Energy in after Fukushima -Nuclear vs vs not Renewable-

Dec 9th 2015 CEE annual meeting Hisanori Nei Professor National Graduate Institute for Policy Studies Japan rd th Japan is the 3 largest Economy and consuming 5 largest volume of energy After Fukushima(2011) , energy consumption has decline 4 consecutive years. Last 3 years , Japanese economy has recovered by the In 2014, House sector shows most rate of reduction in energy demand

Primary by country mtoe 3500.0 Final Energy Consumption & GDP

18.00 540 3000.0

16.00 520 2500.0

14.00

500 2000.0 12.00

480 10.00 1500.0

8.00 460 1000.0 6.00 440

4.00 500.0

420 2.00 0.0

0.00 400 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 US Japan Brazil Industry Business Home Transpot GDP(Real2005)TY GDP(Nominal) In 2014, we had no supply. It’s the first time since 1965. It result in constant increase of electricity tariff.

EJ Primary Energy Supply by Sources 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Oil Coal Natural Gas Nuclear Hydro Renewable

PRIMARY ENERGY SUPPLY BY SOURCES 100%

80%

60%

40%

20%

0% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Oil Coal Natural Gas Nuclear Hydro Renewable Natural Gas (LNG) has been major alternative power sources. Thanks producers especially for the generous increase of LNG export to Japan. GOJ concluded its at 2030 (July 2015)

Energy demand Primary energy supply 489 million kl Self- 13 to 14% sufficiency Economic growth rate 1.7%/year Nuclear power 24.3% 361 mi kl 10 to 11% 50.3mkl Electric Final energy consumption 15%(13%) Natural gas power 25% 326 m kl 18% Electric power 28% Coal 25% Heat, gasoline, Heat, town gas, LPG 3% gasoline, etc. town gas, 75% etc. 72% 30%

2013 2030 2030 (Actual result) (After energy conservation measures) values are approximate 5 Japan is heavily depending on imported crude from ME

Crude Oil Import by countries 600 100.0

90.0

500 80.0

70.0 400

60.0

300 50.0

40.0

200 30.0

20.0 100

10.0

0 0.0 1960 65 70 75 80 85 90 95 2000 05 10 13

Saudi Iran UAE other ME China Rossua Others ME% Power demand Power source composition

1,278 billion kWh 196.1 billion kWh (Total generated energy) 20%(17%) Energy conservation Geothermal 1.0 to 1.1% Economic growth 17% 1,065 billion kWh 1.7%/year 40%. 3.7 to 4.6%

Renewable energy Renewable energy Wind power 1.7% 19 to 20% 22 to 24% Solar power 7.0%

Nuclear power Nuclear power Hydroelectric 17 to 18% Approx. 20 to 22% 8.8 to 9.2% Electric Electric power power 966.6 980.8 LNG LNG 22% 27% billion kWh billion kWh

Coal Coal 22% 26% Base load ratio: 56% Petroleum 2% Petroleum 3% 2013 2030 2030

values are approximate 7 Basic Act on Energy Policy (June 2002)  Securing of Stable Supply (Article2)  Utilization of Market Mechanisms(Article4)  Environmental Compliance(Article3) National Government(Article 5), Local Government(Article6), Business(Article 7), Citizens (Article8).Mutual Cooperation(Article9)

/Legislative arrangement, Fiscal or Financial arrangement if needed(Article10) /Report to the Diet(Article 11: White Paper) /Strategic Energy Plan (Article 12: Strategic Energy Plan) /Promotion of International Cooperation (Article13) /Dissemination of Knowledge Regarding Energy (Article 14) 8 Major Change around the time of the Accident(Strategic Energy Plan) TEPCO’s Fukushima Accident and subsequent to NPS a stop  Concerns over serious damage caused by the TEPCO’S Fukushima Nuclear Accident and the Safety of Nuclear Power Generation  Outflow of National Wealth and increased supply instability due to higher dependency on fossil fuels  Rapid increase in Greenhouse gas emissions in Japan  Exposed defects related to supply systems, including power interchange and emergency supply between eastern and western Japan  Reduced confidence in the government and business operators involved in energy supply  Change in the demand trend-increased introduction of cogeneration and changes in power saving actions  Higher electricity bills due to a change in the power source mix. And the impact of the international regional differences in energy price on the macro economy, industry and household economy (by combination with the shale revolution) Shale Revolution  Signs of a change in the global energy supply-demand structure caused by the shale revolution in North America

Turmoil in MENA region after “Arab-Springs”  Change in the geopolitical structure of resource-supplying regions, including instability in the Middle Eastern and North African regions. The Strategic Energy Planth The Strategic Energy Plan (First) Oct. 7 2003 (Background) /TEPCO’s Falsification Scandal---Subsequences to 17 NPS shut down /Kyoto Protocol ratified (June 2002) th The Strategic Energy Plan (Second) Mar. 9 2007 (Background) /Oil Price Increase---Demand Shock /Kyoto Protocol Effective (Feb. 2005), First Commitment Period start 2008 /New National Energy Strategy (May 2006) ---Nuclear Renaissance th The Strategic Energy Plan (Third) June. 18 2010 (Background) /Administration Change from LDP to DP /Oil Price Spike and fluctuate /25% CO2 emission reduction proposal by PM of Japan (Sep 2009. UN) There are several challenges to overcome for achieving the policy target 110

/The target of Energy Conservation is extremely high. 100 ・・・ /The share of Renewable and Nuclear Political Message 90 /Power Market Reform・・・Uncertain /Coal vs Natural Gas ・・・ Fuel Price 80 /Nuclear 70 1970-1990 1990-2010 2012-2030 60 0 5 10 15 20 GOJ need to review its Strategic Energy Plan in every 3 years by Law.

/Last Strategic Energy Plan was published on April 2014. /In fact, the amendment of the plan has been done every 3 – 4 years. /Next 3 years, there should be some progresses to create more concrete plan . Historically, between 1960 and 1980, actual energy consumption had been lower than planed energy outlook. From late 80s , it had been difficult to lower energy demand than planned outlook by 2008.

Primary Energy Supply 1200

1000

800

600

400

200

0 1965 1968 1973 1975 1977 1980 1982 1985 1986 1989 1990 1992 1995 1996 1999 2000 2005 2010 2013 2020 2030

Feb-67 Jul-70 Aug-75 Jun-77 Jun-77 Aug-79 Apr-82 Nov-83 Oct-87 Oct-90 Jun-94 Jun-94 Jun-97 Jun-97 Jul-01 Jul-01 Mar-05 Mar-05 Mar-05 May-08 May-08 May-08 Aug-09 Aug-09 Aug-09 Jul-15 actual Do we have more rooms to improve energy efficiency?

450 600 Primary energy supply per GDP unit of each 400 Real GDP country（（（2011））） 1973→2013 500 350 2.5 Times 22.5% 9.0 （82 million kL） 8.0 300 400 7.7 16.4% 20.6% 7.0 （ ） 250 76 million kL 6.2 9.2% 300 6.0 5.7 5.7 5.1 5.2 200 14.0% 5.0 8.9% （51 million kL） 150 200 4.0 65.5% 3.0 100 2.5 2.5 2.0 2.0 1.7 100 1.4 50 43.0% 1.0 1.0 1.1 1.1 1.0 0.8 （158 million kL） 0 0 0.0 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Current electricity system

・Partial liberalization : retail competition for over 50kw Negative aspects of regional monopoly were revealed customers by 3.11 ・Retail players : 10 big GEUs(vertically integrated, regional 1.Lack of system to transmit electricity beyond monopoly), PPS, etc regions. ・Situation is… 2.Little competition and strong price control ・Share of non-GEU power producer and supplier : 3.6% 3. Limit in digesting the change in energy mix (cf. ・0.6% of the total retail market sales is transacted at JEPX renewables) Decision on Electricity System Reform in 2013

・The Cabinet decided to execute the Policy on Electricity System Reform on April 2, 2013

Objectives: /Securing the stable supply /Suppressing electricity rates to the maximum extent possible /Expanding choices for consumers and business opportunities

Process: A bold reform will be steadily carried out step by step focusing on the 3 agendas: /Cross-regional Coordination of Transmission Operators was established on April 2015 /Full Retail Competition starts at April 2016 (regulated tariff expired by 2020) /Unbundle the transmission/distribution sector by 2020 Supply Share of Natural Gas is varied by countries. Japan maintain the largest volume of Import. After the Fukushima Nuclear Accident, Japan increase its NG import from 75Mt to 90Mt/year If NPS resume as expected, import volume will decrease to previous level.

Supply Share by Sources - Gas Production 100% mtoe 800.0 Natural Gas Import by countries BCM 90% 700.0 140.0 80% 120.0 600.0 70% 100.0 500.0 60% 80.0 50% 400.0 60.0 40% 300.0 40.0 30% 200.0 20% 20.0 100.0 10% -

0% -

Pipelin Import LNG import Oil Natural Gas Coal Nuclear Energy Hydro electric Renew- ables Gas Production Import Fuel Price Changes in Japan (CIF) /Fuel Price difference make difficult to increase Natural Yen/tkcal 8

Gas Power Units 7

/Utilities consider to build new NG Power Unit as well 6 as Coal ones. 5 /Under the future liberalized power market, many 4 smaller (less than 112.5Mw) coal power plants are 3 planned to build 2 1

0

Coal LNG Crude Mkw 2014New Add Abolish 2024 Hydro 48.14 0.4 0.03 0.04 48.53 Normal 20.82 0.2 0.03 0.04 21.01 COMPOSION OF POWER PLANT BY Pumped-Strage 27.32 0.2 0 0 27.52 UTILITIES Thermal 159.41 14.71 0.97 5.07 170.02 Coal 40.41 4.77 0.61 1.01 44.78 Hydro Coal LNG Oil Nuclear Renewable LNG 74.55 9.48 0.36 1.2 83.19 2.3% 2.2% 17.2% 15.8% Oil 44.45 0.46 0 2.86 42.05 15.8% Nuclear 44.26 0 0 2.22 42.04 17.3%

Renewable 5.86 0.09 0 0 5.95 28.9% 31.2% Wind 0.09 0.02 0 0 0.11 Photovoltaic 4.47 0.03 0 0 4.5 15.7% 16.8% Others 1.3 0.04 0 0 1.34 18.7% 18.2% Total 257.67 15.2 1 7.33 266.54 2 0 1 4 2 0 2 4 EIA Coal Retirement Forecast

Change of Nuclear Regulatory System Reform of Nuclear Regulatory Organization /Independence Separate the functions for nuclear regulation and nuclear promotion Establish the Nuclear Regulation Authority(NRA) as an independent commission body Amendments to the Nuclear Regulation Act /New regulation on severe accidents /Regulation based on the state-of-the art information (backfiting) /40-years operational limit for NPPs (exceptional less-than-20 years extension) New Regulatory Requirement Principle of Regulation /Strengthening of Design Basis /Place emphasis of Defense-in-Depth /Severe Accident Measures /Eliminate common cause failure /Enhanced Measures for Earthquake/Tsunami /Protective measures against extreme natural hazards Process of Resuming Nuclear Power Plant in Japan

Reactor Installation Construction Tech-Spec Construction NRA Permission Approval Approval Inspection

Submit Permit Submit Approve Submit Approve Approve

Licensee Assessment of Change Change of Construction Change of Operation in Reactor Installation Plan Tech-Spec

Request Approval

Local Safety Agreement Government with Licensee

Tomari

Higashidori

Tsuruga Kashiwazaki-Kariwa Mihama Onagawa Takahama Shika Fukushima-Daiichi Ooi

Fukushima-Daini Shimane

Tokai-Daini Genkai

Hamaoka Ikata Sendai Next Challenge of Nuclear in Japan

After Fukushima, new regulatory system and severer safety standards are implemented. It has required to the utilities or licensees to do many works. It needs time for several years. The main process of resuming NPS has not been changed significantly. After years, power supply by NPS in Japan will recover. We need to consider next issue challenged by the industry.

NRA’s permission for over 40 Years Operation NPS in within a few years EDMG facility by 2018 Longer Post-Outage Period after 2017 Longer term operation New NPS development 350000 6000 300000 5000 250000 4000 200000 3000 150000 2000 100000

50000 1000

0 0 201020112012201320142015201620172018201920202021202220232024

Capacity Electricity Electricity Next Challenge of Nuclear in Japan

After Fukushima, new regulatory system and severer safety standards are implementedIt has required to the utilities or licensees to do many works. It needs time for several years. The main process of resuming NPS has not been changed significantly. /Fukushima Daiichi(2011) Sendai NPS Unit 1 resuming 25 months after new regulation guideline set , 36 months after NRA establishment, 36 month

/Kashiwazaki Kariwa(2007) 25 month to 45 month more after the earthquake (Unit 6-7, Unit1, Unit5) *Unit 2-4 never operated since then /Shika Criticality event hiding (2007) 25months after stopping for inspection /Hamaoka & Shika Turbine Missile(2006) 8 month to 20 month after the accident /Onagawa Earthquake(2005) 7 month to 21 month after the scram /Mihama Unit 3 accident (2004) 32 month after the accident /Fukushima Daiichi Falsification (2002) 40 month after stopping for inspection /Monju (FBR) (1995) 178 month after the accident After years, power supply by NPS in Japan will recover. We need to consider next issue challenged by the industry. Estimation for NPS supply recovery

/NPS supply will recover by 2020 exceeding the target of the outlook in 2018 /If NRA reject the proposed TA related with fault line assessment, it still exceed the target. /If NRA agreed the fault line assessment, It will exceed the lever of before the accident

Nuclear Capacity & 400 6

350 5

300

4 250

200 3

150 2

100

1 50

0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Capacity Approved Case2 Case3 Electricity Case2 Case3 target low target high NPS Operation and Inspection in Japan

2-3 month Normal Operation within 13 month 2-3month Normal Operation within 13 month

Regular Outage InspectionInspectionInspection

Outage Ajustment Operation(25days)

Periodic Retest Periodic Retest ECCS pump ECCS pump Emergency DG Emergency DG

Regular Periodic Safety Safety Regular Outage Inspection Surveillance Outage Inspection Inspection

28 There are 100s of mobile equipment provided in NPSs

Resilience for AC power supply

Resilience for CV cooling Resilience for H2 Accumulation

Hydrogen Passive Autocatalystic Recombiner Heated Igniter Resilience for Water Injection & Tsunami Motor driven pump

Mobile Water Injection Pump

Water Proof Door New NPS construction at Sanmen China(Nov. 2015)

Unit 1 Unit 2