Japanese trader sees money in the wind

A company profile of Tomen Corp of Japan, a trading company that operates a broad portfolio of interests in the wind business and has almost 600 MW of wind power to its name, with at least as much on its books for the future.

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Japanese trading company and wind developer Tomen Corp, which has established itself to be a major player in the American and European wind markets over the last decade, is shifting its focus away from the United States and will instead concentrate on Europe and Japan. The strategy is mainly due to a change in economic incentives for wind energy in the US, explains Shigehito Nakamura from the Power and Utility Projects Division at Tomen's head office in Tokyo.

The US federal Production Tax Credit (PTC), which adds up to $0.017/kWh to utility payments for wind power, expires June 30 (Windpower Monthly, December 1998). Tomen is one of several companies rushing to finish projects in the US by that time in order to receive the subsidy. Besides a 1.8 MW addition to its 41 MW Foote Creek wind station in Wyoming, which Tomen has co-developed with SeaWest Energy Systems, Tomen has recently bought two wind farms in California with plans to repower them by the end of June. "Viking 1" and "Viking 2," previously owned by the Danish Viking Windfarm A/S and located near Tomen's 85 MW "Mojave 89" project, consist of 150, 150 kW units. Tomen will replace these with 40, 600 kW machines made by Japan's Mitsubishi Heavy Industries.

After June 30, though, Tomen will take its new development plans elsewhere, with no other plans scheduled even if the PTC is reinstated. "We wonder what will happen after that time," says Nakamura. Tomen began its wind development business in the US in 1987 because the country was one of the first to formulate a wind energy policy. Tomen is responsible for about 210 MW of wind power stations at five sites in the US (table).

As European countries started implementing wind energy policies in the early 1990s, Tomen entered the scene there. The company is currently behind 368 MW of wind plant England, Spain, Italy and Portugal, either operating or being built. In Spain, where Tomen owns three wind farms, the company is currently developing its concession to enlarge its Paxareiras project in Galicia to 525 MW (Windpower Monthly, June 1998). To date Paxareiras has 85 MW in operation, using Bonus 600 kW turbines, and an additional 45 MW is expected to be operating by the end of the year, Nakamura says.

Spain will probably be the most important market for Tomen in three years time, he adds. The company is looking at other sites in the country, but is waiting for further regions to introduce more concrete wind energy policies.

Elsewhere in Europe, Tomen is studying the potential in Greece and Turkey, but again, these countries lack wind energy policies for proper development, Nakamura points out. The ongoing discussion about offshore wind farms in countries like England, Norway and Sweden has piqued Tomen's interest as well, he says. Countries like Denmark and Holland, however, are not within Tomen's main business scope, he adds, since it seems difficult for a foreign independent power producer to operate in these countries.

Coming home

Although Tomen is based in Japan, it became involved with its first wind project in the country only last year -- a 20 MW station using Bonus 1 MW units, which are being installed near Tomamae on the northern island of Hokkaido (Windpower Monthly, December 1998).

The breakthrough in Japan came last April, when utilities created long term security by agreeing to sign 17-year contracts with wind electricity producers (Windpower Monthly, May 1998). While the move attracted Tomen, Nakamura thinks it will increase wind's penetration in the Japanese market overall, but he wonders as to what extent. One of the regions where the wind blows hardest, Hokkaido, is also one of the most difficult to establish wind farms in, he explains. There, the local utility's total grid capacity is only 5000 MW, which puts a limit to how much wind generated electricity can be added, he says.

Tomen is looking at other Japanese sites for future development -- including one near Wakkanai on Hokkaido -- with a goal to generate 200 MW of wind power in Japan in five years, says Nakamura. In the other high wind area, Okinawa in the far south, the local utility company is doing its own wind development research.

A possible liberation of the Japanese electricity market might add more spice to the country's wind industry, Nakamura adds. A government study group is examining the potential and must present a proposal before 2001. If electricity generation and distribution are separated, as has happened or is happening in several European countries, then new business will result, says Nakamura. Private energy developers like Tomen should then be able to sell their own electricity to their own factories. But whether or not this is feasible depends upon uncertainties such as transmission costs. One thing Nakamura is sure about is that liberation of the electricity market will take time.

Partners abroad

Outside of Japan, Tomen is not active in the Asian wind business. It remains aloof from China because of difficulties in operating as an independent power producer there, Nakamura says. The Indian wind market, meantime, seems crowded enough. If the Japanese government decides to use money from its overseas development program for wind, then Tomen will take the Asian market up for revision, he says.

It is Tomen's strategy to be an independent power producer, as well as an independent energy developer with no formal ties to special wind turbine suppliers. A turbine supplier is chosen case by case according to the site and price. Tomen chose Bonus over Mitsubishi, for instance, when it decided to use Bonus's 1 MW turbines for its first wind farm in Japan. So far Tomen has used wind turbines from Mitsubishi, Bonus and Vestas. While Tomen will probably be the sole owner of its wind farms in Japan, it usually works with local partners abroad. The ideal equity participation is 50-50, says the company.

Tomen is also involved in the gas, oil, coal, and geothermal sectors with interests in a combined operating capacity of 8000 MW. Its roles in power production are many varied, ranging from construction company to turnkey contractor to financier.

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