Energy Policy of Japan

June 2012

Agency for Natural Resources and Energy

Natural Resources and Fuel Department

Coal Division

Koji Nakui

Contents

1. Review of The Basic Energy Plan ・・・2

2. Near-term Electricity Supply-demand Balance ・・・7

3. Rethinking the Basic Energy Plan ・・・14

4. Renewable Energy ・・・30

5. Energy Resource Development ・・・42

6. Future Energy Policy of Japan ・・・46 1

1. Review of the Basic Energy Plan

2

History of Japan‟s Energy Policy

Japan is poorly endowed with energy resources, which are indispensable to economic and social activities. To meet the

changing economic and energy situation of the time at home and abroad, Japan has reviewed its energy policy in order to

ensure “energy security,” “economic efficiency,” and the “environment.”

Energy security

Energy security

Economic efficiency

Energy security Environment

Economic efficiency

Energy security Environment

Economic efficiency

1973: First oil shock

1970s

1990s

2000s

+

+ +

+ +

[(4) Enhancing resource security (2000s)]

[(1) Responding to the oil crises (1970s-80s)]

1980s

[(2) Promoting regulatory reform (since 1990s)]

[(3) Coping with global warming issues (since 1990s) ]

[(5) Current Basic Energy Plan]

1979: Second oil shock

1997: Kyoto Protocol adopted

2005: Kyoto Protocol came into effect

Enhanced resource security

2002: Basic Act on Energy Policy enacted

2003: Basic Energy Plan established (revised in 2007 and 2010) 3

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1953

1955

1957

1959

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

Japan‟s Energy Supply Structure

3%

12%

19%

21%

Coal

Oil

Natural gas

Nuclear power Hydro

Coal

Renewables etc.

First

oil shock

* “Renewables etc.” consists of

solar power (0.1%), wind power

(0.1%), geothermal heat (0.1%),

and biomass (2.8%).

3% *

42%

Source: Prepared based on “Comprehensive Energy Statistics” issued by the Agency for Natural Resources and Energy.”

(in crude oil equivalent kL)

4

5

(trillions of CF)

○U.S. shale gas production in 2009 was about 3 trillion cubic feet (approx. 16% of total gas

production, equivalent to approx. 70 million tons of LNG). The country’s shale gas production is

forecast to continue increasing steadily.

○As shale gas production increases, projected U.S. LNG imports are projected to decline significantly.

Projections for U.S. natural gas production (by type) Projections for U.S. LNG imports

Source: EIA, “Annual Energy Outlook 2011.” Source: EIA, “Annual Energy Outlook 2011.”

7

5

(trillions of CF)

3

1

0

2

4

6

Results Projections Results

As of 2005

Projections

As of 2011

Projections for Shale Gas Production Increases and LNG Imports in the U.S.

6

○Japan’s LNG import prices, which are linked to crude oil import prices (JCC), have been rising in recent years.

○By contrast, natural gas prices (Henry Hub price) in North America have been declining in recent years, reflecting a less

tight supply and demand balance in the North American market due to the increased production of shale gas.

Natural Gas Prices (Japan vs. North America)

LNG import price Crude/raw oil price (JCC) Henry Hub price

Dec-0

8

Jan-0

9

Fe

b-0

9

Mar-

09

Apr-

09

May-0

9

Jun-0

9

Jul-09

Aug-0

9

Sep-0

9

Oct-

09

Nov-0

9

Dec-0

9

Jan-1

0

Fe

b-1

0

Mar-

10

Apr-

10

May-1

0

Jun-1

0

Jul-10

Aug-1

0

Sep-1

0

Oct-

10

Nov-1

0

Dec-1

0

Jan-1

1

Fe

b-1

1

Mar-

11

Apr-

11

May-1

1

Jun-1

1

Jul-11

Aug-1

1

Sep-1

1

Oct-

11

Nov-1

1

Dec-1

1

7

2. Near-term Electricity

Supply-demand Balance

8

1 2 3 4 5 6 7

1 2

1 2

1 3

1 2 3

1 2 3 4

4

1 2

1 2 3 4

1 1

3

2 3

4 5

1 2 3 4

5 6

1 3 2

1 2 3 1

2

Output

<0.5 million kW <1 million kW ≥1 million kW

NPS in operation

NPS not in operation

2

All the 50 NPSs in Japan have suspended operation (red)

Operational Status of Nuclear Power Stations (as of June 8)

Tohoku EPCO Onagawa NPS

TEPCO Fukushima Daiichi NPS

TEPCO Fukushima Daini NPS

JAPC Tokai No. 2 NPS

Chubu EPCO Hamaoka NPS

Shikoku EPCO Ikata Power Station

Hokkaido EPCO Tomari NPS

Tohoku EPCO Higashidori NPS TEPCO Kashiwazaki-Kariwa NPS

Hokuriku EPCO Shiga NPS

JAPC Tsuruga Power Station

KEPCO Mihama Power Station

KEPCO Ohi Power Station

KEPCO Takahama Power Station

Chugoku EPCO Shimane NPS

Kyushu EPCO Genkai NPS

Kyushu EPCO

Sendai NPS

8

9

Peak power shortage announced on July 29

[Policy]

○Aim to avoid planned power outages and power usage restriction

○Support efforts to save energy and increase power supply capacity through the FY 2011 initial and

supplementary budgets (\235.3 billion for direct measures to meet peak power demand and \579.4 billion in

total, including indirect measures) and regulatory reform (26 priority items)

[Three pillars]

(1) Increasing visibility of power use (shared saving targets, visualized power consumption with smart meters,

more price plans encouraging electricity saving)

(2) Promoting energy saving by electricity customers (demand structure reform)

(3) Supporting efforts to increase supply capacity involving diverse entities (supply structure reform)

Efforts to increase supply capacity

Increasing visibility of

power use

Diversifying price plans, etc.

7.10 million kW

-16.56 mil. kW

(-9.2%)

Promoting energy saving by

electricity customers

(budget measures, etc.)

2.70 million kW

Supporting efforts to increase supply capacity

involving diverse entities

( budget measures, etc.) 2.33 million kW

Supply measures by utilities

(Increasing thermal power capacity, installing

emergency power sources, etc.) 4.09 million kW

Reducing demand

Up to 9.80 million kW

Increasing supply

Up to 6.42 million kW

Efforts to reduce demand

Dealing With Peak Power Shortages This Summer(figures indicate projections as of November 2011)

10

(1) Increased use of distributed power

sources - Promote installation of distributed power

sources (e.g. self-generation, renewable

energies) and enhance neutrality and fairness

of power transmission and distribution to

support them ・Essentially reduce the burden of the “self-generation

backup contract,” which is needed to prepare for a

failure of self-generation

・Lower the imbalance fees imposed based on the rule

that generated power be equal to demand at all times

・Use utility grids to effectively use excess self-generated

power

・Implement wide-area operation of power transmission

・Establish rules to give priority to renewable energies for

connection and power supply

(2) Promotion of smart meter installation

and flexible electricity price plans

・Provide flexible price plans to further motivate

customers to reduce peak-hour consumption and save

energy

・Establish an institutional framework to accelerate smart

meter installation in accordance with a five-year

intensive installation plan

・Standardize the smart meter interface

(3) Cost reduction by invigorating the

wholesale market ・Use extra power generation capacity of wholesale utilities

and IPPs

○To responsibly implement measures to resolve the power shortage problem this summer, the government established the “Government Action Plan for Energy Regulation and System Reform.”

○The government will stress the implementation of 26 regulatory and system reform items.

○In principle, the conclusion should be reached by the end of FY 2011, followed by swift implementation.

Power system reform (9 items) - Promoting participation of diverse

entities for this summer -

(1) Solar power generation

・Review safety regulations under Electricity

Business Act

・Review of treatment under Factory Location Act

(2) Wind power generation

・Consider reviewing technical guidelines for

examination of wind power plants in natural

parks

・Improve institutional environment for offshore

wind power generation

(3) Geothermal power generation

・Clarify permission requirements under location

regulation pursuant to the Natural Parks Act

・Establish the concept of judgment criteria for

drilling permission under the Hot Springs Act

(4) Small hydro power generation and

biomass

(5) Common items ・Facilitate adjustment of the use of farmland and

woodland for promoting renewable energy

installation in rural villages under the new act to

promote renewable energies in rural villages

・Review permission requirements and standards

for national forests

・Clarify the handling of renewables installation in

local government action plans for global warning

prevention measures

Installation of renewable energies

(9 items) - Supply structure reform -

(1) Introduction of demand-side

measures for peak hours ・Actively evaluate peak electricity measures

under the Energy Conservation Act

・Foster cooperation of suppliers on demand-

side measures for peak hours

(2) Expanded use of storage batteries ・Review regulations concerning the handling

of lithium-ion batteries under the Fire and

Disaster Management Act

・Permit use of lithium-ion batteries as

emergency power sources

(3) Enforcement and reinforcement of

energy conservation regulations

mainly in the private sector ・Review energy conservation standards for

houses and buildings

・Enhance the housing/building labeling

system

・Phase in mandatory conformance to energy

conservation standards for houses and

buildings under the Energy Conservation

Act

(4) Promotion of the effective use of

thermal energy ・Establish systems for thermal energy use

Energy saving promotion

(8 items) - Demand structure reform -

Outline of the Government Action Plan for Energy Regulation and System Reform

11

<Conceptual image>

Nuclear power generation

Thermal power

generation, etc.

Daytim

e

Nig

ht

Substitution of thermal power generation

Thermal power

generation will

be used as a

substitute if

nuclear power

generation is

not operated

Daytim

e

Nig

ht

Estimation of additional fuel costs arising from the substitution of thermal power generation, assuming that LNG-

/oil-fired thermal power generation substitutes the entire generation capacity (approx. 280 billion kWh) of

nuclear power plants operated at a level equal to FY 2009

○Risk of a fuel cost increase of approx. more than \3 trillion (about 20% of Japan’s electricity expenses of

approx. \15 trillion)

○Factors of increasing overall social costs, e.g. installation of self-generation systems by customers and

installation of emergency power sources, aside from the cost increase due to the use of alternative fuels

Nuclear power generation (shut down)

Mo

rnin

g

Mo

rnin

g

<Two measures>

(1) Reducing total demand

(2) Improving management efficiency of electric utilities

(2) Cost increase due to

substitution of thermal

power generation

(1) Peak power shortage

Reduction in supply

capacity due to shutdown

of nuclear power plants

Maximum supply

capacity

Capacity margin

Risk of Electricity Cost Increase Due To the Use of Alternative Fuels

12

<Actions by electric utilities>

○Reducing procurement costs

○Improving management efficiency

・ Taking action considering the points identified in the

“TEPCO Management and Finance Investigation

Committee Report”

<Actions by the government>

○To promptly review the electricity fee system and its

implementation, the government formed an “Expert

Panel for the Review of the Electricity Fee System and

Its Implementation” and compiled a report in March

2012. The fee calculation rules and the fee examination

procedure were revised in FY 2011.

○The validity of fees set by individual utilities will be

checked with improvement of management efficiency as

a major precondition.

Improving management efficiency of

electric utilities

(1) Introducing energy management systems

(HEMS/BEMS)

(2) Promoting installation of energy-/power-saving

equipment (efficient boilers, efficient air

conditioners, building insulation, double-paned

windows, etc.)

(3) Promoting investment to increase production

capacity for LED lights and other energy-saving

products/parts

(4) Encouraging industries, businesses, and

households to save electricity

○Efforts toward peak shaving (e.g. visualizing

power consumption) also have a great potential

to contribute to reductions in total demand

because they lead to rational behavior to save

electricity

Reducing total demand through

energy saving

＋

Measures to Curb Electricity Cost Increase

13

25 ▲445 ▲36 ▲10 2 20 53 53 251 137 ▲269 294

Projections for the electricity supply-demand balance this summer the Electricity Supply-Demand Verification Committee

Supply-demand balance projections, assuming a summer as hot as in 2010, economic conditions in 2012,

and established effects of electricity saving measures

Central

& Western Eastern Country Kansai Kyushu Hokkaido Shikoku Hokuriku Tohoku Chugoku Tokyo Chubu

supply-demand gaps

(in 10,000s kW)

Supply-demand Balance Projections for Electric Utilities

※Included the electricity saving effects of supply and demand adjustment contracts

※The light blue number take account of 3% capacity margin.

14

３. Rethinking the Basic Energy Plan

○The government established a new “Basic Energy Plan” in June 2010. Considering increased public interest in

global warming issues, it seeks to significantly improve the energy self-sufficiency ratio (from approx. 18% to

approx. 40%) by 2010 and reduce energy-related CO2 emissions by 30% by 2030 by mobilizing all policy

measures, including the construction of new/additional nuclear power plants.

Targets for 2030 ○Double the energy self-sufficiency ratio and the self-developed fossil fuel supply ratio

(*thereby increasing the energy independence ratio from 38% to about 70%)

○Raise the zero-emission power source ratio from 34% to about 70%

○Reduce CO2 emissions from people‟s lives (residential sector) by half

○Maintain and enhance energy efficiency in the industrial sector at the highest level in the world

○Allow Japanese companies to obtain leading shares of global markets for energy-related products

○ Expanding the feed-in tariff system for renewable energy and promoting deregulation

○ Promoting nuclear power generation

New/additional reactors: 9 by 2020, 14 or more by 2030

Capacity utilization rate: 85% by 2020, 90% by 2030 ○ Improving the efficiency of coal-fired thermal power generation

Comprehensive efforts to secure resources and enhance supply stability

Promotion of international business expansion in the

energy and environment sector

Creating a new energy society

Development and diffusion of innovative energy technologies

Establishment of an independent and environmentally friendly

energy supply structure

Establishment of a low carbon energy demand structure

○ Maintaining and enhancing the world’s most advanced energy efficiency (business

sector)

○ Making net-zero-energy houses/buildings available by 2030

○ Replacing 100% of lights with highly efficient lights (LED etc.) by 2020 on a sales

basis and by 2030 on an installation basis

○ Raising next-generation vehicles’ share of new vehicle sales to up to 50% by 2020

and up to 70% by 2030

○ Demonstrating smart grids and smart communities in Japan and abroad

○ Deepening strategic relationships with resource-rich countries through public-

private joint efforts

○ Raising the self-sufficiency ratio of strategic rare metals to more than 50%

etc.

etc.

etc.

etc.

Measures to achieve the targets

15

Current Basic Energy Plan (Cabinet decision in June 2010)

0

2,000

4,000

6,000

8,000

10,000

12,000

1970 1980 1985 1990 1995 2000 2005 2007 2009 2030

○The current Basic Energy Plan adopted in June 2010 seeks to increase power dependence on

nuclear energy to more than half by 2030. This should be reviewed from scratch.

・14 new/additional reactors

・Improved capacity

utilization rate

(60.7% in 2007

approx. 90% in 2030)

Coal

Oil etc.

Natural gas

GDP: 1.4-fold increase

by 2030

Power demand: 1-fold

increase by 2030

Including about 30%

energy saving

10,200 10,239

11%

21%

2%

13%

53%

Renewables

etc.

9%

25%

13%

28%

Basic Energy Plan

Energy saving

Fossil fuels

26%

Nuclear 53%

Renewables etc. 21%

Fossil fuels

66%

9%

26%

(in 100 millions of kWh)

＝

First oil crisis

Renewables

etc.

25%

Fossil fuels

74%

25%

59%

13%

16

Developing the Strategy From Scratch (material for the third meeting of the Energy and Environment

Council on October 3)

December 21 (Wed): Energy and Environment Council (5th meeting) ○Adopted Basic policy for presenting options in the next spring.

Next summer: Energy and Environment Council

○Will adopt “An Innovative Strategy for Energy and Environment”

Cost Estimation

and Review

Committee

Dec. 19

Report

Advisory Committee

for Natural

Resources and

Energy

Dec. 20

Major discussion

points

Atomic Energy

Commission

Under

deliberation

Central

Environment

Council

Dec. 9

Draft report

[Past developments] [Future plans]

Energy and

Environment

Council

・Discussing

green growth

strategy

Advisory Committee

for Natural

Resources and

Energy

・Developing draft

energy mix scenarios

Atomic Energy

Commission

・Developing

draft nuclear

policy options

Central

Environment

Council

・Developing draft

options of climate

change measures

Energy and

Environment

Council

・Green Growth

Strategy (draft)

Advisory Committee

for Natural

Resources and

Energy

・Strategic Energy

Plan of Japan (draft)

Atomic Energy

Commission

・New

Framework for

Nuclear Energy

Policy (draft)

Central

Environment

Council

・New global

warming

countermeasures

(draft)

December 22 (Thu): Council on National Strategy and Policy (5th meeting)

Will incorporate policy in the “Strategy for the Rebirth of Japan”

Next spring: Energy and Environment Council

○Will present options of energy and environment strategies

Fostering national debate

October 3 (Mon): Energy and Environment Council (3rd

meeting)

○Formed “Cost Estimation and Review Committee.”

17

Past Developments and Future Plans ( material for the fifth meeting of the Energy and Environment Council

on December 21)

June 7 (Tue): Energy and Environment Council formed as

a subgroup of the Council on the Realization of the New

Growth Strategy.

July 29 (Fri): Energy and Environment Council ○Adopted “Interim Compilation of Discussion Points for the

Formulation of Innovative Strategy for Energy and the

Environment.” ・Decided the general direction of the strategy - a scenario to reduce

dependence on nuclear power and a shift to a distributed energy system.

Principle 1: Draw up a scenario for reducing dependence on nuclear energy ○The government will conduct a zero-basis reexamination of the present energy mix, in which nuclear power generation constitutes more than half the electric power supply.

○In other words, the government will enhance the safety of nuclear power plants and continue to use them but with reduced dependence.

○At the same time, the government will cultivate energy frontiers, such as increasing the percentage of renewable energies, drastically reforming the energy demand structure through energy-

saving efforts, and enhancing the clean use and efficiency of fossil fuels.

Principle 2: Develop a clear and strategic schedule in order to avoid energy shortfalls and price hikes

Principle 3: Conduct a thorough review of nuclear power policies and pursue a new vision ○When developing a specific scenario for reducing dependence on nuclear power, the government will comprehensively inspect nuclear policies.

○For how long and by how much should the government reduce dependence on nuclear power? How should the government handle new-generation nuclear technology R&D? What should it

do with back-end issues or nuclear fuel cycle policies? How should the government secure/foster technologies or human resources for attaining the world’s top class safety or maintain the

safety of existing nuclear power plants? How should the government enhance collaboration or cooperation with international organizations or foreign nations? The government will make these

issues clear.

Principle 1: Seek to realize distributed energy systems

Principle 2: Seek to make international contributions as an advanced problem-solving nation

Principle 3: Take a multifaceted approach to the realization of distributed energy systems

Principle 1: Stimulate a national discussion to overcome the confrontation between the opposition to and

promotion of nuclear power generation ○The confrontation between the opposition to and promotion of nuclear power generation has blocked discussions and brought about an unfortunate gap between expert decisions and public

opinions. ○As for nuclear power plants consisting of existing technology, if people can agree with the idea that the government should reexamine the current Plan from scratch and reduce the

dependence on nuclear power, the national discussions will be developed with the theme of “realizing the scenarios for reducing nuclear dependence.” ○Such discussions should help effective energy choices in the future.

Principle 2: Verify objective data in developing the strategy ○The government should hold practical and concrete discussions by objectively verifying data, such as the cost of nuclear power generation and the amount of introducible renewable

energies. ○The Energy and Environment Council will set up the “Cost Estimation and Review Committee” for cost examination and reflect the results in the basic policy formulation scheduled at the year-

end.

Principle 3: Formulate innovative energy and environmental strategies while maintaining dialogue with a broad

range of citizens

Basic philosophy 1: Three principles for achieving a new best mix of energy sources

Basic philosophy 2: Three principles for the realization of new energy systems

Basic philosophy 3: Three principles for the formation of national consensus

18

Highlights of the “Interim Compilation of Discussion Points for the Formulation of „An Innovative Strategy for Energy and the Environment‟”

(prepared based on material for the second meeting of the Energy and Environment Council on July 29, 2011)

0

10

20

30

40

50

Nuclear Coal-fired (new policy scenario)

LNG-fired (new policy scenario)

Wind power

(onshore) Oil-fired Solar

(residential) Geothermal

[capacity utilization rate (%) /useful years ]

[70%/40 yr]

[80%/40 yr] [80%/40 yr] [20%/20 yr]

[80%/40 yr] [50% or 10%

/40 yr] (30% in 2004

estimates)

[12%/20 yr] (35 yr in 2030 model)

Gas cogeneration (before deduction

of heat value)

[70%/30 yr]

5.9

8.9- （2010=2030）

10.3

↑

9.5

10.9

↑

10.7

9.9-

17.3

↓

8.8-

17.3

9.2-

11.6

（2010= 2030）

11.5

↑

10.6

33.4-

38.3

↓

9.9-

20.0

5.7 6.2

Energy

saving

A/C:

7.9-23.4

Fridge:

1.5-13.4

Incandesce

nt lamp

LED 0.1

<Legends>

2004

estimates

2010

model

2030

model

Upper limit

Lower limit

Upper limit

Lower limit

20.1 ↑

19.7 (before

deduction of heat value)

Wind power

(off-shore)

[30%/20 yr]

9.4-

23.1

↓

8.6-

23.1

○Even more attractive to

power consumers when

savings in electricity fees

(\20 for households, \14

for commercial/industrial

customers) are

considered.

(4) Solar : \10-20 (5) Distributed power

sources around \10-20

○Incurs social costs, e.g. cost to prepare for the risk of accidents. ○\8.9/kWh or more

○Increases with fuel

costs and CO2

emission measures.

○As competitive as

nuclear energy.

○Competitive even in at present

if conditions are favorable.

○The following constraints apply

to large-scale installations.

・Higher transmission costs for

wind power due to concentration

of plants in Hokkaido and

Tohoku

・Constraints on geothermal heat,

e.g. concentration in natural

parks

(1) Nuclear approx.

\9 or more

(2) Coal & LNG in the \10 range

(3) Wind & geothermal \10 or less in some

cases even now ○For large-scale installations,

backup by auxiliary power

supply or storage batteries is

needed.

[\/kWh]

16.5

38.9

↑

36.0 （10％）

25.1

↑

22.1 （50％）

19

Power Generation Cost Comparison Among Major Power Sources

20

(3) Direction of energy policy reform

1. Realizing the world’s most advanced energy-

saving society: Reform of the demand structure • Enhance energy conservation policies that include a peak-

shaving approach

• Build a flexible fee structure

• Form dispersal-based smart communities

• Promote visible energy savings through HEMS/BEMS and

reform work style and lifestyle by supplying information to

consumers

2. Realizing a distributed next-generation energy

system: Reform of the supply structure • Achieve distributed next-generation systems that give

consumers various options and makes maximum use of various

supply capabilities (e.g., renewable energies, cogeneration,

private power generation, etc.)

• Reinforce and widen transmission and distribution networks

• Ensure neutrality of the transmission sector

• Spread cogeneration and fuel cells

• Develop infrastructure for the use and interchange of unused

heat in urban districts

• Expand the domestic supply network for natural gas and build a

disaster-resistant petroleum product supply structure

3. Importance of technical innovation • Maintain and reinforce the world’s most advanced energy

technologies

• Accelerate technical innovation

• Implement joint public-private initiatives

General Direction of Major Discussion Points

(1) Perspectives required in rethinking the

Basic Energy Plan

In the aftermath of the Great East Japan Earthquake and the accident at

TEPCO’s Fukushima Daiichi NPS, Japan’s review of the energy policy must

place stronger emphasis on the following perspectives, with the highest

priority given to “ensuring public safety.”

1. Sustainable energy that earns public trust (restoration of public confidence)

2. Energy policy that emphasizes the “demand side” (demand structure reform by providing “options” [e.g. power sources] and

appropriate incentives for energy and power saving; supply structure reform

from the demand side)

3. Energy policy that emphasizes “consumers” and “ordinary citizens” as

well as “regional communities” (participation of “consumers,” “ordinary citizens,” and “regional communities” to

play leading roles; regional revitalization through the use of untapped energies)

4. Energy policy that supports national strength while making international

contributions (maintaining and reinforcing Japan’s industrial competitiveness; ensuring

energy security, providing stable and inexpensive energy; Japan’s responsibility

in the context of the international energy situation; a strong energy policy)

5. Energy policy that utilizes diverse power and energy sources (overcoming vulnerabilities of a large-scale intensive power system; effectively

using energy throughout the market)

(2) Desired energy mix Further discussion will be held on the following basic directions:

1. Fundamental reinforcement of energy and electricity conservation

measures

2. Accelerated development and use of renewable energies to the

maximum degree possible

3. Clean use of fossil fuels (e.g. shift to natural gas)

4. Reduced dependence on nuclear power wherever possible

source: “Major discussion points toward the establishment of

a new „Basic Energy Plan for Japan‟” on December 20, 2011)

21

Energy Mix in Major Countries: Composition of Power Generation by Energy Source

Nuclear Coal Oil Natural gas Renewables etc.

Japan U.S. Europe Korea China Germany France Italy Ukraine Slovakia

Source: EA “ Electricity Information 2010” “Energy Balances of OECD/Non-OECD Countries 2010”

In Europe, where interconnection of power and gas supply networks is more common, energy

security is ensured throughout the region. Europe’s composition of power generation by

energy source is similar to that of Japan.

22

0

100

200

300

400

500

600

0

50

100

150

200

250

300

350

400

450

19

73

19

74

19

75

19

76

19

77

19

78

19

79

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

18.1%

65.5%

Sources: “Comprehensive Energy Statistics” and “Annual Report on National Accounts.”

(millions kL of crude oil equivalent)

Transport sector

Residential & Commercial sector

Industry sector

(\trillions)

Final energy

consumption

1973→2009

1.3-fold

growth

Tra

nsp

ort

19732009

1.9-fold

growth

Resid

entia

l &

Com

merc

ial

19732009

2.4-fold

growth

Ind

ustry

19732009

0.85-

fold

growth

Real GDP 19732009

2.3-fold growth

23.7%

33.6%

42.7%

16.4%

Trends in Final Energy Consumption in Japan

23 * In addition, the law provides for specific regulatory measures for houses and buildings.

The Energy Conservation Act, the basis of Japan’s energy conservation policy, was established in 1979 in

response to the oil crisis.

It calls for the improvement of energy efficiency in the industry, commercial/residential, and transport sectors.

Factories, offices,

carriers, consigners

Machinery &

equipment

(Top Runner program)

●Companies whose energy consumption or transport capacity exceeds the specified level are

required to submit periodical reports concerning the items below every year for review by the

government.

(1) Changes in energy intensity (target: 1% on annual average)

(2) Implementation status of energy conservation measures (requiring actions contributing to energy

conservation in accordance with qualitative guidelines)

●For any company notably lacking in its energy conservation efforts, the government can disclose

the name and issue directives/orders (or fine in the event of violation).

●Manufacturers and importers of energy consuming equipment are required to meet high standards

(Top Runner standards) in the target fiscal year (set about 3-10 years ahead) and to report

results in the target fiscal year so that the government can check the degree of

achievement.

●If substantial improvement in performance is necessary, the government can disclose the name

and issue recommendations/orders (or fine in the event of violation).

Top Runner standards (23 product categories) Designated products, including passenger vehicles, air conditioners, and TV sets, are required to provide,

in their own target year, performance equal to or more than that of the most superior product on the

market at the time of setting the standards.

[Past improvements in efficiency] passenger vehicle fuel efficiency: up 47% (from 1997 to 2009)

air conditioner energy efficiency: up 68% (from 1997 to 2004)

Structure of the Energy Conservation Act (Act on the Rational Use of Energy)

24

○ The global energy market (generated electricity) is dominated by the U.S. and China.

○ The 21st century’s energy supply is expected to be sourced mainly from fossil fuels, especially in developing

countries.

[Sources: OECD/IEA, “Energy Balances of OECD Countries 2010” and “Energy Balances of Non-OECD Countries 2010,” 2008 results.]

Fossil fuels: International Comparison of Electricity Composition Among Major Countries

Renewables

etc.

Hydro

Nuclear

Gas

Coal

Oil

U.S. China Japan Canada Germany France

25

Japan

Germany

USA

China

Australia

India

25

27

29

31

33

35

37

39

41

43

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Japan Germany USA China Australia India

Efficiency of coal-fired power generatio (LHV, %)

Efficiency of coal-fired power generation, by country: The efficiency of coal-fired

power generation in major countries remains low, leaving room for improvement.

Source: Ecofys, “International Comparison of Fossil Power Efficiency (2008).”

Fossil Fuels : Technological Innovation Toward Zero Emissions

26

Oxifuel combustion Co2 recovery power generating system CO2 transportation/storage

Oxygen generator

Coal

Re-circulated gas (mainly CO2）

O2 Air （N2, O2）

Noncondensable gas N2

Dust collector

CO2 liquefaction and recovery

plant

Boiler

CO2 Underground storage

CO2 storage transportation equipment

G

Condenser

ST Smokestack

P

About 225M Australian dollars (including subsidies from Japanese and Australian governments) Japan contributes 42M Australian dollars (about 34B yen that is split between public and private partners)

2008 – 2011 Retrofit of existing power station

2011 – 2013 Oxyfuel demonstration operation

2012 - 2014 CO2 injection and monitoring

Japan : Japan-Australia Oxifuel Combustion Demonstration Project Japan Limited Liability Partnership(formed by J-POWER, IHI and Mitsui & Co.) JCOAL (Supporting Collaborator) Australia: CS Energy, Xstrata, Schlumberger, Australian Coal Association (ACA)

Features

・Applicable to both existing and new power plants

・Has a potential to reduce CO2 recovery energy and costs

・Has a potential to reduce NOx emissions

System

Oxifuel Combustion is:

Technology to facilitate CO2 recovery by burning fuel such as coal using only oxygen to make CO2 the principal component of exhaust gas from the boiler.

・Oxygen generation (air separation) equipment is installed. ・Exhaust gas is re-circulated and flame temperature is adjusted to

use existing boiler technology.

At Callide A pulverized coal power station (generation capacity: 30MWe) in Central Queensland, Australia,

low-emission coal thermal power generation using Oxifuel Combustion Technologies will be demonstrated

toward practical application of CCS (Carbon Capture and Storage) technology.

Project image

Partners

Project budget

Schedule

Technological Innovation toward Zero Emission International Joint Research and Demonstration on Oxifuel Combustion

27

（１） In 2008, by taking into account the presence or absence of data for existing wells with an excavated depth of

over 500 meters, the proposed sites for the CCS demonstration test were narrowed down from 115 to 7 sites.

（２） In 2009, taking into account whether a source of emissions was located in the vicinity, the sites were narrowed down again to three candidates (offshore Tomakomai, offshore Nakoso-Iwaki, and offshore Kitakyushu).

（３） Of the three sites, the survey at the Tomakomai site was the furthest ahead. Thus, based on the survey results at the time, a technical evaluation was conducted. Concurrently, activities to promote the understanding of CSS were carried out locally (holding forums etc.). In February of this year it was decided to begin a trial implementation at the Tomakomai site starting in the 2012 fiscal year.

1. Sequence of Events

（１）Demonstration Test Overview ①Source of emissions ： oil refinery ②Separation and Recovery System ： chemical absorption method ③Injected amount ： 100 000 tones of CO2/year or more (injection period: approximately 3 years) (Injected into two layers: Moebetsu Layer (depth of 1100m to 1200m) and Takinoue Layer (depth of 2400m to 3000m)) （２）Demonstration Test Schedule

2. Future Plans

Launch of EPC in 2012 fiscal year

Injection Monitoring Schematic Diagram

Domestic location of the three proposed sites

Port of Tomakomai

①Measurement of temperature, pressure etc. at wellead

② Measurement of temperature, pressure, CO2 injection amount at wellhead

⑤Periodic 2D and 3D elastic wave survey of ocean region

⑥Observation of seabed vibrations and natural earthquakes（OBS, OBC）

③Well bottom temperature, pressure measurement Vibration and natural earthquake observation

④ Well bottom temperature, pressure measurement

⑦ Observation of vibrations and natural earthquakes by land-based seismometer installation

⑧ Ocean monitoring system (Marine Pollution Prevention Law)

Basic Survey Stage

Survey currently halted due to Great East Japan Earthquake

Kitakyushu Site

Tomakomai Site

Nakoso-Iwaki Site

1styear 2ndyear 3rdyear 4thyear 5thyear 6thyear 7thyear 8thyear 9thyear

CO2 Supply Base

CO2 Injedtion Bsae and Injection Well

Monitoring

Investiga-tion

Phase

Engineering, Procurement ,Construction

Engineering, Procurement ,Construction(Excavation)

Engineering, Procurement ,Establishment

Pre-injection Observation

Supply Operation

Injection Operation

Observation During Injection

Post-injection Observation

The CCS Demonstration Test at the Tomakomai Site

28

Energy Self-sufficiency Ratio and Energy Mix

Source: Excerpts from documents created by the IEA

Nuclear power is an important option for countries with a low energy self -sufficiency ratio

(i.e. with scarce domestic energy resources)

29

Energy Dependence on Specific Regions and Energy Mix

Cru

de

oil

imp

ort

de

pe

nd

ence o

n th

e M

idd

le E

ast

Nuclear energy-using

countries

Non-using countries

Gas import dependence on Russia Source: Excerpts from documents created by the IEA

Japan and Korea (which are heavily dependent on the Middle East for crude oil) and East

European countries (which are heavily dependent on Russia for gas) promote nuclear power.

30

４. Renewable Energy

31 Sources: Agency for Natural Resources and Energy, “Energy in JAPAN”; New Energy Foundation, “New Energy Award”; NEDO, “Best 100 New Energies”; etc.

Solar power

generation

Wind power generation

Geothermal

power generation

Hydroelectric

power generation

提供：㈱ジャイロダイナミクス

提供：(財)エンジニアリング振興協会

Other:

Ocean energy, etc.

Oce

an

cu

rren

t

po

we

r ge

ne

ratio

n

Wave

activ

ate

d

ge

ne

ratio

n

What is Renewable Energy?

Courtesy of Mitsui Engineering & Shipbuilding Co., Ltd.

Courtesy of Kawasaki Heavy Industries, Ltd.

Biomass

power generation

32

New energies, energy conservation and the smart community are technologies still in their infancy. However, their

markets have a large growth potential driven by factors such as increasing resource constraints, energy security,

global warming, and even electricity supply shortages after the 3.11 disaster.

The market size and the market growth rate of new energy industries will be substantial, even compared with the

automobile industry, today’s leading market.

[Automobile industry]

Source: Estimated at the value

of \1,747,718 per vehicle, which

was calculated from METI’s

“Machinery Statistics” (2010

Annual Report), and using

figures in “Automobile Industry

Forecast for 2020 (2011 edition)”

issued by Sougou Giken Co.,

Ltd.

Market for New Energy Industries

[New energy industries]

* Including solar power, wind power,

solar heat, fuel cells, storage batteries

(LiB), ZEB, and ZEH.

Source: Prepared by Teikoku

Databank based on documents, such

as the Global Wind Energy Council’s

“Global Wind Energy Outlook 2010.”

Mark

et gro

wth

rate

(2010

-20)

New energy industries

\86 tn.

\10 tn. \15 tn.

\30.3 tn.

\50 tn. \123 tn.

\151 tn.

Automobiles

\200 tn.

Market size (in \trillions)

The size of the circle

corresponds to the market size.

Projected global market size in 2020

Global market size in 2010

33

* The above data shows electricity supply from facilities certified under the RPS Act. It does not include electricity generated before the enforcement of the RPS Act, electricity

generated by facilities not certified under the RPS Act, and electricity generated by facilities certified under the RPS Act but self-consumed.

* The solar power generation facilities covered by the excess electricity purchasing scheme are counted as “specified solar” facilities in and after November 2009.

Change over the years in total supply of electricity from “New Energy” power generation facilities (in 100 millions of kWh)

Since the introduction of the RPS system (in 2003), the supply amount of renewable energy sourced

electricity has doubled.

Furthermore, since the introduction of the Excess Electricity Purchasing Scheme (in 2009), the

installation of residential solar systems has sharply increased.

Change in the Amount of Electricity Supplied by Renewable Energy

Start of excess electricity purchasing from residential facilities

FY 2003

FY 2004

FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2010

Wind Hydro Biomass

Solar

Specified solar

Wind Hydro Biomass

Solar

Wind Hydro Biomass

Solar

Wind Hydro Biomass

Solar

Wind Hydro Biomass

Solar

Wind Hydro Biomass

Solar

Wind Hydro Biomass

Solar

Wind Hydro Biomass

Solar Specified solar

34

Electric utilities

Cost Bearing Adjustment Organization (responsible for collecting and distributing surcharges)

Purchase electricity for the

government-defined period and price

Sell electricity generated

from renewable energies Supply electricity

Collect surcharges as

part of electricity bills

Pay collected

surcharges Grant purchase

costs

・Certify facilities (The government verifies the facilities’

capability to generate power stably and

efficiently. Certification is revoked for

facilities no longer satisfying the

requirements.) Procurement Price

Calculation Committee

Electricity

customers

Operators of residential

power generation

Government

Operators of commercial power generation from renewable energies

METI Minister

Opinions on purchase price and

period

Set purchase price and period

based on opinions of the

Procurement Price Calculation

Committee

Decide surcharge

unit price per kWh

Electric utilities are obliged to purchase electricity generated from renewable energy sources (e.g. solar power, wind power, hydro, geothermal heat,

biomass) on a fixed-period contract at a fixed price. The system will be launched on July 1, 2012.

The cost of the purchased electricity will in principle be transferred to electricity customers in the form of a surcharge proportional to electricity usage.

The government expects to attract investments to the renewable energy market by promising steady returns. The purchase price and period have been

discussed by the Procurement Price Calculation Committee (appointment of the members requires consent of the Diet), which submitted opinions to the

METI Minister on April 27 (e.g. purchase at \42 for 20 years for large-scale solar power generation). With these opinions in mind, the Minister will decide the

final purchase price.

Outline of the Act on Special Measures for Renewable Energy

35

Source Solar power Wind power Geothermal heat Small & medium hydro

Purchase category ≥10 kW <10 kW

≥20 kW <20 kW

≥15,000 kW <15,000

kW

≥1,000 kW,

<30,000 kW

≥200 kW ,

<1,000 kW <200 kW

Cost

Construction

cost

(in \1,000s)

\325/kW \466/kW \300/kW \1,250/kW \790/kW

\1,230/kW \850/kW \800/kW \1,000/kW

Annual

operation &

maintenance

cost (in \1,000s)

\10/kW \4.7/kW \6.0/kW - \33/kW \48/kW \9.5/kW \69/kW \75/kW

IRR 6% before

tax

3.2% before

tax (*1)

8% before

tax

1.8%

before tax

13% before tax (*2) 7% before

tax

7% before tax

Pu

rch

ase p

rice

pe

r kW

h

Incl.

tax (*3) \42.00 \42

(*1) \23.10 \57.75 \27.30 \42.00 \25.20 \30.45 \35.7０

Excl.

tax \40 \42 \22 \55 \26 \40 \24 \29 \34

Purchase period 20 yr. 10 yr. 20 yr. 20 yr. 15 yr. 15 yr. 20 yr.

(*1) Residential solar power generation

In solar power generation, although the purchase price for <10 kW may seem equal to that for ≥10 kW, the actual price for residential power

generation is \48 when a subsidy of \35,000 per kW (FY 2012) is taken into account.

Since ordinary consumers are not obliged to pay consumption tax on electricity they sell, their prices including tax are equal to those

excluding tax.

(*2) IRR of geothermal power generation

The IRR set for geothermal power generation (13%) is higher than those for other energy sources because site development, including earth

surface surveys and exploration well drilling, costs about \4.6 billion per project and because the rate of successful commercial operation is

low (about 7%).

(*3) Handling of the consumption tax

Tax-exclusive pricing is proposed regarding the consumption tax, assuming the possibility that the consumption tax rate may be changed in

the future. However, with regards to the case of purchasing excess electricity generated from solar power (a majority of which is generated

by ordinary consumers) the existing consumption tax should be applied.

Purchase Categories, Prices and Periods Proposed by the Committee Chair

36

Source Biomass

Purchase category Gasification

(sludge)

Gasificatio

n (livestock

excreta)

Solid fuel

combustion (unused

wood)

Solid fuel

combustion

(general wood)

Solid fuel

combustion

(municipal

waste)

Solid fuel

combustion

(sludge)

Solid fuel

combustion

(recycled wood)

Cost

Construction cost

(in \1,000s) \3,920/kW \410/kW \410/kW \310/kW \350/kW

Annual operation &

maintenance cost (in \1,000s)

\184/kW \27/kW \27/kW \22/kW \27/kW

IRR 1% before tax 8% before tax 4% before tax 4% before tax 4% before tax

Purchase

price

per kWh

Cat.

[Biomass from

methane fermentation

gasification]

[Unused wood] [General

wood (incl. palm

shell)]

[Biomass from wastes

(other than wood)]

[Recycled

wood]

Incl.

tax

\40.95 \33.60 \25.20 \17.85 \13.65

Excl.

tax

\39 \32 \24 \17 \13

Purchase period 20 yr.

Purchase Categories, Prices and Periods Proposed by the Committee Chair

37

○Starting with the Sunshine Program in 1974, Japan has been leading the global solar cell market. However, China,

Germany and the U.S. have made huge strides in recent years.

○Japan needs to accelerate the improvement of power generation efficiency and significant cost reductions by

conducting R&D of innovative technologies for new types of high-efficiency, low-price solar cells (thin-film type, dye-

sensitized type, quantum dot type, etc.), in which Japan has advanced technology.

Future technology development

Promoting the Development of Innovative Photovoltaic Technology

Market share by photovoltaic module

manufacturers (2009)

First Solar (U.S., Germany, Malaysia) 9.5%

2009 global

production

10,660 MW

Source: IEA “Trends In Photovoltaic Applications – Survey report of selected IEA countries

between 1992 and 2008”

Suntech Power

(China) 6.6%

Other

35.9%

Sharp (Japan) 5.6%

Yingli Green

Energy (China)

4.9%

Q-Cells (Germany,

Malaysia) 5.0%

SANYO Electric (Japan) 2.4%

Kyocera (Japan) 3.8%

Solar fun

(China)

2.1%

Canadian Solar

(China) 3.1%

Sun Power

(Philippines

[U.S.]) 3.7% Trina Solar (China)

3.7%

E-TON (Taiwan 2.1%

JA Solar (China) 4.8%

Gintech

(Taiwan)

3.5%

Motech

(Taiwan)

3.4%

\260/kWh

Polycrystalline

silicon

CIS (chemical

compounds)

\49/kWh

Development of innovative

solar cell technology

Thin-film silicon

Dye sensitized

Quantum dot structure

Commercialization of thin

film products

(silicon/chemical

compounds) in addition to

bulk crystalline silicon

Conversion efficiency: 10-15% Over 40%

\7/kWh

Systems with no burden on the grid

From standalone to integrated

systems

\24/kWh

Emergence of solar cells using new

materials (dye, etc.) and new

structure (quantum nano-structure)

instead of silicon or chemical

compounds

Systems with storage batteries

Pow

er

genera

tion

Source: Prepared by METI based on the “Report by the Review Committee on

the PV Roadmap Toward 2030 (PV2030),” issued by NEDO in June 2004.

Storage battery costs

reduced by technological

innovation

\14/kWh

38

Effort toward innovative technologies ○Development of floating technologies (lightweight, strong materials/structures for the floating body) in order to operate offshore wind

power generation in deep-sea areas

○Development of high-strength foundations (base) resistant to strong sea currents

○Development of highly durable components (bearings, etc.) to cope with the difficulty of offshore repair work

○The development cost of onshore wind power generation in Japan

may increase gradually because facilities are installed at locations

with favorable conditions first and because they face noise and

landscape problems.

○Japan’s offshore wind power generation has a large potential (sea

area) if conditions - which are less favorable than in Europe (e.g.

fewer large shallow water areas, impact of typhoons and sea

currents) - are overcome with new technologies.

○Japan should promote development with an eye toward plant export

and technology transfer to Southeast Asian countries, where

meteorological conditions are similar to Japan’s.

Increasing the Installation of Offshore Wind Power Generation

Coast of Kamisu,

Ibaraki

Coast of Goto,

Nagasaki

Coast of Miura,

Kanagawa

Coast of Kitakyushu,

Fukuoka

Coast of Boso

Peninsula, Chiba

Coast of Ichikikushikino,

Kagoshima

6 sea areas subjected to feasibility study (detailed FS indicated in blue)

Installed capacity of offshore wind power generation, by country

(as of June 20, 2010)

Installed capacity (MW)

Insta

lled c

apacity (

MW

)

U.K. Denmark Netherlands Sweden China Germany Finland Belgium Ireland Spain Norway

Source: Prepared based on “Wind Service Holland” (http://home.kpn.nl/windsh/wsh/html).

Wind observation tower

Windmill

Wave observation unit

Conceptual image of experimental study

on the wind observation and power generation system (Courtesy of Tokyo Electric Power Company, Inc., the University of Tokyo, and Kajima Corp.)

39

Integrated control of multiple sectors

Yokohama City Keihanna

Kitakyushu City Toyota City Independent

house type

Housing

estate type

Major provincial

city type

Heavy dependence on the grid

(centrally controlled)

(Participants)

Toyota City, Toyota Motor, Chubu Electric Power, Denso,

Sharp, Fujitsu, Dream Incubator, etc.

• Operated by Toyota City, Toyota Motor, Chubu Electric Power,

Denso, Sharp, Fujitsu, Dream Incubator, etc.

• Installed HEMS in 67 houses (27 occupied as of April 2012) to

perform a demand response demonstration (changes in the

residents’ demand by dynamic pricing) and demonstrate

automatic home appliance control and V2H.

• Implementing demand-side management of the transport

sector in collaboration with public transport systems and a one-

mile mobility project.

Small dependence on the grid

(distributed control)

<Participants>

Kyoto Prefecture, KEPCO, Osaka Gas, Omron, Mitsubishi

Heavy Industries, Mitsubishi Electric, Mitsubishi Motors, etc.

• Smart meters have been installed in a new housing estate

consisting of about 900 households to apply dynamic pricing and

demonstrate changes in demand among residents (demand

response demonstration).

• The project provides families with energy consulting services

(through ESCO) and studies commercialization of healthcare

and retail services by means of in-home terminals to visualize

energy consumption.

Control of the single sector (residential)

To install renewable energies in large amounts, a “smart grid” is necessary in order to manage the supply-demand balance in response

to constant fluctuations of renewable energies by means of energy creation, conservation and storage.

Since the Great East Japan Earthquake, the need for a decentralized, rather than centralized, energy network based on distributed

power sources has become pronounced.

With the goal of developing technologies for a “smart community” that implements these concepts, field trials are underway in

Yokohama, Toyota, Keihanna Science City, and Kitakyushu to establish EMS and power storage technologies.

<Participants>

Kitakyushu City, Fuji Electric Systems,

IBM Japan, Nippon Steel, NTT West, etc.

• This demonstration project started in April this year to install

smart meters in 230

households and 50 offices

in the area receiving power

from Nippon Steel under

special contract and to change

the electricity pricing scheme

in real time in accordance with

the supply-demand balance.

Establishment of a regional electricity saving station that totally manages area-wide energy

Increasing Needs for a Smart Community

Wide urban

area type

Minato Mirai district Kohoku New

Town district

Kanazawa district <Participants>

Yokohama City, Toshiba, Panasonic, Hitachi,

Meidensha, Nissan, Tokyo Gas, TEPCO, etc.

• Conducting technical demonstration of a regional energy

management system in a large area (Minato Mirai, Kohoku New

Town and Kanazawa districts) inhabited by 4,000 households.

• Introduced dynamic pricing based on the smart meter and the

HEMS.

• Installed a large-capacity lithium-ion battery (1 MW) in the

substation for virtual integration with residential storage batteries to

achieve control as a single storage battery.

40

For example, operators of solar power generation, which depends on weather, can reduce

dependence on grid power by using fuel cells as well, which can generate power on rainy or cloudy

days.

The distributed energy system will become a more reliable energy infrastructure when combined with

fuel cells, along with solar power generation and storage batteries.

Oil factory Natural gas supply lines (existing)

Hydrogen pipelines

(future)

Apartments

House

Fuel cell vehicles

(FCV)

<to be launched in 2015>

Hydrogen filling

Hydrogen station

Hydrogen

Hydrogen as a

by-product

Hospital Commercial fuel cell

(100 kW class)

Residential fuel cells

(Ene Farm)

Residential fuel cells

(Ene Farm)

Factory

(steelworks, chemical factory, etc.)

Commercial facilities

Fuel cell-gas turbine

combined power generation system

(250 kW class)

<under development>

Commercial fuel cell-gas turbine

combined power generation system

(1.20 million kW class)

<development starting in FY 2012>

Fuel cell scooter

<under field trial>

Conceptual image of

a fuel cell train

<copied from JR East website>

Factory (steelworks, chemical

factory, etc.)

Mobile/portable fuel cell

<copied from JEMA website>

Highway shuttle bus

<under field trial>

Smart community

Consolidating the Distributed Energy System with Hydrogen Infrastructure

41

○The government has been active in introducing and expanding flexible price plans for peak

shaving/shifting (applicable to unregulated fees first), even before the installation of smart

meters.

○The target for the installation of smart meters, as outlined in the Basic Energy Plan

(installation in every household in the early 2020s, in principle), will be met ahead of schedule.

Near term (this winter) (this summer) Install smart meters for

80% of total demand in

the next 5 years Install smart meters for

all large customers

Install smart meters for

all small customers

」 Field trials of meter communications

Creation of roadmap for installation

Hig

h

vo

ltag

e

Low

vo

ltag

e

2020

Meet the Basic Energy

Plan target ahead of

schedule Full-scale installation of smart meters

×

■

(1)Time-of-day fees (fees doubled during peak

hours)

Power consumption reduction effect: -13.1%

(2) Emergency peak-hour surcharge (fees tripled

during peak hours on a day with a temperature at

33 degrees C or higher)

Power consumption reduction effect: -15.6%

(3) Visualizing power consumption

<Peak-hour electricity saving effects of pricing measures on households>

<Installation of smart meters>

Source: FY 2010 project to demonstrate the effects of a large-scale

installation of smart meters.

Accelerating the Introduction of Smart Meters and Flexible Price Plans

42

5. Energy Resource Development

43

Exploration and Development by International Oil Majors

Shale gas

Shale gas

Arctic Ocean development

Arctic Ocean development

Land: Coalbed methane Sea: Development in the ultra-deep ocean

Development in the ultra-

deep ocean

Mining property acquisition in 2008-2009

44

Major Coal Trading Across the World (estimates for 2009)

Indonesia

Kazakhstan

Poland

Colombia

South Africa

Australia

Russia

China

Canada

North

America

United States

South

America

Other parts

of Europe

Japan

Other parts

of Asia

Africa & Middle

East

European OECD

countries

45

Methane Hydrate Distribution

Latest BSR distribution map (2009)

BSR area = approx. 122,000 km2

BSR (accumulations estimated by detailed surveys) approx. 5,000 km2

BSR (characteristics suggesting accumulations found in some parts of the sea area)

approx 61,000 km2

BSR (no characteristics suggesting accumulations) approx. 20,000 km2

BSR (little survey data available) approx. 36,000 km2

* The BSR is an abbreviation for the bottom simulating reflector, which is observed in seismic exploration.

It is used as an indicator of the presence of methane hydrate.

46

6. Future Energy Policy of Japan

47

1. Fundamentally enhancing energy and electricity conservation

measures

2. Accelerating the development and use of renewable energies to the

maximum degree

3. Promoting the clean use of fossil fuels (shifting to natural gas, etc.)

4. Reducing dependence on nuclear power generation wherever

possible

In the wake of the great earthquake disaster and the nuclear accident, Japan

faces the need to radically review its policy for energy structure, which aims to

increase its energy dependence on nuclear power to more than half by 2030.

<Basic direction of review>

Direction of Japan‟s Desirable Energy Mix

48

2. The desired energy mix and direction of energy policy reform

(1) Desired energy mix Further discussion will be held on the following basic

directions:

i. Fundamental reinforcement of energy and electricity

conservation measures

ii. Accelerated development and use of renewable

energies to the maximum degree possible

iii. Clean use of fossil fuels (e.g. shift to natural gas)

iv. Reduced dependence on nuclear power wherever

possible

• Regarding nuclear power generation, two directions are

mentioned: “withdrawing from nuclear energy as soon

as possible” and “maintaining a certain proportion

of nuclear power.”

3. Next Steps The subcommittee will hold intensive discussions on specific scenarios for individual energy sources and present desired

energy mix options around this spring, with the aim of reflecting the results in a new Basic Energy Plan to be completed around

this summer.

Outline of the “Major Discussion Points” Published by the Fundamental Issues Subcommittee of the Advisory

Committee for Natural Resources and Energy (released on December 20, 2011)

The report is a summary of the general direction of the discussions held by the subcommittee to date and is

considered as the starting point for a full-fledged debate.

1. Perspectives required in rethinking the Basic Energy Plan i. Sustainable energy policy that earns the public’s trust

ii. Energy policy that emphasizes the “demand side”

iii. Energy policy that emphasizes “consumers” and “ordinary citizens” as well as “regional communities”

iv. Energy policy that supports national strength while making international contributions

v. Energy policy that utilizes diverse power and energy sources

(2) Direction of energy policy reform i. Realizing the world’s most advanced energy-saving

society: reform of the demand structure

ii. Realizing a distributed next-generation energy system:

reform of the supply structure

* Regarding the power system reform, two

directions are mentioned: fundamental review (e.g.

liberalization, separation of generation and

transmission) and more reserved opinions on the

reform.

iii. Importance of technical innovation

49

Nuclear power

generation

Renewable

energy

Thermal

power

generation

Cogeneration/

self-

generation

Energy saving

(power saving)

Energy-related

CO2 emissions

(Electricity-related

CO2 emissions)

[compared with

1990 level]

Electricity fees

[basically

compared with

2010 level]

1 (approx.)

0% 35% 50% 15%

[Compared with

2010 level]

Energy saved by

approx. 20%

(Electricity

saved by approx.

10%)

-16%

(+5%)

+78%

to +130%

2 (approx.)

15% 30% 40% 15% -20%

(-8%)

+64%

to +101%

3 (approx.)

20-25% 25-30% 35% 15% -23%

(-15%)

+66%

to +94%

Reference

case

(approx.) 35% 25% 25% 15%

-28%

(-33%)

+53%

to +76%

4 Realizing a socially optimal configuration for electrical power according

to the market choice of consumers under a system that places the burden

of the social cost on providers (as well as consumers). - -

Present plan (established in

FY 2010) 45% 20% 23% 12%

-31% -

(-27%)

FY 2010 26% 11% 57% 6% +6%

- (+25%)

*1: Energy-related CO2 emissions, electricity-related CO2 emissions, and electricity fees are preliminary figures (and still under detailed examination).

The real growth rates are based on conservative cases (note) (approx. 1.1% in the 2010s, approx. 0.8% in the 2020s).

(Note: Conservative cases refer to a conservative economic outlook compiled in accordance with the decision shown in “Fiscal Management Policy” [Cabinet

decision in June 2010]: “The roadmap for fiscal consolidation targets should in principle be predicated on a conservative economic outlook.”)

*1 *1

Quantitative Energy Mix Scenarios Under Discussion

Committee for Natural Resources and Energy

*1

The government has identified five potential energy mix scenarios for 2030: These options have been discussed in

consideration of the results of an economic impact analysis in order to prepare a draft of official scenarios.

50

Thank you for your listening!