AMPONTAN

Japan from the inside out

Crony capitalism nouveau: green and Japanese

Posted by ampontan on Sunday, June 19, 2011

ONE OF Japan’s wealthiest men, entrepreneur Son Masayoshi made his mint by distributing software and taking on the NTT monopoly to provide broadband services. His idea to shift Japan from nuclear power to solar power, combined with Prime Minister Kan Naoto’s out-of-the-blue proposal at the recent summit for an impossibly sharp and rapid increase of solar power generation, has again turned him into a media darling while cogenerating suspicions of crony capitalism gone green.

University professor, author, and blogger Ikeda Nobuo wrote an article last week examining the Son scheme. Here’s part of it in English:

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Mr. Son has established the Natural Energy Council to work with local governments for building solar power generating plants, and they’ve already announced the cooperation of 34 of those governments. The governments will provide the land and Softbank (Son’s company) will provide the capital investment. They plan to build 10 solar energy plants nationwide generating 20,000 kW. Softbank has even modified their Articles of Incorporation to include “the power generation business” in the section dealing with their business content.

This enterprise has a serious problem, however. The unit cost of solar power generation is more than JPY 40/kWh, much higher than the unit costs for atomic or thermal power, which are less than JPY 10/kWh, so power companies won’t buy the power generated. Therefore, Mr. Son held a meeting with Prime Minister Kan Naoto on the day before he launched his initiative and extracted the promise that a system would be instituted in which all renewable energy would be purchased at a fixed cost.

This is a mandatory system in which the power companies must purchase the expensive solar power at a price the government determines. There is at present a scheme for purchasing the surplus power generated by homes and companies using solar cells at a price of JPY 42/kWh. The Cabinet approved a bill in March, however, that will require the purchase of all this power. Because that means the generated solar power will be purchased at JPY 42, anyone who can hold the costs below that amount will make a profit.

Meanwhile, the utilities charge about JPY 15 kWh for power consumption, so the new scheme creates a negative margin. But the power companies will pass that differential on to the consumer through a solar power surcharge. In short, those who bear the liability of the higher costs of Softbank’s solar power plants will be those who use electric power. This is tantamount to Softbank receiving subsidies from the government and taxing the user.

The more basic problem is what these solar power plants will resolve. Mr. Son seems to be inclining toward natural energy to shift from nuclear power, but solar power is useless for reducing nuclear power reliance. If all 10 mega-solar power plants are built, they will generate only 200,000 kW, or one-fifth the amount of one nuclear plant. Solar power generation requires 40 times the land area of nuclear power generation. The amount of land required to generate the one million kW of power produced by a nuclear plant would be equal to 1.5 times the land inside JR East’s Yamanote Line in Tokyo. Further, the solar power plants can’t be used on rainy days. It is not possible to rely on them to replace nuclear power.

If the objective is to reduce the reliance on nuclear power, a more effective way would be to increase thermal power. When the costs of waste material disposition and compensation for damages are factored in, the cost of generating nuclear power is not that much different from thermal power. Fuel costs will rise over the short term, but over the long term, cost savings will be achieved for the facilities and reprocessing.

Natural gas is a particularly important type of thermal power. There have been recent advances in the technology for extracting shale gas, and the costs are said to be cheaper than coal. The Middle East has been the major natural gas production region until now, so there was considerable political risk. But the United States is the largest producer of shale gas, and is estimated to have 160 years’ worth of reserves. It has become the view in the energy industry that natural gas will become the mainstay in 10 years’ time at the least.

Gas turbines are said to have poor energy efficiency, but using the combined cycle technology, the residual heat from using gas to operate the turbines can convert water to steam, achieving 1.5 times the conventional efficiency of thermal power. Cogeneration technology, in which the heat used in blast furnaces, for example, is created simultaneously with electric power, is also becoming more sophisticated. Greater innovation is likely to result if companies other than the power utilities become involved.

The power companies, however, control the transmission lines, making it difficult for other companies to get involved. It is the same situation that Mr. Son claimed was unfair competition when NTT monopolized the telecommunications infrastructure. Attempting to compete with them will require an investment of at least JPY 10 billion. None of the so-called independent PPS power companies could even seriously compete with Tokyo Electric and its zaibatsu affiliations and ties to gas companies.

(End translation)
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This is yet another demonstration that the fundamental things still apply as time goes by in the eternal intercontinental love match between Big Business and Big Government.

The calls for the separation of the power generation and transmission operations were so numerous and made so much sense that even Kan Naoto has come out in favor of them. Mr. Deregulation.

In an amusing piece of journalism, the Asahi-published weekly magazine Aera suggested that Mr. Kan’s support for this was the motivation behind the recent no confidence motion. They offered neither evidence nor quotes from suspicious anonymous sources (and actually allocated more space quoting named sources talking about the rambling wreck of Tokyo Tech). They said Tokyo Electric made substantial political contributions, which they surely do, but specified none of the people who received them. They also admitted the contributions were not close to the scale of the largesse distributed by construction companies.

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5 Responses to “Crony capitalism nouveau: green and Japanese”

  1. σ1 said

    Except the proposed new legislation would be extended to all sources of renewable/alternative energy, including geothermal energy. Japan’s geothermal potential is significant – expected to generate up to 23 nuclear plants worth of energy. However, it has its own problems, with most locations in natural parks and more importantly, after about 50 years or so thermal sites can be exhausted. With time they can (probably) be regenerated, but onsen owners in particular would be concerned. Shale gas is a replacement for oil and coal, not nuclear energy – its environmental footprint is dubious, and like oil and coal, exhaustible. It is obvious that energy security is going to be secured by a mix of different alternatives, and likely still including nuclear power, with carbon and exhaustible technologies as guarantees for stable supply. The benefit of most carbon sources of technology is not just that they are accessible but that input and output can be controlled more precisely than other sources, including nuclear power.

    It is interesting that Professor Ikeda factors in technology advancements for natural gas and thermal and co-generation, but shows shows an almost childish disinterest in future advances in solar technology with his “can’t be used on rainy days” comment. The main advances in solar will be related to nano-level efficiency improvements and advances in battery storage (two areas which Japan accelerates) which will mitigate some of these issues. It is true if mega-solar plants were relied upon then the amount of space required would be phenomenal – but that is the advantage of solar generation, unlike any other type of generation – its potential installation, in an non-invasive way, on almost any building.

    It is true that current discourse focusing on solar in the Japanese media and among Japanese politicians is simplistic. But what else would you expect?
    However, that is no excuse for a professor – he knows as well as anyone else that no serious person is advocating a complete turn to solar, and that future energy demands will be met up by a strategic combination of various sources of energy, likely both renewable and carbon-based. That said, the need for deregulation of the regional power monopolies would of course help things greatly in terms of spurring innovation. Although it has not made a lick in difference for consumer prices in New Zealand unfortunately, where there is separation of transmission and generation and nationally competitive electricity provision market.

  2. Tony said

    I thought the economic life of a geothermal plant was around 50 years rather than they exhaust their resource in that time. Of course, depending on the geothermal source, one may end in 50 years but generally geothermal plants economic life span of 50 years. This favours positively against most thermal and nuclear style power generation plants by an extra 10 years.

  3. σ1 said

    @Tony that could be true also, but I know with the geothermal plants we have here in NZ, (like Wairakei in 1958 which was one of the first commercial ventures anywhere AFAIK) are starting to become “diminished” ie the rate of extraction of heat energy is higher than the rate of heat flow from depth. In theory this should recover after a certain period of time in shutdown, although the thermal physics from place to place is bound to be different so it is unclear how long a period of time that would be. I understand that Wairakei extracts about 4-5 times amount the amount of energy than comes up from the depth. The plans were to keep Wairakei going for another 40 years but maybe it will be relooked at.

  4. Tony said

    I can see how that could happen. In regards to Ampontan’s post, it would seem to me the government will benefit more from supporting a variety of forms of alternative energy rather than just solar.

  5. […] When it comes to these so called “green” solar power stations here are the things that the people pushing these green schemes never seem to want to talk about: The more basic problem is what these solar power plants will resolve. Mr. Son seems to be inclining toward natural energy to shift from nuclear power, but solar power is useless for reducing nuclear power reliance. If all 10 mega-solar power plants are built, they will generate only 200,000 kW, or one-fifth the amount of one nuclear plant. Solar power generation requires 40 times the land area of nuclear power generation. The amount of land required to generate the one million kW of power produced by a nuclear plant would be equal to 1.5 times the land inside JR East’s Yamanote Line in Tokyo. Further, the solar power plants can’t be used on rainy days. It is not possible to rely on them to replace nuclear power.  [Ampontan] […]

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