Japan Energy Newsletter Japan Electric Power Information Center

Vol 4. Issue 2, May 2021

Japan Energy Newsletter

Japan Electric Power Information Center, U.S.A.

Japan Energy Weekly News

Table of Contents

1 Volume 4 Issue 2, May 2021 ...... 3 Japan is Advancing the Development of Ammonia Fuel Technologies ...... 3 1.1.1 Background ...... 3 1.1.2 JERA’s Collaborations on the Ammonia Value Chain ...... 4 1.1.3 Ammonia Use by Japanese Utilities and Electrical Equipment Manufacturers ...... 5 Establishment of a New Regional Electric Power Company, Ena Electric Power, in April 2021 .6 1.2.1 The Establishment of Ena Electric Power ...... 6 1.2.2 New Regional Electric Power Companies ...... 7 2 Volume 4 Issue 1, April 2021 ...... 9 The Recent 2050 Carbon Neutrality Policy and Strategy Trends ...... 9 2.1.1 Green Growth Strategy Through Achieving Carbon Neutrality in 2050 ...... 9 2.1.2 Japanese Utilities’ Carbon Neutral and Zero-Emissions Strategies ...... 10 Japan Establishes a New Power Supply and Demand Adjustment Market ...... 12

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1 Volume 4 Issue 2, May 2021

Japan is Advancing the Development of Ammonia Fuel Technologies Japanese utilities view the ammonia mixed combustion method as a promising pathway to reduce thermal power plant CO2 emissions, which is a key part of their plan to achieve the Japanese government’s goal of reaching carbon neutrality by 2050. In May 2021, JERA, a joint venture between Tokyo Electric Power Company (TEPCO) and Chubu Electric Power (Chuden), confirmed its collaboration with a leading ammonia manufacturer, Yara International ASA (Yara). JERA also signed a memorandum of understanding (MOU) in February 2021 with Petroliam Nasional Berhad, a Malaysian state-owned oil and natural gas company, to collaborate on decarbonization technologies, including the development of ammonia fuel. In March 2020, JERA launched a demonstration project to use and integrate ammonia fuel with thermal power generation. Meanwhile, Chugoku Electric Power, IHI Corporation, and Mitsubishi Heavy Industries are also separately developing and investing in ammonia fuel technologies. This report analyzes the current trends in the development and deployment of ammonia fuel technologies by Japanese utilities and electrical equipment manufacturers, with a focus on JERA.

1.1.1 Background Following the 2050 Carbon Neutral Declaration by Prime Minister (PM) Suga, Japan’s Federation of Electric Power Companies (FEPC)1 announced in December 2020 that it would take a wide range of measures to reduce greenhouse gas emissions to achieve carbon neutrality by 2050. The measures include making renewable energy the main power source in Japan; maximizing the use of nuclear energy; reducing and decarbonizing thermal power generation; advancing new technologies and promoting energy innovation in fields such as hydrogen ammonia, carbon capture, utilization and storage (CCUS), and next-generation nuclear reactors; and promoting the expansion of electrification.2

Zero-emission ammonia fuel is carbon-free and has an established global supply chain, which means that there is increasing potential to use ammonia as a fuel for thermal power plants, industrial reactors, and cargo ships. Thermal power plants, in particular, are well-situated to take advantage of ammonia fuels to reduce their CO2 emissions. Since ammonia can be easily combusted with coal, coal-fired power plants are expected to use ammonia ahead of other industries. Therefore, the ammonia mixed fuel combustion method must be further developed for integration into the power generation field.

In October 2020, Japan’s Ministry of Economy, Trade and Industry (METI) launched the Public-Private Fuel Ammonia Promotion Council in partnership with related companies such as JERA, Mitsubishi Heavy Industries, IHI Corporation, and trading companies, as

1 Japan’s Federation of Electric Power Companies (FEPC) consist of 10 Japanese utility companies. 2 https://www.fepc.or.jp/about_us/pr/oshirase/__icsFiles/afieldfile/2020/12/18/press_20201218.pdf

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well as government-affiliated organizations.3 The Council’s interim report, released in February 2021, sets four top priorities to work towards the expansion of ammonia usage — securing a stable supply chain, reducing costs, minimizing environmental impacts, and expanding overseas usage. The interim report creates a roadmap for boosting the supply and demand for ammonia fuel by 2050 and sets goals for deployment: introducing and deploying 20% ammonia mixed fuel combustion into coal- fired power plants by 2030; and increasing the ammonia mixed fuel combustion ratio to approximately 50% by 2050.4

1.1.2 JERA’s Collaborations on the Ammonia Value Chain On May 11, 2021, JERA, a joint venture between Tokyo Electric Power Company (TEPCO) and Chubu Electric Power (Chuden), signed an MOU with Yara5, the world’s largest nitrogen fertilizer manufacturer, to collaborate on developing an ammonia value chain, including the development of a blue ammonia6 production plant.7 JERA and Yara agreed to jointly work on the following activities:

1) Upgrading Yara’s Pilbara Fertilizer plant in Australia to a blue ammonia production plant; 2) Developing new blue and green ammonia production projects; 3) Optimizing the sea transportation of ammonia fuel; and 4) Meeting the ammonia demand and supply in Japan, including the demand for power generation

JERA expects that the collaboration with Yara will ensure a stable supply of ammonia fuel for power generation, helping to build and expand its green fuel supply chain as part of the realization of the JERA Zero CO2 Emissions 2050.8

In addition to its MOU with Yara, JERA has been aggressively pursuing various other decarbonization initiatives. In February 2021, it signed an MOU with the Malaysian state- owned oil and natural gas company Petroliam Nasional Berhad to collaborate on promoting Liquefied Natural Gas (LNG) usage in Asian countries and building ammonia and hydrogen fuel supply chains.9 Furthermore, JERA and its partners, including IHI Corporation, Marubeni, and Woodside Energy, announced in March 2020 that they would conduct an Ammonia Mixed Fuel Combustion for Coal-Fired Power Plants Pilot Project. The pilot project was commissioned by New Energy and Industrial Technology Development Organization (NEDO). 10 The project, which ran from March 2020 to

3 Member List. https://www.meti.go.jp/shingikai/energy_environment/nenryo_anmonia/pdf/001_03_00.pdf 4 https://www.meti.go.jp/shingikai/energy_environment/nenryo_anmonia/pdf/20200208_1.pdf 5 https://www.yara.com/investor-relations/ 6 There are mainly two types of ammonia categorized by manufacturing methods. Blue ammonia is the conventional ammonia for which by-products such as CO2 has been captured and stored. On the other hand, green ammonia is made with hydrogen that comes from water electrolysis powered by alternative energy. 7 https://www.jera.co.jp/information/20210511_675 8 https://www.jera.co.jp/corporate/zeroemission 9 https://www.jera.co.jp/information/20210210_622 10 https://www.jera.co.jp/information/20200327_479

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February 2021, examined and evaluated the feasibility, economic efficiency, and technical issues of using ammonia as a fuel for coal-fired power plants.

1.1.3 Ammonia Use by Japanese Utilities and Electrical Equipment Manufacturers In addition to JERA, Chugoku Electric Power (Energia) and several Public-Private Fuel Ammonia Promotion Council members, such as IHI, Mitsubishi Heavy, and Mitsubishi Power, have also conducted ammonia fuel projects in recent years. Major past projects include the following.

Company Month/Year Description Chugoku July 201711 • Commissioned by the Japan Science and Electric Power Technology Agency (JST), Energia conducted an (Energia) ammonia mixed fuel combustion test (Mixed combustion ratio: 0.6% and 0.8%) at Energia Mizushima Coal-Fired Power Station (Location: Kurashiki City, Okayama Prefecture, Output: 156MW) • The project confirmed that ammonia fuel combustion will not affect the environment. Energia will seek to increase the mixed combustion ratio in a future project. IHI March 202012 • Commissioned by NEDO, IHI has been developing a Corporation 2MW class gas turbine with sprayed liquid ammonia. It is the first time in the world that the turbine has been able to stably combust liquid ammonia with a thermal ratio of 70% and reduce the amount of NOx generated. Furthermore, the project has demonstrated that the gas turbine can be partially operated with 100% liquid ammonia mixed fuel combustion. Mitsubishi March 202113 • Mitsubishi Power announced that it had started Power developing the world’s first 40MW class gas turbine system that directly uses ammonia as fuel for gas turbine power generation. It aims to make ammonia for common practical use by 2025. • The company is contributing to the creation of a fuel ammonia supply chain by developing technologies that can directly combust ammonia. They hope to offer ammonia fuel combustion as an option for small and medium-sized power plants in the industrial sector and remote islands.

11 https://www.energia.co.jp/press/2017/10697.html 12 https://www.ihi.co.jp/ihi/all_news/2020/resources_energy_environment/1197059_1601.html 13 https://power.mhi.com/jp/news/20210301.html

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Company Month/Year Description Mitsubishi April 202114 • Mitsubishi Heavy Industries America (MHIA) Heavy invested in Colorado-based Starfire Energy, which Industries develops green ammonia technology. Mitsubishi Heavy Industries aims to accelerate the development of the hydrogen and ammonia value chain businesses. AP Ventures, Chevron Technology Ventures, and Osaka Gas USA also invested in Starfire Energy.

Establishment of a New Regional Electric Power Company, Ena Electric Power, in April 2021

In April 2021, Ena City in Gifu Prefecture, in collaboration with Chubu Electric Power (Chuden) and NGK Insulators, established its first local government-funded regional new electric power company, Ena Electric Power as part of the city’s goal to move forward towards becoming a zero-carbon city. Ena Electric Power plans to begin operating its retail electricity business in April 2022. Since the deregulation of the electricity retail market in Japan, local governments are increasingly taking the lead in establishing new electric power companies in the region. Regional electric power companies can balance the electricity supply and demand locally and boost the local economy. This report highlights the latest development of local government-led electric power companies in Japan.

1.2.1 The Establishment of Ena Electric Power In April 2021, Ena City (Gifu Prefecture) announced that it would establish a new regional electric power company, Ena Electric Power, in cooperation with NGK Insulators and Chuden’s subsidiary, Chuden Miraiz. Utilizing in-house solar power systems with NAS Batteries for power storage, Ena Electric Power will provide stable electricity to public facilities and NGK Insulators’ buildings located in the city without relying on feed-in tariffs (FITs system). The company will contribute to the decarbonization of the city and will support local business development by promoting the consumption of locally produced energy sources. The company also plans to enhance regional disaster resilience by using the solar battery system as a backup power source in emergency situations such as power outages caused by natural disasters. The city will also create a sustainable business model to monetize its local renewable energy investment activities. The establishment of Ena Electric Power is a public-private partnership that aims to realize the Japanese government’s goals for carbon neutrality.15 The business information of Ena Electric Power is as follows.

14 https://www.mhi.com/jp/news/210409.html 15 https://miraiz.chuden.co.jp/info/press/1206096_1938.html

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Figure 1 Ena Electric Power • Retail electricity business Services • Renewable energy generation and sales business • Services that expand the use of renewable energy, etc.

Equity 80 million yen (appx. $734,716 USD) Capital NGK Insulators 75.0％ Investment Ena City 12.5％ Ratio Chuden Miraiz 12.5％ Established April 14, 2021 (Scheduled) Start of April 1, 2022 (Scheduled) Business

1.2.2 New Regional Electric Power Companies Since March 2000, Japan has gradually pursued the deregulation of the electricity retail market. With the full liberalization of the market in 2016, Japanese consumers, including households and businesses, are allowed to freely select their own provider, and new retail electric providers have begun to enter the market. 16 New regional electric power companies are being established to maximize the region’s power sources and to provide power to public facilities, companies, and residential homes located in the region. A regional electric power company established with the investment of a local government is called a “local government electric power company.” As of February 2020, there are at least 52 nationwide, and the number is expected to increase.17 The main purposes for these companies are to revitalize local productivity; reduce greenhouse gas emissions by using renewable energy; enhance emergency preparedness and response to disasters; and reduce electricity rates for public facilities. These companies generally seek to provide renewable energy for local production and consumption.

While local government electric power companies are expected to bring many advantages to the regions that they serve, there have been some challenges associated with their market entry and operations, including financial difficulties, dissatisfaction with their results, and concerns about whether they are meeting their region’s mission and vision. For example, Miyama Smart Energy, launched by Miyama City, Fukuoka Prefecture in 2015, became insolvent due to inadequate business operations.18 Ikoma Citizen Power, established by Ikoma City, Nara Prefecture, was sued by residents who alleged that the electricity charges under a free contract were set at a high price.

There have also been cases where local government electric power companies only procure a small portion of local electricity, even though they claim to use 100% local power sources. Similarly, in some cases, the companies do not generate electricity from the power sources within the area, and instead sign a contract with other retail electricity providers located outside of the region. It remains to be seen whether the

16 https://www.enecho.meti.go.jp/category/electricity_and_gas/electric/electricity_liberalization/what/ 17 https://www.env.go.jp/press/files/jp/113284.pdf 18 https://miyama-se.com/wp-content/uploads/2020/02/c43517446419c1e98268425fcde5739d.pdf

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local government electric power companies can overcome these challenges, through actions such as securing power resources and hedging against risks.

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2 Volume 4 Issue 1, April 2021

The Recent 2050 Carbon Neutrality Policy and Strategy Trends

With the 2050 Carbon Neutral Declaration in October 202019, Japanese Prime Minister (PM) Suga has prioritized the technology development and deployment of renewable energy, hydrogen, thermal power generation with CO2 reduction technologies, and nuclear power. These technologies will help Japan achieve its decarbonization goals in the electric power generation sector, which accounts for 37% of Japan’s total CO2 emissions. Therefore, Japanese utilities have announced their carbon-neutral zeroemission strategic plans since 2021 to meet Japan’s 2050 carbon neutrality strategy. This report provides a general overview of the Japanese administration’s 2050 Carbon Neutral Declaration and Japanese utilities’ strategic plan to achieve the goal.

2.1.1 Green Growth Strategy Through Achieving Carbon Neutrality in 2050

In October 2020, PM Suga set the goal to realize carbon neutrality and a decarbonized society by 2050. In accordance with this goal, in December 2020, Japan’s Ministry of Economy, Trade and Industry (METI), in collaboration with other related ministries and agencies, formulated and released the Green Growth Strategy Through Achieving Carbon Neutrality by 2050. The Strategy is an industrial growth strategic policy to address the challenges for achieving a carbon-free society while ensuring a virtuous cycle of economic growth and environmental protection. The Strategy has prioritized fourteen industrial and technological areas to achieve its aggressive goals and provides action plans for budget, tax agenda, regulatory reform and standardization, and international cooperation.20

In Japan, the electric power sector is the largest CO2 emissions by Sector source of its CO2 emissions, with a share of 37%; therefore, decarbonizing the sector is the highest Others, priority for reducing national carbon emissions. To 11% achieve this goal, Japan aims to develop and Commercial & Power introduce the following four technology fields: Residential Sector, 10% Generation, 37% • Renewable Energy: Maximize the introduction of renewable energy, with the goal Transportation, of upgrading transmission systems, reducing 17%

costs, balancing renewable energy usage with Industrial the surrounding environment, and utilizing Sector, 25% storage batteries. Also, prioritize offshore wind and battery technologies as high-growth industries. Source: METI

19 https://www.kantei.go.jp/jp/99_suga/statement/2020/1026shoshinhyomei.html 20 https://www.meti.go.jp/press/2020/12/20201225012/20201225012.html

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• Hydrogen power: Introduce hydrogen power as an energy source option, expand its supply and demand, promote infrastructure development with reduced costs, and create a hydrogen ecosystem. • Thermal power integrated with CO2 reduction technology: Maximize thermal power integrated with CO2 reduction technologies as an energy option and aim to advance related technology developments and reduce the costs. Realizing that thermal power will still be used minimally in Asia, Japan aims to support its carbon recycling and ammonia fuel industries to contribute to reducing the thermal power plant CO2 emissions. • Nuclear Power: Rely on well-developed nuclear power technologies. Japan aims to improve nuclear safety, restart idled nuclear reactors, and research and develop next-generation nuclear reactors. Japan will continue to make the best use of nuclear power while reducing its reliance on it.21

In addition to the carbon-free emissions goals in the electric power sector, electrification is the key focus in other sectors. Electricity demand is expected to increase by 30 to 50% from the current level (about 1.3 to 1.5 trillion kWh) due to the increasing electrification of the industrial, transportation, and residential sectors. To address increasing electricity demand, Japan has underscored the need to grow energy- saving related industries and promotes energy efficiency and energy saving in these sectors. The transportation sector will promote electrification, while the commercial and residential sectors will seek to develop all-electric buildings with storage batteries. Japan also aims to meet its carbon-neutral goals by improving the technology development and installation of storage batteries. Heating demand will be met by using hydrogen energy and reusing CO2 captured from fossil fuels.

2.1.2 Japanese Utilities’ Carbon Neutral and Zero-Emissions Strategies

Following the Japanese government’s declaration of carbon neutrality by 2050, most Japanese utilities have announced their own strategies and roadmaps to achieve this goal. In December 2020, the Federation of Electric Power Companies of Japan (FEPC), which consists of Japan Nuclear Fuel, Japan Atomic Power Company, and the Electric Power Development Company (J-Power), established the 2050 Carbon Neutral Realization Promotion Committee. In order to meet the carbon-neutral goal by 2050, the Committee will explore the following issues: 1) Deploy renewable energy as the main power source 2) Maximize the use of nuclear power energy, and decarbonize thermal power generation 3) Develop advanced technologies (hydrogen, ammonia, Carbon Capture Utilization and Storage (CCUS)/carbon recycling technologies, and next-generation nuclear reactors) 4) Promote electrification22

21 https://www.meti.go.jp/press/2020/12/20201225012/20201225012-1.pdf 22 https://www.fepc.or.jp/about_us/pr/oshirase/__icsFiles/afieldfile/2020/12/18/press_20201218.pdf

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In response to this policy, Japanese utilities have launched their own carbon-neutral zero-emission strategic plans since February 2021. The carbon-neutral/carbon-free strategies of each utility and J-Power are as follows.

Company Announced Strategy and Goal Description Month/Year J-Power23 February 2021 J-POWER Blue Proposes three pillars: 1) CO2-free hydrogen energy (hydrogen Mission 2050 power generation, CO2-free hydrogen fuel production); 2) CO2- free power generation (hydropower, wind power, geothermal renewable energy, nuclear power), and 3) stabilize and enhance the electric network to reduce 40% of CO2 emissions from the 2017-to-2019 average by 2030 and to achieve zero emissions by 2050. Tokyo Electric October 2020 JERA Zero CO2 As of mid-April 2021, TEPCO Holdings has not yet announced Power Company Emissions 2050 its company-wide carbon-neutral strategic plan. However, (TEPCO)24 JERA25, a joint venture between TEPCO and Chubu Electric Power (Chuden), has set its goal of pursuing zero emissions by 2050 by expanding the use of renewable energy and adopting zero-emissions thermal power technologies with green fuel that does not emit CO2. It aims to promote the introduction of offshore wind power, ammonia fuel for thermal power plants, liquefied natural gas (LNG), and hydrogen energy. Kansai Electric February 2021 Zero Carbon Vision Move forward with decarbonization and address the challenges Power Company 2050 of both energy demand and supply; promote the expansion of (KEPCO)26 distributed energy resources, storage battery, and e-mobility on the demand side; deploy renewable energy, maximize the use of nuclear energy, hydrogen and ammonia fuel, and the promotion of CCUS on the supply side by collaborating with the public and private sectors and related stakeholders. Chubu Electric March 2021 Zero Emissions Reduce 50% of CO2 emissions from FY2013 and 100% electrify Power Challenge 2050 the company’s vehicles. The plan aims for net-zero CO2 (Chuden)27 emissions for the entire business by 2050. Promote maximum utilization of non-fossil energy, practical application of hydrogen technology, carbon recycling, and electrification. Tohoku Electric March 2021 Carbon Neutral Maximally use renewable energy and nuclear energy, and Power Challenge 2050 decarbonize thermal power while meeting S+3E29 objectives. (Tohoku)28 Tohoku aims to create businesses that realize a smart society through utilizing distributed energy resources and electrification. Kyushu Electric March 2021 Towards Carbon Kyuden plans to announce its decarbonization plan and Power Neutrality by 2050 roadmap in 2021. For the energy demand side, it aims to (Kyuden)30 promote electrification and enhance the regional energy system. For the energy supply side, Kyuden will expand the development of renewable energy; make use of nuclear energy; research and develop hydrogen, ammonia fuel and CCUS; and build an energy network that optimizes the use of renewable energy.

23 https://www.jpower.co.jp/news_release/2021/02/news210226_4.html https://www.jpower.co.jp/news_release/pdf/news210226_4-2.pdf 24 https://www.jera.co.jp/corporate/zeroemission/ 25 JERA was jointly established by TEPCO and EnerGia in April 2015. 26 https://www.kepco.co.jp/corporate/pr/2021/0226_3j.html https://www.kepco.co.jp/corporate/pr/2021/pdf/0226_3j_01.pdf 27 https://www.chuden.co.jp/resource/file/20210323b.pdf 28 https://www.tohoku-epco.co.jp/news/normal/1219392_2558.html https://www.tohoku-epco.co.jp/news/normal/__icsFiles/afieldfile/2021/03/24/b1_1219392.pdf 29 S+3E emphasizes energy security, economic efficiency, and environmental protection without compromising safety. 30 http://www.kyuden.co.jp/var/rev0/0280/3076/r63bet2i.pdf

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Company Announced Strategy and Goal Description Month/Year Chugoku Electric February 2021 Carbon Neutral 2050 For the power generation business, EnerGia aims to expand Power Roadmap renewable energy, including solar, wind and hydropower; to (EnerGia)31 continuously utilize nuclear power; and to develop high- efficiency coal-fired, biomass, and hydrogen and ammonia power generation technologies. Shikoku Electric March 2021 Yonden Group Yonden aims to maximize its utilization of nuclear energy, make Power Company Carbon Neutral renewable energy its main power source, develop low (Yonden)32 Challenge 2050 carbonization technologies for its thermal power generation, and achieve decarbonization. It sets to achieve low carbonization by 2030 and meet decarbonization by 2050. Hokkaido Electric March 2021 Hokuden Group's By 2030, Hokuden plans to reactivate the Tomari Nuclear Power Company Efforts to Realize Power Plant, promote its renewable energy power generation (Hokuden)33 Carbon Neutral business, and reduce its CO2 emissions by facilitating electrification and energy saving. Hokuriku Electric April 2021 Carbon Neutral Rikuden plans to be carbon neutral by 2050. The company will Power Company Roadmap focus on the decarbonization of power sources, the (Rikuden)34 electrification of residential houses, and installing next- generation power and energy systems. Rikuden will also adopt advanced digital technologies such as AI, IoT, blockchain, etc., while working to improve users’ quality of life. Okinawa Electric December 2020 Efforts for Zero Okiden aims to achieve zero CO2 emissions by 2050 by making Power (Okiden)35 Emissions36 renewable energy its main power source and reducing CO2 emissions from thermal power generation. It will expand the introduction and operation of renewable energy and the use of LNG and biomass.

Japan Establishes a New Power Supply and Demand Adjustment Market

Nine Japanese transmission and distribution operators37 jointly announced on March 17, 2021, that they will establish a new power supply and demand adjustment market, called the Electric Power Reserve Exchange (EPRX), and will begin power trading on April 1, 2021.

After the Great East Japan Earthquake occurred in March 2011, some challenges emerged for conventional power systems, such as a shortage in the power supply due to the shutdown of large-scale centralized power generators. To tackle these issues,

31 https://www.energia.co.jp/assets/p20210226-1b.pdf 32 https://www.yonden.co.jp/press/2020/__icsFiles/afieldfile/2021/03/31/pr010.pdf#page=14&zoom=1 00,0,0 33 https://wwwc.hepco.co.jp/hepcowwwsite/info/info2020/__icsFiles/afieldfile/2021/03/19/210319a_1.p df 34 http://www.rikuden.co.jp/press/attach/21042803.pdf 35 https://www.okiden.co.jp/shared/pdf/news_release/2020/201208.pdf 36 https://www.okiden.co.jp/shared/pdf/news_release/2020/201208.pdf 37 These operators are Hokkaido Electric Power Network, Tohoku Electric Power Network, TEPCO Power Grid, Chubu Electric Power Grid, Hokuriku Electric Power Transmission & Distribution Company, Kansai Transmission & Distribution, Chugoku Electric Power Transmission & Distribution, Shikoku Electric Power Transmission & Distribution Company, and Kyushu Electric Power Transmission & Distribution.

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Japan has begun to reform its existing electricity systems based on providing diverse electricity options to consumers, maximizing the use of distributed renewable energy, strengthening the power transmission and distribution networks, and ensuring the neutrality of the power transmission sector. Since then, Japan has legally divided its major utility company’s transmission and distribution functions from the generation segment, deregulated the retail electricity market, and expanded wide-area grid operations.

Although Japan’s transmission and distribution operators are responsible for power frequency adjustments, they no longer own the power generation after they were required to split off that business segment in April 2020. Since October 2016, they have solicited bids for supporting power frequency adjustments, most of which were procured from incumbent electric utility companies. Since Japan is increasingly introducing renewable energy sources, particularly solar power, the ability to adjust power frequency has become more significant. With the establishment of EPRX, operators can operate wide-area adjustment power beyond each area and will be able to procure adjustment power from the trading system. Japan aims to improve the efficiency of the procurement process and the wide-area power operation through enhancing competition and transparency, reducing the costs of power coordination, and allowing new electric businesses to enter into the trading market.38

Products in the EPRX are categorized according to the requirements, such as frequency control and supply-and-demand balance adjustment, response time, and duration. There are five supply-and-demand balance adjustment products (in ascending order): 1) Synchronized Frequency Restoration Reserve (S-FRR), 2) Frequency Containment Reserve (FCR), 3) Frequency Restoration Reserve (FRR), 4) Replacement Reserve (RP), and 5) Replacement Reserve-for FIT (RR-FIT). For wide-area procurements, RR-FIT trading is scheduled to begin in 2021 and RP trading will begin in 2022.

The wide-area operation of RR-FIT and RP began in Central Japan (Chubu, Hokuriku, Kansai) prior to March 2020. It expanded to the Chugoku region (the western part of Japan’s main island, Honshu) in August and to Kyushu in September. By October 2020, it was open to five regions. The wide-area operations will be active in all areas starting in April 2021.39

38 https://www.meti.go.jp/shingikai/enecho/denryoku_gas/denryoku_gas/seido_kento/pdf/043_04_01.p df 39 https://www.meti.go.jp/shingikai/enecho/denryoku_gas/denryoku_gas/seido_kento/pdf/043_04_01.p df

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