retail market

• Review of reserve capacity with an

expanding FIT power source

• Suppression/control of output (advancement)

• Cross-regional grid connection use

* Best cost sharing methods and priority on enforcing upper-connection for cross-regional

grid links and applying cross-regional grid connection, should be discussed.


Renewable energy

generation policies

3. Future Work

(2) Remaining issues

13

Large-scale introduction of renewable energy generation will have

different cost effectiveness depending on the overall energy mix

structure, such as improved electricity supply-demand substitutability

(electrical-heating, etc.) and flexible supply capacity procurement.

Can the ongoing final phase fully attain liberalization and cohesion of the energy industry?

Cross-regional grid use: usage plans with high probability are being prioritized (use-it-or-lose-it). Is the mechanism to transmit deviated renewable energy in a specific region to another region consistent with respect to the system frame?

Construction of cross-regional grid connections: present cost is principally borne by the party giving rise to the construction needs. How should cost be shared when a construction project is initiated by governmental policy?

Installation of storage battery: FIT-electricity is purchased by electricity resale businesses, but if the installation is prompted by governmental measures for surplus wheeling, the resale business becomes the beneficiary of subsidies, posing a concern for fair competition.

Improved electricity demand substitutability: should flexible electricity usage, such as electric-heating and electric automobiles, be promoted?

Ensuring flexible supply capability: what types of funding should facility upgrades for thermal power station be provided? Very few examples exist in the world of a system to procure reserve capacity responsively.

* While time limitations exist due to meeting the climate change target, thorough discussions must be

conducted.


[Reference] Surplus wheeling of FIT electricity

14

-1,000

-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

21:0

0

22:1

0

23:2

0

0:3

0

1:4

0

2:5

0

4:0

0

5:1

0

6:2

0

7:3

0

8:4

0

9:5

0

11:0

0

12:1

0

13:2

0

14:3

0

15:4

0

16:5

0

18:0

0

19:1

0

20:2

0

21:3

0

22:4

0

23:5

0

1:0

0

2:1

0

Net import Other renewable energy

Solar power Windpower

Other thermal CCGT

Coal Hydropower

Nuclear power Demand

Demand- renewable energy

10 MW

December 24 December 25 December 26

Source) REE

Supply-demand operation in Spain on

December 25, 2013

FIT-power

Electricity resale

operator

Transmission and

distribution operators

(1) D

irect

purc

ha

se

(2)T/D operators convert

electricity to sell it to

electricity resale operators

Surplus renewable energy is

wheeled to other time slots by

using pump-storage power.

As solar power generation expands, surplus supply

may restrict FIT-power introduction especially during

the low-load period, such as GW. While energy

storage, such as pump-storage power generation

and storage batteries, are often viewed as a

promising solution, in terms of electricity system

reform, care has to be taken since the electricity

resale business may heavily represent such

operations.

FIT power purchase methods

in Japan


[Reference] Generated power/on-site generation

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

100

200

300

400

500

600

700

800

900

1,000

Other renewable energy Solar power

Windpower Other

Nuclear power Hydropower

Other thermal Oil-fired thermal

LNG thermal Coal-fired thermal

Oil-fired thermal power share Renewable energy share

100 GWh シェア

15

Changes in generated

power

Source) compiled based on Electric Power Investigation Statistics, Agency for Natural Resources and Energy

0%

10%

20%

30%

40%

50%

60%

0

50

100

150

200

250

300

2010/4

2010/7

2010/1

0

2011/1

2011/4

2011/7

2011/1

0

2012/1

2012/4

2012/7

2012/1

0

2013/1

2013/4

2013/7

2013/1

0

2014/1

2014/4

2014/7

Other operators PPSs

GEUs In-house consumption/loss, etc.

On-site power generation ratio Ratio for PPS sales

100 GWh シェア

Changes in on-site

generators

Increase in

electricity sales

Share

Share


[Reference] Power consumption/Max power

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

2010/4

2010/7

2010/1

0

2011/1

2011/4

2011/7

2011/1

0

2012/1

2012/4

2012/7

2012/1

0

2013/1

2013/4

2013/7

2013/1

0

2014/1

2014/4

2014/7

2014/1

0

Eastern Japan Mid-western Japan

万kW

16

Note) Maximum monthly figure from the total daily max power from

companies

Source) compiled based on Electricity Supply-Demand Review, Electric

Power System Council of Japan

Changes in max power

by month

0%

5%

10%

15%

20%

25%

30%

35%

0

100

200

300

400

500

600

700

800

900

2013/4

2013/5

2013/6

2013/7

2013/8

2013/9

2013/1

0

2013/1

1

2013/1

2

2014/1

2014/2

2014/3

2014/4

2014/5

2014/6

2014/7

2014/8

2014/9

Specified high voltage High voltage

Electric power Lighting

Specified high-voltage share

10 GWh シェア Changes in power

consumption

Source) compiled based on Electric Power Investigation

Statistics, Agency for Natural Resources and Energy

Share 10 MW


[Reference] PPS/Spot trading

17

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

0

5

10

15

20

25

30

2013/4

2013/5

2013/6

2013/7

2013/8

2013/9

2013/1

0

2013/1

1

2013/1

2

2014/1

2014/2

2014/3

2014/4

2014/5

2014/6

2014/7

2014/8

2014/9

High voltage Specified high voltage

Share (specified high) Share (high voltage)

Share (liberalized field) Share (overall)

100 GWh シェア

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

0

5

10

15

20

25

2013/0

4

2013/0

5

2013/0

6

2013/0

7

2013/0

8

2013/0

9

2013/1

0

2013/1

1

2013/1

2

2014/0

1

2014/0

2

2014/0

3

2014/0

4

2014/0

5

2014/0

6

2014/0

7

2014/0

8

2014/0

9

Exchange trading share 24hr average price

Daytime average price Peak average price

円/kWh シェア

FIT avoidable cost standard

Changes in PPS power

supply

Source) compiled based on Electric Power Investigation Statistics, Agency for

Natural Resources and Energy

Source) Japan Electric Power Exchange (JEPX)

Share yen/kWh Share

Changes in spot trading price


[Reference] Japan/US/Europe electricity price comparison (2013)

0

5

10

15

20

25

30

35

40

45

Den

ma

rk

Ge

rma

ny

Cyp

rus

Ire

lan

d

Ita

ly

Sp

ain

Be

lgia

n

Po

rtuga

l

Sw

ed

en

Au

str

ia

Neth

erla

nd

s

UK

Norw

ay

Ma

lta

Slo

va

kia

Lu

xe

mb

ou

rg

Slo

ve

nia

Fin

lan

d

Gre

ece

Fra

nce

Ja

pa

n

Haw

aii

New

Yo

rk

Ala

ska

Con

ne

cticu

t

Ve

rmo

nt

Calif

orn

ia

New

Ha

mp

sh

ire

Ma

ssa

ch

use

tts

New

Je

rsey

Rho

de

Isla

nd

Mic

hig

an

Ma

ine

Wyo

min

g

Ma

ryla

nd

Dela

wa

re

Pe

nn

sylv

an

ia

Wash

ingto

n D

.C.

US

ave

rage

Min

ne

so

ta

Oh

io

Total

Taxes

Network

Supply

Japan

yen/kWh

Note 1) exchange rate of December 2013 figures (101.02 yen/$, 136.46 yen/$)

Note 2) European taxes include renewable energy generation fees

Source) Eurostat (power consumption 2,500kWh to 5,000kWh) in Europe, EIA “Electric Power Annual” (average electric

fee income) in US, and IEA “Energy Prices and Taxes” in Japan. Please direct inquiries to: [email protected]

Documents

Electric power and renewable energy outlook and challenges ...eneken.ieej.or.jp/data/5913.pdf · to cold summer.) Winter 2014 Hokkaido Electric Power General energy-conservation request