JapanJapan’’s Energy Policys Energy Policy

April 26,2006April 26,2006

Atsushi TAKETANIAtsushi TAKETANIEmbassy of JAPANEmbassy of JAPAN

2

Source: METI

Total Primary Energy Supply in JapanTotal Primary Energy Supply in Japan

Coal

Oil

Natural GasNuclear

Hydro

New Energy & others

0100200300400500600700

1965 1970 1975 1980 1985 1990 1995

100m

illio

nK

L<

Oil

Eq

uiv

alen

t>

2001

1st Oil Crisisin 1973 2nd Oil Crisis

in 1979

77% 49%

Gulf Warin 1991

Japan USA UK France Germany Italy EU

Dependence on Oil 49% 39% 35% 34% 37% 51% 40%Dependence on Oil Imports 99.7% 60% ?54? 98% 97% 94% 74%

Dependence on Middle East 87% 23% 5% 24% 10% 30% 22%

Comparison of structure of energy supply with other countriesComparison of structure of energy supply with other countries(Year 2002) (%)(Year 2002) (%)

JapanJapan’’s Energy Supplys Energy Supply

Source :IEA

3

Dependence on OilDependence on Oil

　Dependence on oil has dropped below 50% over the past 30 years. Theshare of oil to total power generated has fallen to 11%.

　However, Japan still depends on overseas fossil fuels for 80% of its primaryenergy supply. Thus, further diversification of energy supply is necessary.

【Figure 3-1: Changes in Shares of Primary Energy Supply】 【Figure 3-2: Changes in Share of Power Generated】

38%

59%

76%69%

54%47%

0%

0%

2%

3%

4%

3%

41%

27%

15%

14%

16%

20%

1%

1%

2%

5%

10% 14%

0%

0%

1%4%

9% 9%20%12%

5% 6% 7% 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1960 1965 1973 1979 1990 2003

Renewable/newenergy,

etc.

Nuclear power

Natural gas

Coal

LPG

Oil

Source: Created based on the Agency for Natural Resources and Energy, “Comprehensive Energy Statistics.”

19%

31%

73%

53%

29%

11%

29%

26%

5%

4%

10%

24%

0%

0%

2%

14%

22% 28%0%

0%

3%

14%27%

26%

0%

0%

1% 1%1% 1%

52%

42%

16% 15%11% 10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1960 1965 1973 1979 1990 2003

Renewable/newenergy, etc.

Pumped hydropower

Nuclear power

LNG

Coal

Oil, etc.

Source: Created based on the Agency for Natural Resources and Energy, “Outline of Electric Power Development.”

Changes in Environment of Japan Changes in Environment of Japan’’s Energy Policys Energy Policy

(1) Structural changes in international oil market(1) Structural changes in international oil market(2) Increase in energy demand in Asian region(2) Increase in energy demand in Asian region(3) Increase in Oil demand and dependence on Middle(3) Increase in Oil demand and dependence on Middle East East(4) Increase of environmental restraints(4) Increase of environmental restraints　　　　　　→→Entry into force of the Kyoto ProtocolEntry into force of the Kyoto Protocol

Ministry of Economy, Trade and Industry hasMinistry of Economy, Trade and Industry hasembarked on a review of the energy policy.embarked on a review of the energy policy.The final reThe final report will be issued in May 2006.port will be issued in May 2006.

5

World Primary Energy Supply Outlook by RegionWorld Primary Energy Supply Outlook by Region

Source: IEA/World Energy Outlook 2004

Primary Energy Supply Outlook in Asian RegionPrimary Energy Supply Outlook in Asian Region

Source: DOE/EIA International Energy Outlook 2004

Increase in Energy Demand in Asian regionIncrease in Energy Demand in Asian region

36%39%42%

45%

56%

9%9%

10%

10%

15%

15%

14%

13%

12%

7%

21%

20%

19%

18%

12%

6%

5%

5%

4%

4%

5%

5%

4%

4%

1%

7%

6%

5%

5%

4%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1971 2002 2010 2020 2030

?iMtoe)

5,536

10,345

12,194

14,404

16,487

OECD?iExcludingJapan and Korea?j

Former USSR

China

Asia?iIncludingJapan and Korea?j

Latin America

Middle East

Africa

447.5

547.5

657.5675

992.5

2275

637.5

1135

2060

0

500

1000

1500

2000

2500

1990 2001 2025

(Mtoe)

Japan

China

Other Asia

6

World Primary Energy Supply Outlook by SourcesWorld Primary Energy Supply Outlook by Sources

World Oil Supply Outlook by RegionsWorld Oil Supply Outlook by Regions

Total Supply ：77mb/d Total Supply :121.3mb/d

Asia：India、ASEAN（excluding Indonesia）etc.

出典：IEA/World EnergyOutlook(2004)

20022002 20302030

Increase in Oil Demand and Dependence on Middle EastIncrease in Oil Demand and Dependence on Middle East

22%22%23%23%25%

35%35%

35%36%

44%

25%

24%

22%

21%

16%

5%

5%

6%

7%

1%

2%

2%

2%

2%

2%

10%

10%

10%

11%

12%

2%

1%

1%

1%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1971 2002 2010 2020 2030

?iMtoe?j

5,536

10,345

12,194

14,404

16,487

Coal

Oil

Natural Gas

Nuclear

Hydrogen

Biomass andwaste

Otherrenewables

Source: IEA/World Energy Outlook 2004

OECD28%

Other16%

Asia3%

China4%

Former USSR12% Other OPEC

12%

OPEC Middle East25%

OPEC:37%OECD10%

Other20%

Asia1%

China2%

Former USSR13%

Other OPEC11%

OPEC Middle East43%

OPEC?F54%

7

-10

-5

0

5

10

15

20

1990

1995

2000

2010

（％）

Co

mp

ared

wit

h C

O2

em

issi

on

s o

f 1

99

0

The actual level of CO2 emission caused by energy consumption,The actual level of CO2 emission caused by energy consumption,and Japanand Japan’’s target for 2010s target for 2010＋

＋

＋

＋

Kyoto Target 　-6%

20%

6%

Kyoto Protocol Target Kyoto Protocol TargetThe Kyoto protocol entered into force on 16 February 2005 followingThe Kyoto protocol entered into force on 16 February 2005 followingratification by Russia.ratification by Russia. 　　　　　　　

Formulate a ‘legal plan for achievement of Kyoto Protocol Target’instead of the present revision of ‘Guideline of Measures to PreventGlobal Warming’.

The law concerning implementation of global warming countermeasures will takecomplete effect.

2010

8

The Basic Principles of JapanThe Basic Principles of Japan’’s Energy Policys Energy PolicyStipulated in The Basic Law on Energy Policy-Making Stipulated in The Basic Law on Energy Policy-Making （（2002/62002/6））

Harmony Harmony with Environmentwith Environment

UsageUsage of Market of Market

MechanismsMechanisms

Assurance of Assurance of Stable SupplyStable Supply

**Basic Plan on Energy : endorsed by the Cabinet on October 7, 2003Basic Plan on Energy : endorsed by the Cabinet on October 7, 2003

9

Medium-to-Long Term Energy StrategiesMedium-to-Long Term Energy Strategies

(1) Promotion of Energy Conservation

(2) Diversification of Energy Supply Sources　　

(3) Achievements and Targets forImplementation of New Energy

(4) Energy Technology Innovation

(5) Constructing Regional and Global Networks

10

*Energy Consumption in 2001 （ｋｌ:Oil Equivalent）/GDP in 2001* Converting Japan as 1

　　Energy ConservationEnergy Conservation

Comparison of Energy Consumption per GDPComparison of Energy Consumption per GDP

2.7

1.9

1.61.4

1.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Japan USA UK France Germany120110Å@180100

Cement

Å|Å|Å|161100Paper

120118100Chemicals

111103112118100Steel

GermanyFranceUKUSAJapanÅ@

International Comparison of EnergyInternational Comparison of EnergyConsumption Rates (Japan=100)Consumption Rates (Japan=100)

Source : Subcommittee on Demand & Supply, AdvisoryCommittee for Natural Resources and Energy, Interim Report1998

※Chemicals shows the unit of soda industry.※Cement shows the unit of calcination process.

11

Uniformmanagement

Radical Change of the Law Concerning the RationalRadical Change of the Law Concerning the RationalUse of Energy (The Energy Conservation Law)Use of Energy (The Energy Conservation Law)

Factories and Businesses

Type1 specified energymanagement company*Control of heat and

electricity added together

Type1specified heatmanagement

factoryOver 3,000kl

Type1specifiedelectricity

managementfactory

Over 12GWh

＜Obligations＞ ① Formulation of medium-to-long termplan ② Regular report ③ Appointment of energy management

Factories and businesses Targeted forenergy conservation ： 10,000 → some tens of thousands

Transportation

・Cargo owners・Transportation companies・Passenger　　　transportcompanies

＜Obligations＞① Formulation of action plan② Regular reports

No regulation

House andBuildings

Residences

Residences

Fulfill energyefficiency measures,such as insulationefficiency,concerning housesand buildings

＜Obligations＞House: Publication of guidelineBuilding：Notificationof energy efficiency measures

※Improvement of the factory and businessmanagement system in order to manage heat andelectricity integrally※Type2 specified energy management factoriesabsolved of obligations should also manage heatand electricity integrally.

Newly targeted

Retailer

＜Obligations＞・Achievement ofTop runner standard・Display of energy consumption efficiency

・Display ofannualconsumption ofelectricity andfuel efficiency

newly targeted

Top runner equipments

18 items (cars, air conditioner, etc.)

No regulation

Manufacturer

【Same as at present】

CurrentCurrent

After revisionAfter revision

EnergySupplier

No regulation

Power companyGas company

Newly targeted

・Implementation ofenergy efficiencypromotion business（informationprovision toconsumers)

12

Stockpiling Stockpiling of Oil and LPGof Oil and LPG

● National oil stockpiling bases : 10

National LPG stockpiling bases (under construction) : 5

Source: JNOC

0

2,000

4,000

6,000

8,000

10,000

12,000

7 2 7 3 7 4 7 5 7 6 7 7 7 8 7 9 8 0 8 1 8 2 8 3 8 4 8 5 8 6 8 7 8 8 8 9 9 0 9 1 9 2 9 3 9 4 9 5 9 6 9 7 9 8 9 9 0 0 0 1 0 2

???

Government stockpile

Private sector stockpile

81days

91days

*as of 31Dec. 2004

13

Diversification of Energy Supply SourcesDiversification of Energy Supply Sources：：Sakhalin ProjectsSakhalin Projects

2007:2007:CommencementCommencement

ofofnatural gas bynatural gas byLNG *planningLNG *planningmax. 9.6MMt/yrmax. 9.6MMt/yr

2008:2008:Commencement ofCommencement ofnatural gas bynatural gas bypipeline *planningpipeline *planningmax. 6MMt/yrmax. 6MMt/yrlength: 1,300-1,600kmlength: 1,300-1,600km

1999:1999:CommencementCommencement

ofofoil productionoil productionMax. 180,000B/DMax. 180,000B/D

2005:2005:CommencementCommencementof oil productionof oil productionmax. 250,000B/Dmax. 250,000B/D

ScheduleSchedule

10 billion USD10 billion USD12 billion USD12 billion USDGrand TotalGrand TotalProjectProjectCostCost

Gas: approx.Gas: approx.17TCF17TCF

Gas: approx.Gas: approx.17TCF17TCF

Oil: approx.1.1Oil: approx.1.1billion BBLbillion BBL

Oil: approx.2.3Oil: approx.2.3billion BBLbillion BBLRecoverableRecoverable

ReservesReserves

Sakhalin-2Sakhalin-2

__

Sakhalin-1Sakhalin-1__

Source: Report from related companies

Sakhalin-1

Sakhalin-2

14

Acceleration of Shift to Natural Gas Acceleration of Shift to Natural GasMerits of Natural GasMerits of Natural Gas

☆☆Promising as a source of hydrogen for fuel cells and distributed generationPromising as a source of hydrogen for fuel cells and distributed generation(e.g. co-generation)(e.g. co-generation)　　　　

☆☆Environment friendlyEnvironment friendly☆☆Stable supply sourceStable supply source(e.g. Asia-Pacific, etc.)

Main Measures to Promote Natural GasMain Measures to Promote Natural Gas

☆☆　　Promotion of Domestic Pipeline ProjectsPromotion of Domestic Pipeline Projects

☆☆　　Promotion of new form of utilization (GTL/ DME)Promotion of new form of utilization (GTL/ DME)

Oman2.8%

USA2.1%

Other0.1%

UAE9.0%

Brunei10.9%

Qatar11.3%

Australia13.1%

Malaysia20.8%

Indonesia29.9%

15

Nuclear power generation is a main power source that accounts for about one- third of the total electricity generation in Japan.

At present, Japan has 54 nuclear power generation units in operation (3units are now under construction). There are also plans to build additional11 units in the future.

Promotion of Nuclear PowerPromotion of Nuclear PowerPromotion of Nuclear Power

Development Plan of Nuclear Power Plant

Utilities Plant name GrossCapacity(MW)

Date ofconstruction

start

Date ofcommercialoperation

Currentstatus

Hokkaido Tomari-3 912 November 2003 December 2009 1*Namie-Odaka 825 Fiscal 2011 Fiscal 2016

Higashidori-2 1385 In or after fiscal2011

In or after fiscal2016

Fukushima I-7 1380 April 2007 October 2011 *Fukushima II-8 1380 April 2007 October 2012 *Higashidori-1 1385 Fiscal 2007 Fiscal 2013 *

Higashidori-2 1385 In or after fiscal2009

In or after fiscal2015

Hokuriku Shika-2 1358 August 1999 March 2006 1*Shimane-3 1373 December 2005 December 2011 1*

Kaminoseki-1 1373 Fiscal 2009 Fiscal 2014 *Kaminoseki-2 1373 Fiscal 2012 Fiscal 2017

J-Power Ohma 1383 August 2006 March 2012 *JAPC Tsuruga-3 1538 May 2007 March 2014 *

Tsuruga-4 1538 May 2007 March 2015 *Total

Source: FY 2005 Power Supply Plans

Note 2: * represents the 10 nuclear power plants that are scheduled to be in commercial operation inor before fiscal 2014.

Tohoku

Note 1: 1 represents the plant that is now under construction.14 units 18,588MW

Tokyo

Chugoku

OpetratingOpetrating : 54 units : 54 unitsUnder construction : 3Under construction : 3unitsunits

Note: The units under construction representthose units that have been given approvals toinstall nuclear reactors and their constructionplans have been approved.

J-Power Ohma (prepare to start construction)

Kansai Mihama 1-3, Ohi 1-3, Takahama 1-4 (operating)

Hokkaido Tomari 1,2 (operating) Tomari 3 (under construction)

Kyushu Genkai 1-4 (operating)

Tokyo Kashiwazaki Kariwa 1-7 (operating)

JAPC Tsuruga 1,2 (operating) Tsuruga 3,4 (prepare to start construction)

Hokuriku Shika 1 (operating) Shika 2 (under construction)

Chugoku Shimane 1,2 (operating) Shimane 3 (under construction)

Kyushu Sendai 1,2 (operating)

Chugoku Kaminoseki 1,2 (prepare to start construction)

Shikoku Ikata 1-3 (operating)

Chubu Hamaoka 1-5 (operating)

JAPC Tokai (operation terminated) Tokai II (operating)

Tokyo Fukushima II1-4 (operating)

TokyoFukushima I 1-6 (operating)7,8 (prepare to start construction)

Tohoku Namie Odaka (prepare to start construction)

Tohoku Onagawa 1-3 (operating)

TohokuHigashidori 1 (operating)Higashidori 2 (prepare tostart construction)

TokyoHigashidori 1,2 (prepare tostart construction)

16

Deregulation and Nuclear PowerDeregulation and Nuclear Power•The measures to maintain nuclear power generation amid the deregulation

Maintenance of Robustness in the Field of Technology and Human ResourcesMaintenance of Robustness in the Field of Technology and Human Resources　(Measures for large-scale construction of replacement reactors around 2030)

•Project to develop next-generation light-water reactors (the project by cooperationbetween the government and the private sector for the first time in 20 years)

•Measures for developing human resources. (to support local efforts for development offield service engineers)

•Export business of the nuclear power industry

Steady Promotion of Nuclear Fuel CycleSteady Promotion of Nuclear Fuel Cycle•Scenario to start commercial introduction of fast-breeder reactors (FBRs) in 2050

Compatibility of Non-Proliferation and the Peaceful Uses of Atomic EnergyCompatibility of Non-Proliferation and the Peaceful Uses of Atomic Energy•Discussion on the international nuclear management mechanism

Future Efforts for Nuclear Energy PolicyFuture Efforts for Nuclear Energy PolicyFuture Efforts for Nuclear Energy Policy

The Advisory Committee to the Minister for Economy, Trade andIndustry plans to discuss the following wide-ranging issues and toconclude in summer 2006.

17

Achievements and Targets for Implementation of New EnergyAchievements and Targets for Implementation of New Energy

* Unused energy: includes snow and ice cold heat.

* Black liquor and scrap wood are forms of biomass so this category includes those parts used for power generation.

* Clean energy vehicles: include electric vehicles, fuel cell vehicles, hybrid vehicles, natural gas cars, methanol vehicles and diesel alternative LPgas vehicles.

* Natural gas cogeneration: include production by fuel cells.

New energy on the demand sideNew energy on the demand sideNew energy on the supply sideNew energy on the supply side

19,100,000 Kl(Approximately

3%)

6,930,000 Kl(1.2%)

Total(gross supply of

primary energy ratio)

4,940,000 Kl4,710,000 KlBlack liquor and scrapwood, etc*

580,000 Kl60,000 KlUnused energy *

670,000 Kl-Thermal utilization ofbiomass

140,000 Kl36,000 KlThermal utilization ofwaste

4,390,000 Kl740,000 KlSolar thermalutilizationField of use of energy

340,000 Kl(330,000 kW)

226,000 Kl218,000 kW)

Biomass generation

5,520,000 Kl(4,170,000 kW)

1,520,000 Kl(1,400,000 kW)

Waste powergeneration

1,340,000 Kl(3,000,000 kW)

189,000 Kl(46,3000,000

kW)

Wind powergeneration

1,180,000 Kl(4,820,000 kW )

156,000Kl(637,000 kW)

Photovoltaic powergenerationField of pow

er gen erat ion

Targets forFY2010

FY2002

Fuel cells

Natural gascogeneration *

FY2001

2,200,000 kW12,000K kW

4,640,000 kW1,900,000 kW

3,480,000vehicles

115,000vehicles

Clean energy vehicles *

Targets forFY2010

Renewables Portfolio Standard Lawenforced in April 2003 imposes a certainamount (more than 1.35% in 2010) ofNew Energy usage on electric industry.Consequently, it leads to the expansionof New Energy.

【RPS Law】

18

Installed Photovoltaic(PV) PowerInstalled Photovoltaic(PV) Power< Cumulative >< Cumulative >

Inst

alle

d P

V P

ow

er (

MW

)

Wind Power in JapanWind Power in Japan< Cumulative >< Cumulative >

Source: NEDO

New Energy New Energy

0

100

200

300

400

500

600

700

800

900

(MW?

Japan Germany USA Netherlands Australia Spain Italy France

World Total World Total (2003)(2003)　　　　　　1,8091,809〔〔MWMW〕〕　　JapanJapan　　　　 860MW860MW　　GermanyGermany　　410MW410MW　　USAUSA　　 275MW275MW

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

(MW)

0

100

200

300

400

500

600

700

800Number

Energy Output

Number

FY2003FY2003678M678MWW

Source: Trends in Photovoltaic Applications/ IEA/ PVPS（2003）

*IEA/ PVPS members; Australia, Austria, Canada, Switzerland, Denmark, Germany, Spain, Finland, France, UK, Israel, Italy, Japan, Korea, Mexico, Netherlands, Norway, Portugal, Sweden, USA

735

19

【Targets for introduction of fuel cells】○Fuel Cell Vehicles : about 50,000 by 2010 about 5,000,000 by 2020

○Stationary Fuel Cells : about 2.2GW by 2010

Residential dispersed energy

Long-time usable power supply

－　Harmony with Environment

－　Assurance of Energy Security

－　Creation of new industries

－　Harmony with Environment

－　Assurance of Energy Security

－　Creation of new industries

Stationary Fuel CellStationary Fuel Cell Fuel-Cell VehicleFuel-Cell Vehicle

Portable Fuel CellPortable Fuel Cell High temperature typefuel cell

High temperature typefuel cell

Zero emission vehicle

Fuel Cell

　　

　　

H2O

H2

Polymer Electrolytemembrane

Chemicalchange

Highly efficient power generation

Power Control unit

Motor

Fuel Cell

Hydrogengas cylinder

O2

about 10GW by 2020

Energy Technology Innovation : Fuel Cells Energy Technology Innovation : Fuel Cells

20

MiddleEast

RussiaRussia

ProducingProducingcountriescountries

（ＡＰＥＣ）

Bilateral relations

Consumers：USA, Europe, China, Korea,ASEAN, India, etc.

Producers： Australia, Russia, SaudiArabia, Iran, etc.

（IEA）

Producer &consumerdialogue（IEF, etc.）

Industrializedconsuming countries

(APEC)

Asian ConsumingCountries

= ASEAN+3,India etc.

Asia Pacific EconomicCooperation (APEC)

Constructing Regional and Global NetworksConstructing Regional and Global Networks

New National Energy Strategy

<Background>-The world energy market has changed, due to the rapid growth in China and India- Tight energy supply will continue in the long term- Market will be more sensitive to the factor in the short terms such as hurricanes

The need for New National Energy Strategy in coordination with the private sector<Basic Concept> -Energy Security -Coping with Climate Change

<Time schedule>2006. Mar. Interim Report2006. May. Complete report of New National Energy Strategy Which might include: Targets for Higher Energy Conservation, Lower Oil Dependence, and More Nuclear Power