Japanese Energy Market - Optimum Use of Distributed Energy Resources for Demand- side Response - Yasuhiro SAKUMA Deputy Director, Advanced Energy Systems and Structure Division Agency for Natural Resources and Energy Ministry of Economy, Trade and Industry, Japan 22 April 2021 Power generation and supply 80% Thermal power, 8% Hydro, 8% RE and 3% Nuc. (TWh) 120001,200 1150 新エネ等Renewables (excl. hydro) 石油等Oil 1056 8.1% 100001,000 ＬＮＧLNG 940 水力Hydro 8.7% 石炭Coal 8000800 原子力Nuclear 738 39.8% 6000600 485 4000400 7.9% 294 2000200 32.3% 100 0 3.1% 1952 55606570 1975 1980 1985 1990 1995 2000 2005 2010 2015 2017 (FY) Source: Energy White Paper 2019 in Japan Based on “Outline of electric power development (METI)” and “Outline of power supply plan (METI)” Based on “Comprehensive energy statistics (METI)”2 Power Grid 10 TSOs/DSOs manage grid stabilization. Two frequency areas exist Frequency: 50Hz *The figures below indicates the maximum electricity demand in 2016. Hokkaido Frequency: 60Hz 5GW 0.6GW 0.6GW→0.9G Hokuriku Tohoku W by2019 5.6GW 16.7GW 5GW 14GW Chugoku Kansai 0.3GW 12.6GW 10GW 25GW 5.6GW （Installed capacity） 5.6GW Chubu Tokyo （Total Capability） 2.4GW 1.4GW 24GW 50GW 5.7GW→10.28GW Kyushu Shikoku by2027 Frequency Okinawa 15GW 5GW Converter 2GW 1.2GW→2.1GW 1.2GW by2020 2.1GW→3.0GW by2027 3 Mission/ Background Japan’s Responsibility for Energy Transition Energy trilemma Energy security 3”Es” + Safety Environment (Sustainability) Economic affordability (Cost) Measures; Energy Efficiency Renewable energy Nuclear energy CCS + Fossil fuels Hydrogen 4 More Renewable requires 3 key actions 1. Lower Cost, 2. Strengthen Grid, 3. Flexibility system Capacity Renewable (GW) generation ratio 120 18% Solar PV Wind 16.0% Geothermal 14.6% 100 Biomass 14.3% 15% Hydro Renewable generation ratio (right axis) 12.5% 80 12% 10.9% 10.4% 10.0% 60 9% 40 6% 20 3% 0 0% 2011 2012 2013 2014 2015 2016 2017 (FY) 5 Energy system reform Past Current and Future Non-interactive supply system Interactive supply system based on based on bulk electricity resources both BERs and DERs (BER) and large-scale transmission ＜Electricity＞ ＜Electricity＞ Interactive supply by DERs, using IoT One-way supply by thermal power technology generation, varied with demand ＜Heat＞ ＜Heat＞ Flex. and sharing energy consumption Not consumed enough ＜Players＞ ＜Players＞ Liberalization encouraging various Vertically integrated companies companies to enter the market Generator Generator Transmit/ Transmit/ Distribute Distribute Retail Retail Consumer Consumer 6 Steady growth of DER’s market in Japan Existence of post FIT solar PV in 2019 happened. 2GW solar PV in household graduated from FIT in 2019. Residential PV in Post-FIT will reach 7GW in 2023. Lithium-Ion battery storage in behind the meter marked market record of annual additions, 800MWh in 2019. Cumulative battery storage-BTM reached 3GWh at the end of 2020. Household Solar PV (Post FIT) LiB market (Behind the Meter BS) Cumulative Capacity 1.7 Cumulative No. 8 GW 1.3 1.6 Million （MWh） 900 3,500 7 GW 1.4 Million 800 1st half(Left) 1.0 3,000 6 GW 1.2 Million 700 2nd half(Left) Cumulative capacity(Right) 2,500 5 GW 1 Million 600 0.7 500 2,000 4 GW 0.5 0.8 Million 400 1,500 3 GW 0.6 Million 300 1,000 2 GW 0.4 Million 200 500 1 GW 0.2 Million 100 0 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 7 EV × V2X Combination of EV and V2X enhances their values. 1.Emergency power sources, 2.Smart charging, 3.Solar prosumer, 4.Reducing demand, 5.Grid stabilization. Key element is EV Aggregation business. 1. Emergency power 2. Smart charging with sources for blackout price signal (Dynamic Prc.) Local governments V2B 80 EVs/PHEVs in Kansai V2B Offices／Bus Com. ／Transport Com. 5. Flexibility resources for grid stabilization 3. Solar PV Prosumers TSO Repurposing Batteries. V2G Residents V2H 4. Reducing peak demand 6 EVs/PHEVs in V2G site 8 Recent transaction prices in Kyushu area Renewables are installing rapidly in Kyushu, traded by lowest prices. Need to use lower electricity. System price and area price in Kyushu, as of 24 Feb. 2019 12.0 ［円/kWh] 10.0 システムプライスSystem price 九州エリアプライスKyushu area price 8.0 6.0 4.0 2.0 11:00～15:00 0.01JPY/kWh 0.0 0:00~0:30 1:00~1:30 2:00~2:30 3:00~3:30 4:00~4:30 5:00~5:30 6:00~6:30 7:00~7:30 8:00~8:30 9:00~9:30 23:00~23:30 10:00~10:30 11:00~11:30 12:00~12:30 13:00~13:30 14:00~14:30 15:00~15:30 16:00~16:30 17:00~17:30 18:00~18:30 19:00~19:30 20:00~20:30 21:00~21:30 22:00~22:30 Source: JEPX 9 DR providing reserve power in severe peak time 1.8 GW Demand-side Response (DR) was awarded in TSO’s auction of reserve power. Major resources: Large-scale loads of factories in industry sector. Requirement: 3 hours duration, 3 hour response, 12 times/year. DR (Load curtailment) provided huge contributions in severe peak period in January 2021. Energy Market welcomes more active participants of DR. Challenges are how to encourage large-scale loads in industry sector to DR businesses. 4GW DR won auction in Capacity Market, which will deliver in 2024. Total DR Capacity in TSO’s auction DR dispatched in Jan. 2021 200 （MW） 2,000 1,800175.9 1,300 1,500150 128.9 95.8960 96096.1 890 1,000100 89.3 50050 0 2017年度 2018年度 2019年度 2020年度 2021年度 Source: EGC Source: Energy Pool Japan 10 Aggregation Communication Structure - protocol and cyber security - ①Transmission System Operator (Demand Response Application Server) ②Retailer R1 OpenADR Aggregator Aggregation Coordinator R2 R3 Resource Aggregator Output control Output controlOutput control Proprietary standard (one way) (two way) R4 R4 R4 R4 GW GW GW GW BEMS HEMS GW controller R5 controller ECHONET Lite BACnet,FL-net等 Proprietary standardR5 R5 R5 R5 R5 R5 R5 11 Third Party Aggregators enhancing DERs values 12 Current business model in Japan – Major resources: Large-scale loads in industry sectors – Major business area: Demand response in sever peak time New business models in Japan – New resources: Small-scale DERs (EVs, Battery Storages, Fuel Cells in Households), Solar PV, Wind, Grid-scale Battery Storages. DERs need to be cost down and market entrance. – New business area: Balancing Market, Capacity Market, JEPX (FIP Scheme for REs), and Local Residents in Micro-Grid Current Near future TSO TSO Elec. Retailers (FIP) Micro-grid Grid Scale CHP Large Loads EVs BS(FTM Fuel PV Wind CHP BS in industries Cells Batteries or BTM) 12 VPP national demonstration project (2016-20) About 100 participants joined. Major Resources: BTM Battery, CHP, EV, HP. Total Capacity: 60MW Outcomes: Demand response for Replacement Reserves for FIT, Demand shift by dynamic pricing, EV aggregation (V2H or V2G) Aggregation Coordinators Resource Aggregators 13 VPP flattening demand load VPP can reduce use during peak generation (kWh) (which is costly) and reduce the need for investment in peak operating capacity (kW) by reshaping the demand load flat. Flattening duration curves Reduction of peak generating Reduce investment in peak time (kWh value) capacity (kW value) 電力供給設備量 （イメージ） 50GW 50GW 3.8GW × ｌｌ Peak generation 7.5% of Peak demand Middle generation Middle generation GW GW Base-load Base-load generation generation 0 Top 88 hours Hour 8,760h 0 Top 88 hours Hour 8,760h || 1％ of annual hours Source: METI 14 VPP helping PV to generate power in low-demand period Solar PV output produced 73% of demand in Kyushu. VPP can help solar PV to generate electricity by shifting demand to necessary times, similarly pumped hydro storage 12 [GW] 10 Pumped storage Pumped storage generation generation Demand Pumping 8 Thermal 6 Solar PV output: 5.65 GW (73% of demand) 4 2 Nuclear, Hydro and Geothermal 0 00:00 06:00 12:00 18:00 24:00 15 VPP provides new reserve power sources Aggregators provide reserve power by controlling multiple distributed energy resources. VPP shifts electric power to necessary time for grid stabilization. Power Controlled by Aggregators Baseline (kW) Dispatch Command Demand Resources: Thermal power, Industrial Battery, Household Battery, A/C Source : KEPCO 16 Market Reform Schedule Energy market reform has been progressed. Replacement Reserves for FIT in Balancing market has opened in April 2021. FIP scheme, new business license of Aggregators or Distributed Network Operators and new imbalance price based on JEPX price will be in force in April 2022. FIP scheme requires aggregators to support VREs to enter JEPX. 2020FY 2021FY 2022FY 2023FY 2024FY 2025FY~ TSO’s auctions for reserve power Main auction Capacity Additional in C.M. for Delivering Market (C.M.) auction in 2024 C.M. for 2024 in C.M. R.R.-FIT Balancing in B.M. Market (B.M.) R.R. in B.M. F.F.R. and F.C.R. in B.M. FIP scheme In force License of Aggregators, In force DNOs 17 （Ref.）Product specification in balancing market Market specification decides who can enter the balancing markets. Major requirements in balancing market, as of now Frequency Synchronized Frequency Ref. Containme Frequency Replacement Replacement Ref. Restoration Auction : nt Containment Reserves Reserves for Capacity Reserves Severe peak Reserves Reserves (S- (RR) FIT (RR-FIT) Mechanism (FRR) reserve (FCR) FCR) Open of 2017- 2024 2024 2024 2022 2021 2024 Markets 2023 Response Within Within 5 Within 5 15 Min.