Future Prospects of Renewable Electricity Supply under the Renewables Portfolio Standard in Japan In

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Future Prospects of Renewable Electricity
Supplyunder the Renewables Portfolio Standard in
JapanInternational Energy Workshop 2004, 22-24
June K. Nishio and H. AsanoCentral Research
Institute of Electric Power Industry (CRIEPI),
Japan

• Contents
• 1. RPS in Japan
• 2. Method and assumptions
• 3. Results
• 3-1. Basic analysis
• 3-2. Sensitivity analysis
• 4. Brief conclusions

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1. Renewables Portfolio Standard in JapanRPS
enacted in Apr. 2003

• Cap trade
• Minimum targets on retail electricity suppliers
  (now 25)for the use of electricity from
  renewable energy sources (RES-E).
• Trade of RES-E certificates (ref. TGCs, RECs).
• Eligible renewables(Electricity for self use
  are ineligible.)
• Photovoltaics (PV)
• Wind
• Biomass Municipal waste is regarded as
  semi-biomass. Biomass rate is specified from
  regular calorimetric measurement.
• Small hydro Less than 1,000kW (ref. 10,000kW in
  Europe).
• Geothermal Environmentally risk-free plant (
  binary cycle) only.
• Other provisions
• Banking and borrowing. Maximum certificate price
  11 JPY/kWh.

Ref. Exchange rate 1 Japanese Yen (JPY) 0.90
US cents 0.74 Euro cents (May 2004)
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1. Renewables Portfolio Standard in Japan
Estimated targets of 10 power companies

• RES-E target.

• RES-E target as of total electricity sales in
  prior FY.

Approx. 1.35
12.2 TWh
Rapid increase
Note. Region A Hokkaido, B Tohoku, C Tokyo, D
Chubu, E Hokuriku, F
Kansai, G Chugoku, H Shikoku, I Kyushu, J
Okinawa
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1. Renewables Portfolio Standard in Japan Main
concerns

• Effective strategy for implementing the RPS
• Volume What is introduced, where, when?
• PriceHow much is price of RES-E certificate?
• Measure How is it implemented
  cost-effectively?By trading, banking or
  borrowing?
• Outlook of economic impacts
• How much is additional cost and impact on average
  sale price?

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2. Method and assumptions Flowchart
Target
PV supply amount
C
Small hydro supply amount
Additional cost for retail suppliers
costanalysis
Wind (existing) supply amount
Wind (new) supply amount
A
Biomass(existing) supply amount
Biomass (new) supply amount
resourceassessment
Imbalance
Wind (new) supply condition
B
Marginal price of RES-E certificate
optimization
Biomass (new) supply condition
input
Marginal price of electricity
Purchase price
output
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2. Method and assumptions A. Resource assessment
- B. Optimization - C. Cost analysis

• PV
• Assess supply amount based on analysis of
  relationship between payback time and
  installation rate.(Not based on optimization.)
• Small hydro
• Assess supply amount (constant).(Not based on
  optimization.)
• Geothermal
• Excluded in this study.
• Biomass not from municipal waste
• Excluded in this study.

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2. Method and assumptions A. Resource assessment
- B. Optimization - C. Cost analysis

• Wind
• Past (incl. confirmed plans) assess supply
  amount.
• Future assess supply condition based on data of
  wind speed and some factors for installation in
  each 1km2.? derives supply amount by
  optimization.
• Biomass (from municipal waste only)
• Past (incl. confirmed plans) assess supply
  amount
• Future assess supply condition based on data of
  regional plans for constructing disposal
  facilities (estimates) and assumptions relevant
  to availability for generation.? derives supply
  amount by optimization.

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2. Method and assumptions Photovoltaics

• Cost reduction increases installation rate.

Installation cost
Installation cost for generator
Subsidy
Ref. Exchange rate 1 Japanese Yen (JPY) 0.90
US cents 0.74 Euro cents (May 2004)
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2. Method and assumptions Wind power
GIS(Geographic Information System) approach
Average wind speed
Land use Sectional regulations
Resolution 1km2
Average altitude
Capacity factor
Max. width of road
Max. angle of gradient
Available area
Distance from transmission line
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Method and assumptions Biomass power from
municipal waste

• Larger facility has better resource conditions.
• For example

Ref. Exchange rate 1 Japanese Yen (JPY) 0.90
US cents 0.74 Euro cents (May 2004)
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2. Method and assumptionsA. Resource assessment
- B. Optimization - C. Cost analysis

• Derives an optimal renewable portfolio as for
  targetafter removal of assumed PV, assumed small
  hydro,installed wind and installed biomass.
• Objective function minimizing total cost to
  introduce wind and biomass (4 of discount rate).
• Constraints resource conditions of wind and
  biomass, RPS requirements.
• Time horizon is FY2014 (assumes that targets in
  FY2011-2014 are the same as FY2010, i.e.,
  12.2TWh), but results in this presentation only
  cover the period until FY2010.
• Assumes that marginal prices of electricity from
  wind and biomass are 4 JPY/kWh (commonly known as
  marginal operating cost of thermal power plant in
  Japan).

Ref. Exchange rate 1 Japanese Yen (JPY) 0.90
US cents 0.74 Euro cents (May 2004)
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2. Method and assumptionsA. Resource assessment
- B. Optimization - C. Cost analysis

• Calculates additional costs for retail suppliers
  using derived supply amount of RES-E andmarginal
  price of RES-E certificate.
• Purchasing RES-E certificates
• a large portion of additional costs.
• Electricity sales loss
• along with increase of self use of PV and
  biomass.
• Installation of renewables by retail suppliers
• excluded in this study.
• Reinforcement of power system
• excluded in this study.

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3-1. Basic analysisGrowth in renewables

• Mainly from wind and biomass.
• Front loaded action ? necessitated by rapid
  increase of target in later years.

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3-1. Basic analysis RES-E supply in each region

• PVRegion C,D,F
• Many houses.
• Wind Region B, A
• Large windy land areas.

• BiomassRegion C, F, I
• Many municipal wastes.
• Small hydro Region B, D

Note. Region A Hokkaido, B Tohoku, C Tokyo, D
Chubu, E Hokuriku, F
Kansai, G Chugoku, H Shikoku, I Kyushu, J
Okinawa
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3-1. Basic analysis Comparison between target
andRES-E supply in each region

• Regional differences in resource endowments.

2000
2010
Target
Supply
Note. Region A Hokkaido, B Tohoku, C Tokyo, D
Chubu, E Hokuriku, F
Kansai, G Chugoku, H Shikoku, I Kyushu, J
Okinawa
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3-1. Basic analysis Price
Maximum price for pure renewables to be
competitive.
Maximum price for semi renewables to be
competitive.
(Reference) Generation costs in Japan Nuclear
5.9 JPY/kWh Oil fired 10.2 JPY/kWh LNG fired
6.4 JPY/kWh Coal fired 6.5 JPY/kWh
Example Municipal waste including renewables
(60) non-renewables (40)
Ref. Exchange rate 1 Japanese Yen (JPY) 0.90
US cents 0.74 Euro cents (May 2004)
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3-1. Basic analysis Additional costs for retail
suppliers

• 93 billion JPY in FY2010,which will raise retail
  price by 0.1 JPY/kWh.

Note. Region A Hokkaido, B Tohoku, C Tokyo, D
Chubu, E Hokuriku, F
Kansai, G Chugoku, H Shikoku, I Kyushu, J
Okinawa
Ref. Exchange rate 1 Japanese Yen (JPY) 0.90
US cents 0.74 Euro cents (May 2004)
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3-2. Sensitivity analysis Sensitivity analysis
in marginal prices (MPs) of electricity from
different renewables

• Optimal portfolios vary indifferent MPs of
  electricity.

Example MP of electricity from wind is set low
due to its instability.
less wind
more biomass
lower
lower
MP of electricity from wind (JPY/kWh)
MP of electricityfrom biomass (JPY/kWh)
MP of electricityfrom biomass (JPY/kWh)
MP of electricity from wind (JPY/kWh)
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3-2. Sensitivity analysis Sensitivity analysis
in marginal prices (MPs) of electricity from
different renewables

• Certificate prices and additional costs also vary
  in different MPs of electricity.

Example MP of electricity from wind is set low
due to its instability.
higher price
higher cost
lower
lower
MP of electricity from wind (JPY/kWh)
MP of electricityfrom biomass (JPY/kWh)
MP of electricityfrom biomass (JPY/kWh)
MP of electricity from wind (JPY/kWh)
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4. Brief conclusions

• Cost-effective strategy regarding volume, price
  and measures for implementation of RPS.
• Purchasing RES-E certificates from other
  generators.
• Trading RES-E certificates among retail
  suppliers.
• Long-term viewpoint gives incentive for
  front-loaded action.
• Constituent of renewable portfolio and economic
  impacts are different according to marginal
  prices of electricity.
• Further considerations
• Assess supply-demand situation more precisely
  from the viewpoint of regional resource
  endowments.
• Consider future RPS targets.