Case Studies onFinancing Renewable Energy Development Japan22nd Meeting of the Expert Group on New and Renewable Energy Technologies

12-13 May 2004Honolulu, Hawaii, USA

Ms. Yayoi IIJIMA Chief Officer International Projects Dept. New Energy and Industrial Technology Development Organization (NEDO)

Principle of Japans Energy Policy: 3EsJapans New and Renewable Energy IndicatorsCost Competitiveness of NRECreation of Initial DemandNew Energy Budget Trend/Origin/AllocationPolicy Tools for NRE PromotionSupport Measures/SystemWind PowerPV PowerNEDOs Role in Japans New Energy Scheme2Outline

Harmony with Environment Lowering CO2 emission

Economic EfficiencyMarket mechanism Security of Energy Supply Alternatives to oil3Es*The Basic Plan for Energy Supply and Demand issued in October 2003 *Revision of long-term outlook for energy supply and demand is scheduled to be finalized this summer(1) Principle of Japans Energy Policy: 3Es3

(2.1) Japans New and Renewable Energy IndicatorsSupply SideNew EnergyRenewable Energy4

FY2001FY2010 IndicatorsPower generation Photovoltaic power generation 110,000 kl (452 MW)1,180,000 kl(4,820 MW)Wind power generation 127,000 kl (312 MW)1,340,000 kl (3,000 MW)Waste power generation 1,250,000 kl (1,110 MW) 5,520,000 kl (4,170 MW)Biomass generation 48,000 kl(71 MW)340,000 kl(330 MW)Energy utilizationSolar thermal utilization 820,000 kl4,390,000 klThermal utilization of waste 45,000 kl140,000 klThermal utilization of biomass -670,000 klUnused energy (incl. snow-ice)44,000 kl580,000 klBlack liquor and scrap wood, etc* 4,460,000 kl4,940,000 klTotal(ratio of totalprimary energy supply) 6,900,000 kl

(1.2%)19,100,000 kl

(approx. 3%)

FY2001FY2010 IndicatorsTotal New Energy7 million kl 19 million klHydro Power20 million kl20 million klGeothermal 1 million kl1 million klGrand Total (ratio of total primary energy supply) 28 million kl

(4.6%)40 million kl

(approx. 7%)

Demand Side

(1)Includes electric vehicles, fuel cell vehicles, hybrid vehicles, natural gas vehicles, methanol vehicles, and diesel-alternative LP gas vehicles.

(2) Including those powered by fuel cells. (2.2) Japans New and Renewable Energy IndicatorsClean Energy Vehicles (1) 115,000 vehicles3,480,000 vehiclesNatural Gas Cogeneration (2) 1,190,000 kW4,640,000 kWFuel cells 12,000 kW2,200,000 kW FY 2001 FY 2010 Indicators5

(3) Cost Competitiveness of NREPower generation cost of new energy (unit: yen/kWh) [Source] Report (July 2001) by the New Energy Subcommittee of the Advisory Committee on Energy and Natural Resources, and othersPower generation cost by power source (unit: yen/kWh) [Source] Data of the 70th Nuclear Power Subcommittee (December 1999) of the Advisory Committee for Energy 6

(4) Creation of Initial Demand7

(5.1) Japans Policy Tools for NRE PromotionMarket Expansion by Synergy of These Measures8

Legal aspect (5.2) Recent Policy Strengthening to Expand NRE IntroductionJan. 2002Added two new energy sources: biomass and snow ice, to the new energy sources stipulated in the Law concerning Promotion of the Use of New Energy (in fiscal 2002, the Government began supporting projects to introduce these energies).May 2002Establishment of the Special Measures Law concerning the Use of New Energy, etc., by Electric Retailers. This Law made it obligatory, starting in April 2003, for electricity retailers to increase their ratio of power generated by new energy sources, such as photovoltaic power, wind power, and biomass.)Collaboration among ministries 9

1 US$ \106(6.1) New and Renewable Energy Budget Trend10

Graph1

47.9

56

74.8

87.5

92.5

110.5

144.9

156.8

161.3

452

528

706

825

873

1,042

1,367

1,479

1,522

million US$

(Fiscal year)

billion yen

Sheet1

199619971998199920002001200220032004

47.956.074.887.592.5110.5144.9156.8161.3

Sheet1

0

0

0

0

0

0

0

&A

Page &P

Sheet2

Sheet3

Special A/C for Petroleum and Sophisticated Structure of Energy Supply/Demand(Petro: \2,040/kl; LPG: \800/t; LNG: \849/t; Coal: \230/t; etc.)Petroleum-related MeasuresEnergy ConservationNatGas Utilization PromotionEnvironmentally Friendly Utilization of CoalNew Energy UtilizationSpecial A/C for Electric Power Development Acceleration Measures(Electricity sales: \0.425/kWh)Regional Power Source DevelopmentNuclear Energy Utilization PromotionHydro/Thermal Energy UtilizationEtc.Etc.\63.5B\87.6B(6.2) Overview of NRE Budget Origin (FY 2004)11

(6.3) NRE Budget Allocation

Budget for FY2004: about \42.4 billion US$400 million Fundamental investigation Development for practical applicationBudget for FY2004: about \26.5 billion US$250 million Field tests Demonstrative researchBudget for FY2004: about \92.4 billion US$872 million Creation of initial demand for inducing market independency Creation of environment hospitable to introducing leading-edge new energy systems Financial support (tax system, fiscal investment and loans) The Green Purchase Law Enlightenment and public information activities Renewable Portfolio Standard 1 US$ \106Technological DevelopmentDemonstrative Testing. Introduction Promotion (full utilization of market mechanism)12

Subsidy Program for Residential PV Systems(7.1) New and Renewable Energy Introduction Support MeasuresProject for Promoting the Local Introduction of New EnergiesProject for Supporting New Energy Enterprises Project for Promoting the Local Deployment of New EnergiesProject for Promotion of Non-Profit Activities on New Energy and Energy ConservationProject for Supporting Regional Activities for Prevention of Global WarmingProject for Establishing New Energy Visions at the Local LevelBy offering opportunities to create initial demand, these measures aim to improve the cost effectiveness of new and renewable energy, with costs expected to be reduced in the future through economies of scale.13

(7.2) Support System to Expand New and Renewable Energy Use

Study on project introduction and project implementationIntroduction planningStudy on financial sourceProject methodExperimental testing, etc. Coordination with related agencies, establishment of implementation plan, designing,Installation construction Judgment on project implementation Establishment of regional new energy plansComprehension and analysis of regional characteristicsEstablishment of individual project plans, etc. Start of service of new energy General introduction flow Projects, such as establishment of regional new energy visions (for local public bodies)FY2003 budget: 1,320 million yen FY2004 budget: 1,180 million yen Field Test Project (for enterprises and local public bodies)FY2003 budget: 6,900 million yen FY2004 budget: 8,290 million yen

Regional New Energy Introduction Promotion Project (for local public bodies)FY2003 budget: 12,710 million yen FY2004 budget: 11,030 million yenSupport Main support systemsSupport New Energy Enterprise Support Project (for enterprises)FY2003 budget: 38,820 million yen FY2004 budget: 48,260 million yen Support 14

Supporting the Dissemination of Japanese New Energy/Energy Efficiency Equipment and TechnologiesExamination Stage by Developing Economies Govt(Support for Master Plan Preparation, Model Projects, etc.)Implementation Stage by Developing Economies Govt (Supported by JBICs Untied Loans/ODA)

Private Sector Activity Stage(Supported by JBICs Export Loans, Overseas Investment Loans, F/S Preparation)JBICMETI, NEDO, JICA(7.3) Japan Bank for International Cooperation (JBIC)15

Export LoansSupport for the Export of New Energy/Energy Efficiency Equipment and Technologies (e.g. Wind Power Plant, Solar Power Plant, etc.) to Developing Economies (Support for Private Sector Business)Overseas Investment LoansSupport for the Overseas Investment by Japanese Private Companies of New Energy/Energy Efficiency Projects in Developing Economies (incl. CDM/JI, ESCO) (Support for Private Sector Business)Untied Loans / ODASupport for the Introduction of New Energy/Energy Efficiency Projects by Developing Economies Government or Public Corporation (Support for Public Sector)

(7.4) JBIC-Financial Support16

Mexico- Geothermal Power Generation Project (BOT, 25MW4)(Export Loan, 2000)

Philippines- Geothermal Power Generation Project by Philippine National Oil Company (Untied Loan & Guarantee, 1994/1999)

Purchase of Solar Power Battery Maker by Japanese Firms (Overseas Investment Loan, 1994)(7.5) JBIC SupportThree Examples17

Fiscal YearSource: NEDO research data(8.1) Wind Power Generation Capacity in Japan End of FY200368.4MW, 738Turbines (Preliminary)Introduction Volume[MW]Number of Turbines18

Graph2

0.13

0.29

0.210

0.418

0.524

137

1.147

1.970

3.5108

8.1180

14.2248

31.3431

46.3576

68.4738

Introduction Volume [MW]

Number of Turbines

23456789101112131415

19901991199219931994199519961997199819992000200120022003

W0.10.20.20.40.51.01.11.93.58.114.231.346.368.4

39101824374770108180248431576738

&A

Page &P

Introduction Volume [MW]

Number of Turbines

14,609

6,374

6,202

3,110

2,110

912

904

684

649

568

Sheet3

Note 1: US and European data are from AWEA and EWEANote 2: The data of Japan is from NEDO (preliminary value)(8.2) International ComparisonsInstalled Wind Capacity (MW)19

* The incentive was reduced to 180,000 yen/kW for the second half according to subscriber interest and the price of PV systems. There was a need to reduce it to 150,000 yen/kW during the second half. (9.1) Residential PV System Subsidy Scheme20

YearSubsidyInstalled Capacity (Cumulative MW)19971/3 of installation cost (Max: \340,000/kW)32.819981/3 of installation cost (Max: \340,000/kW)56.919991/3 of installation cost (Max: \340,000/kW)114.62000Max: \270,000/kW*189.02001\120,000/kW280.02002\100,000/kW421.4

(9.2) PV Power Generation Capacity in Japan 21

Graph1

370024

200031

170043

120060

104091

1020133

930209

840330

750453

710637

\58/kWh

\52/kWh

\49/kWh

\65/kWh

\71/kWh

\72/kWh

\82/kWh

\120/kWh

\140/kWh

\260/kWh

Cost of residential PV system (unit: 1,000JPYen(\))

Applications of PV power generation (unit: 1MW)

trial period

diffusion project

Power generation cost per 1kWh

Installation costper 1kW

Sheet1

year1993199419951996199719981999200020012002

price(thousand yen/kW)370020001700120010401020930840750710

Total Capacity2431436091133209330453637

Sheet1

00

00

00

00

00

00

00

00

00

00

&A

Page &P

\58/kWh

\52/kWh

\49/kWh

\65/kWh

\71/kWh

\72/kWh

\82/kWh

\120/kWh

\140/kWh

\260/kWh

Cost of photovoltaic power system for households (unit: 1,000JPYen(\))

Applications of photovoltaic power generation (unit: 1MW)

trial period

diffusion project

power generation cost per 1kWh

Installation costper 1kW

Source: IEA/PVPS (end of 2002)(9.3) International ComparisonsInstalled PV Capacity (MW)22

Support for experiment-al testing and introduction Research and development / technological development Development of revolutionary next-generation technology Establishment of infrastructure in the software aspect (systems) International cooperation Integrated linkage-type experimental testing Private companies efforts Development of advanced solar battery technology Development of diffusion promotion-type technology Research and development, and investigation, on common basic technology (Research and development on common basic technology to meet new needs) (Medium- and long-term technological development) Electric companies Makers, etc.Review of related systems and regulations (construction of certification systems, etc.) Special Measures Law on Use of New Energy, etc., by Electric Enterprises (from 2003) International joint experimental development on photovoltaic power generation systems, etc. Market expansion through surplus electricity purchase scheme Support by a green power system Economic target Measures toward introduction and diffusion Implementation of technological development for further cost reduction and efficiency improvement Establishment of essential technology Diffusion stage Stage of experimental testing and introduction Power generation cost 30 yen/kW25 yen/kW 1015 yen/kW 510 yen/kW (introduction level) Module cost 140 yen/W 100 yen /W 75 yen /W 50 yen /W 30 yen /W(technological level)Residential system sales price 370,000 yen/kW 300,000 yen/kW200,000 yen/kW120,000 yen/kWProject to aid promotion of regional new energy introduction 2010 introduction target: photovoltaic power generation 4.82 million kWEstablishment of essential technology Maintenance of international superiority by using results of technological development and improving productivity (9.4) Scenario on Introduction/Expansion of PV Power Generation23

(10) NEDOs Role in Japans New Energy Scheme24

Private SectorPlans, FS, Introduction

Local GovtsVisions, FS, Introduction

Advisory Activities Explanatory Meetings Dispatch of Experts Consultation Workshops etc.

Projects & Programs for Local Govtsfor Private Sectorfor Both Local Govts and Private Sector (Joint)

Other Related OrganizationsManufacturers, NEF, Think Tanks, Industry Assoc.

R&D Projects and Programs

METICreates policies/measures, provides budget to NEDO

Thank You!!The End