1

September 6, 2012

Masayoshi Son Founder and Chairperson

Japan Renewable Energy Foundation

Opening Remarks

2

Safety for future generations

3

0% %

%

%

3 Scenarios for Energy Strategy in Japan

4

Target for introducing Renewable Energy

Renewable Energy

35%

Renewable Energy

30%

Thermal

65% Thermal

55%

Scenarios: Zero Nuclear 15% Nuclear

Renewable Energy

More than 30%

mandatory

target

Nuclear

15%

5

Renewable Energy Deployment

in 2012 (forecast)

+ 2 million kW + 380,000 kW *Source: Agency for Natural Resources and Energy, “Feed-in Tariff Scheme in Japan” (July 2012)

Solar Power Wind Power

6

～

Need to

increase

more than

6 times

(within 18 years)

19 GW

120 GW

140 GW

2012 2030 (18 years later)

Renewable Energy to be deployed by 2030

*Estimate by JREF based on data by National Policy Unit

7 *Source: Ministry of Environment, “Study of Potential for the Introduction of Renewable Energy (FY 2010)”

Renewable Energy

potential does exist

Wind Energy Potential (Hokkaido)

540 GW

Wind Energy Potential (Kyushu)

480 GW

Grid operation

optimized for

separate regions

Hokkaido Electric Power

Tohoku Electric Power

TEPCO Hokuriku Electric Power

Chubu Electric Power

Kansai Electric Power

Chugoku Electric Power

Shikoku Electric Power

Kyushu Electric Power

Renewable

Energy does not

reach consumers

9

Nationwide integrated operation of grids

Solution 1 Tohoku EP

TEPCO

Hokuriku EP

Chubu EP

Kansai EP

Kyushu EP

Chugoku EP

Shikoku EP

Hokkaido EP

Independent grid operators

10

Grid reinforcement for long-distance

transmission

Solution 2

11

2030

Abundant Renewable Energy for Japan

12

The remaining issue

13

Price rise

(Households/corporations)

14

Electricity cost by scenario (Government estimates)

Zero

Nuclear

15%

Nuclear

20~25%

Nuclear

¥10,000 (2010)

¥16,000~23,000

Will Zero Nuclear

raise the cost?

¥13,000~18,000 ¥13,000~18,000

15

Want to keep the cost

as low as possible

16

One major

misunderstanding

17

¥13.2 ¥ 12.6~13.4

¥12.6~13.9

Power generation cost

(reviewed) (per kWh)

Zero Nuclear 15%

Nuclear

20~25%

Nuclear

No major

difference in

electricity cost

*Estimate by JREF

18

In order to keep

the cost down,

we need an environment

for sound competition

19

Targeted

for

Liberalization

Not

Targeted

67%

(Total power demand: 1000 TWh)

Formally,

two-thirds are

liberalized

2000 Liberalization of EHV

(Extra High Voltage)

2004 Partial liberalization of HV

2005 Complete liberalization of HV

*Source: Handbook of Electric Power Industry 2010

20

Conventional Power Suppliers

96.5%

PPS (New Power Producers &

Suppliers) 3.5%

Present share of the liberalized market

(Feb. 2012)

Liberalization

without

substance

*Source: Handbook of Electric Power Industry 2010

21

・・・

・・・

Transmission Dept.

Generation Dept.

Retail Dept.

Po

wer C

om

pan

y

High access

charges

Adverse effect of the conventional system (Accounting separation)

Connection to grid

refused

Unfair competition G

en

era

tion

Co

mp

an

y

“A

”

Gen

era

tion

Co

mp

an

y

“B

”

Reta

il

Co

mp

an

y

“C

”

Reta

il

Co

mp

an

y

“D

”

22

Separation of

power generation

and transmission

(Separation of ownership)

Solution

・・・

・・・

・・・

・・・

23

Legal separation Ownership separation

Ineffective Fair competition

Ge

ne

ratio

n

Co

mp

an

y

“A

”

Ge

ne

ratio

n

Co

mp

an

y

“B

”

Transmission Company

Generation Company

Retail Company

Reta

il C

om

pan

y

“C

”

Reta

il C

om

pan

y

“D

”

Gen

era

tion

C

om

pan

y

“A

”

Gen

era

tion

C

om

pan

y

“B

”

Transmission Company

Generation Company

Retail Company

Re

tail

Co

mp

an

y

“C

”

Re

tail

Co

mp

an

y

“D

”

Ho

ldin

g C

om

pan

y

24

(Competitive area)

Deregulation

(Neutral area)

Strengthened regulation

(Competitive area)

Deregulation

Ge

ne

ratio

n

Co

mp

an

y

“A

”

Ge

ne

ratio

n

Co

mp

an

y

“B

”

Transmission Company

Generation Company

Retail Company

Reta

il C

om

pan

y

“C

”

Reta

il C

om

pan

y

“D

”

Fair competition

Ownership separation

25

Keeping energy prices low

26

Separation form of

power generation

and transmission

will greatly change

Japan’s energy cost

27

Towards YR2030 and Beyond

28

29

Appendix

30 Legal separation cannot create an environment for fair competition

Legal separation Ownership separation

PPS

(New Players) ? Possible interference ✔ No interference

Grid connection ✘ Possible biased

prioritization ✔ Neutral operation

Costs for monitoring competitive environment

✘ Incurred ✔ No cost

Connection

charges ✘ Constantly high ✔

Optimized for market

environment

Evaluation of generation/transmission separation forms