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Japan phasing out Coal, increasing RE Spending

BOTH Japan and Germany are finalizing plans to phase out coal fired power stations, in moves which will require a big increase in spending on renewable energy as well as increase the importance of natural gas and liquified natural gas (LNG) imports.

Japan plans to set up an expert panel to find agreement with electric utilities on closing older and less efficient coal fired plants, and shift towards more renewable energy, according to industry minister Hiroshi Kajiyama on July 3.

Japan has vast requirements for imported coal, oil and gas, and given its lack of resources, does not intend to fully phase out coal. However, local media report that around 100 out of 140 coal-fired facilities will be taken offline between now and 2030.

At present Japan generates around 32% of its electricity from coal, with Australia being its main supplier. It is also a major importer from Indonesia, Russia, the United States and Canada. Around 17% of Japanese power generation comes from solar and wind power.

The Ministry of Economy, Trade and Industry will set up an expert panel in July to come up with concrete proposals. “We will look for ways to usher out low-efficiency coal while ensuring there is enough capacity to maintain a stable energy supply,” says Kajiyama, adding that placing new restrictions on electric utilities could be an option.

Kajiyama also says the government will look for ways to promote renewable energy, including by reforming rules on using the power grid.

Japan, under its 2018 Strategic Energy Plan, targeted a reduction on coal generation to 26% of total requirements by 2030, while renewable energy would rise to 24%. It also has a sizeable programme of new nuclear reactors.

The government is also considering tougher requirements for companies that receive support such as Export Credit Agency financing for the sale of coal power generation technology. But it will not totally exit this export industry. The government position is that there are developing countries which need coal fired generation for economic growth.

Japan is itself still building new coal fired power plants, with 16 under construction. It has come in for plenty of criticism from environmental groups for its slow progress on hitting Paris Agreement targets on CO2 reduction.

The accelerated move on coal will increase demand for LNG on the part of Japanese electricity suppliers, and to that end Japanese firms are already taking the leading role in the Ichthys LNG project off the northern coast of Australia.

Japan is also stepping up imports from Russia. In September 2019 the participants in the Arctic LNG 2 project approved a final investment decision, with Mitsui & Co combining with JOGMEC to take a 10% stake.

Arctic LNG is 60% owned by Russian firm Novatek, and also counts Total, China National Petroleum Corporation and Abu Dhabi National Oil Company as shareholders with 10% each.

Much of the LNG from Arctic LNG 2 will be shipped to Asia via the Northern Route during the summer months, as is already the case with the Yamal LNG project, which includes Japanese firms as important customers.

Capital expenditures to launch the Arctic LNG 2 project at full capacity is estimated at US$21.3 billion, with production starting in 2023.

Germany steps up

Germany is also stepping up its energy cooperation with Russia as it phases out coal, which has led to a diplomatic row with the United States. The Trump administration has attempted to stop the completion of the Nord Stream 2 natural gas pipeline by putting in place sanctions on construction companies.

On July 3, the German government legislative package on fossil fuel was voted through the Bundestag (Parliament), setting a 2038 date for a total exit from coal fired power generation.

This was branded as much too slow by the Green Party and other opposition politicians, who accuse the coalition government of giving in to pressure from the coal lobby and power generation firms.

In spite of her climate friendly rhetoric, German Chancellor Angela Merkel has a poor track record when it comes to reducing CO2 emissions during her time in office, which began in 2005.

Germany was aided in showing progress from the base level calculation for CO2 emissions because during the 1990s it shut down many energy inefficient heavy industries in the former East Germany.

But the decision to phase out all nuclear power, taken after the Fukushima disaster in 2011, has had the effect of making coal a more important part of the overall energy mix. The last seven reactors will be shut down by December 2022. 

German coal fired plants include those burning lignite, which is more polluting than hard coal. Lignite is mined domestically. 

In June of this year a brand new coal fired power plant actually came on line. The 1,100MW Datteln 4 power plant is located in the state of North Rhine Westphalia, and is expected to be the last to be built in Germany, and its inauguration met with protests.

The US is pressuring Germany to look at using more LNG in an attempt to boost its own exports. But the comparatively short distance between Russian natural gas terminals and Germany means that it is more cost effective to ship natural gas directly by pipeline.

Nord Stream’s business model is to provide gas transportation capacity for the natural gas coming from western Russia for distribution into the European gas grid. The gas transportation system is comprised of its twin, 1,224-kilometre pipelines through the Baltic Sea. Each has the capacity to transport 27.5 billion cubic metres of natural gas per year.

The Nord Stream twin pipeline system through the Baltic Sea runs from Vyborg, Russia to Lubmin near Greifswald, Germany. The pipelines were built and are operated by Nord Stream AG.

Nord Stream AG, based in Zug, Switzerland, is an international consortium of five companies. They are Gazprom with 51%, leading German energy companies Wintershall Dea GmbH and PEGI/E.ON with 15.5% each, and Dutch natural gas infrastructure company N.V. Nederlandse Gasunie and French energy provider ENGIE with 9% each.

The Nord Stream route crosses the Exclusive Economic Zones of Russia, Finland, Sweden, Denmark and Germany, as well as the territorial waters of Russia, Denmark, and Germany.

The twin pipelines of Nord Stream 1 began pumping gas in 2011 and 2012, respectively. A 917-kilometre onshore pipeline in Russian territory built by Gazprom connects Nord Stream to the Russian gas transmission system. Two onshore connections from Greifswald to the south and west of Germany, with a total length of more than 900 kilometres, connect the pipeline with the European gas transmission system. Total investment in the pipeline system was 7.4 billion euros (US$8.3 billion).

The Nord Stream 2 twin pipeline currently under construction runs approximately 1,230 kilometres through the Baltic Sea from Russia to Germany, a route that largely runs parallel to Nord Stream 1, and, according to Chancellor Merkel on July 1 in response to a question in parliment, Germany is committed to finishing the project.

Consequently, on July 6, the Danish Energy Agency announced that it has decided that Nord Stream 2 may use pipelaying vessels with anchors in connection with construction. Only 160 kilometres of pipeline still needs to be laid in Danish waters.

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