Japan

Japan

Home market focus by global player

Japan is at a crucial turning point concerning the direction of its wind energy development, says the country's biggest independent wind power developer, Eurus Energy Japan Corporation. The company, a subsidiary of Eurus Energy Holdings Corporation, is busy seizing a large chunk of its home market while continuing to develop projects in the US and Europe.

Japan's Eurus Energy Holdings, the world's fifth largest wind plant developer, is busy seizing a large chunk of its home market while continuing to develop projects in its traditional stamping grounds in the United States and Europe

Japan is at a crucial turning point concerning the direction of its wind energy development, says the country's biggest independent wind power developer, Eurus Energy Japan Corporation (EEJ). The company is a subsidiary of Eurus Energy Holdings Corporation (EEH), founded in September 2002 when Tokyo Electric Power Company (TEPCO) joined Tomen Corporation as a co-owner of Tomen's global wind power business. TEPCO, with 60%, is the majority owner of EEH, which is one of the top five owners of wind plant in the world in terms of volume of megawatts.

EEJ, meantime, has secured a major chunk of the Japanese market. By March 2007 it expects to be operating 24% of the country's wind power capacity, adding 200 MW to its current 100 MW holding. Japan's wind development, currently amounting to about 650 MW, is driven by a government mandate on power companies, passed in March 2003, to source 1.35% of their electricity from renewables by 2010. A further 200 MW is forecast for the year up to March 2005 and around 1300 MW by March 2007.

According to EEJ and others active in the Japanese market, however, the government's overall aim for 3000 MW of wind capacity by 2010 will not be achieved unless the grid network is seriously upgraded. Other restrictions include government guidelines which, according to EEJ president Shigehito Nakamura, hinder the use of green belt areas and agricultural land for wind development.

The grid problem has contributed to the low interest from utilities in buying new wind energy this year to meet the renewables mandate. Utilities in the main wind regions of Hokkaido and Tohoku have failed to announce any plans to buy additional wind power this year. The only utility to do so is Kyushu Electric Power in the south. It plans to buy electricity from 50 MW of new wind plant, less than half the 120 MW it signed up for last year.

under review

The technical issues are under review by a committee for grid connection, set up by the Ministry of Economy, Trade and Industry (METI) in April. The result of the review is due this month. While the 200 MW already planned by EEJ will proceed, it has put all other plans for new projects on hold. "The utility owned grid network has become a major obstacle for further development in the wind energy sector," says Nakamura. "Were it not for technical grid problems and other restrictions, Eurus could install towards 1000 MW in Japan. About half of the projects could physically be in Hokkaido."

The electricity network, says Nakamura, is relatively weak and cannot deal with big fluctuations in power supply. At the same time the local grids of Japan's ten major utilities -- historically organised as independent units -- are not well connected. This is a particular problem between the windy northern part of Japan and the big metropolis of Tokyo. The main island of Hokkaido and the northern prefectures of Tohoku have the best potential wind resource in Japan. The Tokyo area, however, has poor winds and little available land area, jeopardising the local utility Tepco's chances of fulfilling its considerable obligation under the mandate.

Two frequencies

To complicate the issue further, the grids in the north and south of Japan run on different frequencies, making it difficult to exchange or trade electricity between the two. Utilities in the north operate at 50 hertz and those in the south at 60 hertz. The difference goes back to the 19th century when Japan opened up to the outside world. The southern part of the country got its electricity know-how from the United States. Tokyo and the northern part of Japan relied on technology from Europe.

Nakamura is hopeful the technical issues can be resolved. He is one of five wind developers on the 15 member grid review committee. The remaining ten consist of five representatives from utilities and five university professors. "The appointment of the committee and the short deadline indicates that the government takes the problem seriously," says Nakamura. He suggests a short and a long term solution to the grid problem will be proposed.

As an intermediate solution, he explains, wind plant operators may be required to restrict output when demand for electricity is low. Resulting losses sustained by wind plant operators could be covered by public subsidies from METI, he says. The long term solution is to upgrade and strengthen the grid infrastructure. Connecting Hokkaido, Tohoku and Tokyo is vital, he stresses.

Spanish supplier

Meanwhile, EEJ is proceeding with projects already past the starting post. These include two wind farms in Aomori-Prefecture -- 50 MW at Noheji and 12 MW at Kitanosawa. Both will use Gamesa Eólica G80 2 MW wind turbines from Spain, with construction scheduled to start in July 2005 and the wind farms expected to come online by November 2006. It is the first time Gamesa turbines will be used by Eurus in Japan, but the Spanish company already has a small presence in the country, having installed a 2 MW turbine for JF Engineering Corporation at Kushizaki last year.

Gamesa is also participating in a series of projects in Japan through Toshiba, according to the Spanish company, which states that the recent deal with EEJ "implies the beginning of the collaboration" between Gamesa Eólica and EEH in Japan.

The rest of the 200 MW planned by EEJ includes a 57 MW wind farm in Soya City and a 1 MW turbine in Hamatonbetsu city in Hokkaido. Both are expected to use 1 MW turbines from Mitsubishi Heavy Industries (MHI). Work on the sites has begun and electricity generation is expected to start in November 2005. MHI is also supplying 1 MW machines for a 43 MW wind farm being built by Eurus at Kamai in Akita-Prefecture, due online in December. In addition, EEJ is developing a 13 MW wind farm in Odanozawa village in Aomori Prefecture, which will use Danish 1 MW turbines from Bonus, and a 30 MW project of Vestas 2 MW units at Nishime in Akita Prefecture, both to be operational in the autumn.

Overseas activity

As a major player on the global wind power scene, Eurus plans to continue its long term focus on overseas development. Today it owns 230 MW of wind plant in the US and 545 MW across three countries in Europe, Spain, Italy and Britain, although the pace of overseas development has slowed in the last few years. In 2003, it added just 10 MW in Europe and 41 MW in the US.

In the coming year, Tsuchiya expects overseas development to increase significantly with Eurus aiming to develop another 200 MW in Europe and 100 MW in the US next year, if America reinstates wind's federal production tax credit.

In Europe, the company's immediate focus is Greece, where it is about to start construction on its first wind project in the country. The company has been scouting for wind sites in Greece for the last three years and its first venture will be two 20 MW projects in the Peloponese to be developed with a local Greek partner. Eurus hopes to build more wind power in the country, but the company's Shoji Tsuchiya says gaining all necessary permits is a long and tortuous process in Greece. In the future, Eurus expects its European activity to concentrate on Britain and Spain, although it declines to give more details.

Meanwhile, it is also looking at development in Australia and South Korea. Australia's renewable energy legislation, the Mandatory Renewable Energy Target (MRET), has attracted the company's attention, although EEJ is waiting for a sustained government commitment to the MRET legislation. In South Korea, potential local partners have approached Eurus with an offer to join them in project development.

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