German Electricity Rates Projected To Return to 2015 Levels by 2035

In 2015 Germany enacted a law whose short title is the Renewable Energy Sources Act of 2014 (Erneuerbare-Energien-Gesetz, or EEG 2014).  EEG 2014 formalizes the fundamental shift in energy policy in Germany, the Energiewende, from a coal and nuclear system to one which requires the mix of electricity generation in Germany to reach 40% – 45% renewable sources by 2025 and 55%- 60% renewable sources by 2035.  This is to be encouraged by feed in tariffs that guarantee prices for new renewable entrants while requiring grid operators to receive and purchase electricity from these sources.  As expected, EEG 2014 met with some criticism, primarily a claim that it would be too expensive. Agora Energiewende, an energy policy group, commissioned the Oeko Institute e.V. to model the effects of EEG 2014 specifically on its likely impact on consumer electricity rates.  The report* concluded that:

  • The cost of electricity to consumers increases through to 2023 by between one and two cents per kwh, but then declines at a rate of between two and four cents/kwh until 2035. In 2035 rates are forecasted to be the same as 2015 – 8 to 10 cents/kwh.
  • By 2035 60 percent of German electricity will come from renewable energy sources, from about 28% today.
  • As the real costs for renewable generation decline, the primary drivers to the incremental costs of the German Energy Plan become the actual demand levels and the extent to which energy intensive industries are subsidized.
  • Investments in renewable energy increase through 2023 and then decline, however renewable energy’s share of the generation mix continues to rise.

The assumed generation mix that was used in the reference case for this study is presented in the figure below:

EEG Ref Generation

Source: Oeko Institut 2015, EEG Model

This translates to the following projected share of the overall electricity source mix for renewables:

EEG Renew Share

Source: Oeko Institut 2015, EEG Model

EEG 2014 provides for the following feed in tariffs, cents/kWh:

2015 2025 2035
Onshore Wind 8.9 7.2 5.3
Offshore Wind 19.4 14.3 10.9
Solar 11.0 10.3 8.4
Biomass 17.7 16.0 14.5
Geothermal 25.2 19.6 15.2
Hydro 11.7 11.2 10.6
Average Mix 14.8 10.6 8.1

Source: Angora Energiewende

Note that the system average feed in tariff declines over time.  Nonetheless, these tariffs are significantly higher than wholesale power costs from conventional sources.  Under EEG 2014, transmission system operators (TSOs) are permitted to charge electric utilities an “EEG Levy” to compensate them for paying these feed in tariffs and the utilities pass these charges on to consumers.

The EEG Levy assumed in this analysis, along with the base cost of electricity, is shown in the following graphic.

EEG Rates

Source: Oeko Institut 2015, EEG Model


Based on the assumptions inherent in this analysis, the overall cost of electricity to the consumer rises a few cents in the early 2020’s and then declines to rates comparable to rates experienced in 2010.

The Big Loophole

Not all consumers are subject to the EEG Levy, however.  Many electricity intensive industrial and commercial end users have received exemptions from the EEG Levy, a point of considerable controversy in the country.  58 TWh are totally exempted and 110 Twh are partially exempted. Most notably residential customers pay full freight.  Were there less exemptions, the EEG Levy would be much lower, as shown in the figure below.  No exemptions for any customer basically cuts the levy in half.

EEG Loophole

Source: Oeko Institut 2015, EEG Model

The EEG Levy cannot be viewed in isolation, however.  No doubt applying the levy to all industries would have some concomitant effect on the economy and some exempting is necessary.  That said, however, even with loopholes, maintaining a relatively flat trajectory on consumer rates while radically increasing the renewable energy mix in electricity generation to over 60% will be quite an achievement.


*Agora Energiewende “Die Entwicklung der EEG-Kosten bis 2035” May 2015:

The Recent “Mind Bogglingly Stupid”* Arguments Against Fuel Cell Vehicles

During a press conference at the Automotive News World Congress in February Elon Musk was famously quoted saying hydrogen fuel cells are “extremely silly,” and that fuel cell electric vehicles (FCEVs) are “incredibly dumb.” He made two arguments to support this view – that electrolysis to generate hydrogen is way less efficient than using solar to charge vehicle batteries and that hydrogen was an unsafe fuel. So this is pretty transparent: it’s just the old slam-your-competition marketing ploy.  Musk’s Tesla must feel pretty threatened by the spate of fuel cell electric vehicles coming on the market, especially in Japan and California. But then a month later we get Climate Progress publishing an article by Joe Romm seconding Musk’s view and supporting his opinion with actual charts.   Romm’s analysis, with all its credentials, is no better than Musk’s uninformed off the cuff commentary.

Romm essentially recycles an article he published in Scientific American in 2006 where his primary criticism, as I interpret it, follows this equation:


REI=> (CHG) or (EWMFC) => EMP


REI=Renewable power in

CHG= Charge battery

EWMFC=Electrolyze water for hydrogen, make fuel cell

MP=Energy expended motive power

In the case of a FCEV fueled with hydrogen from renewably generated electrolysis, only 20% to 25% of REI ends up as EMP.  An electric vehicle (EV) charged with renewably generated electricity gets 75% to 80% of REI.


That’s it.  The sum total of the argument. Note the complete absence of any economics. Eliminating cost (and the discussion of other paths for zero emission FCEVs) relegates this whole argument to the realm of fierce debates over how many angels dance on the head of a pin.  Perhaps intellectually challenging, but irrelevant to the market or to policy decisions.  Think about it: install a solar array at a particular cost. Use its output to operate an electrolysis unit for hydrogen or use it to charge batteries.  Is one more efficient in the use of solar power? Sure.  But does it matter? No. Either way you have a true zero emission vehicle.  And as long as the cost per mile is competitive, it makes sense in the market place. Might the battery vehicle be a little cheaper in cost per mile? Perhaps, but what if the end user is willing to value range, where the FCEV wins hands down?

The reality, however, is that we are on the cusp of a new market of lower emission vehicles.  The zero emission world is still a good distance away because economics are a real factor.  That means we need EVs and FCEVs, and it also means that they are not completely “green” but rather olive drab.  EVs in most places will not be charged with renewable electricity but from whatever the local grid supplies, and that can be pretty dirty.  Most FCEVs will get their hydrogen from natural gas – its use in a fuel cell is an improvement over direct combustion but still results in carbon emissions.

The bottom line here is that simplistic assertions are no more than that, and while soundbites in headlines attract, they are not analysis and should not be taken seriously.

** Headline in EV World, July 7, 2014 “Musk: Fuel Cells ‘Mind Bogglingly Stupid'”

Is That Fuel Cell Economic? Forget cents/kWh or GGE

It’s very easy to find graphics that compare the cost of several forms of emerging energy technologies.  In the case of fuel cells, since they make electricity to perform a task, the metric used is the cost of a unit of electricity: (pick your currency) per kilowatt-hour or cents/kWh.  In vehicular applications, an attempt is made to equate hydrogen fuel with gasoline, generating the absurdly fictitious “gallon of gasoline (or liter of petrol) equivalent” or GGE.  If you see these metrics used, you are witnessing one of the greatest failures of the fuel cell industry: its inability to articulate its worth.

Allow me to demonstrate how daft and self-defeating these comparisons can be.  We all use batteries in our daily lives.  Batteries generate electricity, which we put to good use.  The going rate for AA batteries is broad, but to pick a number, a 4 pack of Energizer batteries is $4.01, or about $1/battery.

Each battery provides a little less than 3 watt hours of electricity.  That means that if you compared AA batteries with other forms of generation, its output would be about $330/kWh.    Now let’s take that value and do the conventional comparison with other generation forms, shown below.  Note that this uses a logarithmic scale.

Clearly it looks horribly expensive.  But here’s the thing- we don’t value the AA battery for its costs of electricity, we value it for its convenience and size.  Relative to other kinds of electricity generation, it costs a fortune, but only because we are using the wrong metric.  A friend and mentor reminds me frequently that what is being sold is the product of the product, not the product itself.  And so it goes with fuel cells.

This is readily apparent in three applications where fuel cells are deemed commercial and where sales are happening every day: remote telecommunications backup power; uninterrupted storage and as replacement drives for battery systems in materials handling equipment.  In each case, what make the fuel cell commercially viable is its context in an economic system that values the attributes of its output, not the actual output itself.  Consider any of the following factors:

  • Avoided costs of equipment to achieve desired level of enhanced:
    • Reliability
    • Power Quality
  • Avoided costs of battery maintenance and disposal
  • Value of quiet operation
  • Avoided fees and penalties for emissions for certain industries
  • Longer operational periods in EPA non-attainment areas
  • Much longer operation in battery replacement applications
  • Portability

Each one can be valued and monetized in the overall economic equation.

Total Cost of Ownership (TCO)

A far better metric and methodology for evaluating the commercial viability of fuel cells is total cost of ownership (TCO), a form of life cycle cost analysis.  Investopedia defines TCO as “The purchase price of an asset plus the costs of operation. When choosing among alternatives in a purchasing decision, buyers should look not just at an item’s short-term price, which is its purchase price, but also at its long-term price, which is its total cost of ownership. The item with the lower total cost of ownership will be the better value in the long run.”

Materials Handling Equipment

Use of TCO is best illustrated by the business case for fuel cell replacements in electric drive systems for materials handling equipment.  Virtually all indoor forklift trucks are battery powered electric units. A recent DOE report provides a detailed analysis, summarized below.[i]

The relevant costs of ownership include the following items:

  • Cost of the bare forklift
  • Cost of the required battery or fuel cell systems
  • Cost of battery changing and charging or hydrogen fueling infrastructure
  • Labor costs of battery changing or hydrogen fueling
  • Cost of energy required by the forklifts
  • Cost of facility space for infrastructure (indoor and outdoor)
  • Cost of lift truck maintenance
  • Cost of battery or fuel cell system maintenance.

When each of these cost elements are evaluated, the following table results for a hypothetical Class I or Class II forklift:

Total Annual Cost of Ownership
Cost Element Battery Drive Forklift Fuel Cell Drive Forklift
Amortized cost of truck $2,800 $2,800
Amortized cost of Battery or Fuel Cell Unit $2,300 $2,600
Per Truck Cost of Charging Battery/ Fuel Cell Hydrogen Fueling Infrastructure $1,400 $3,700
Labor Cost for Charging or Refueling $4,400 $800
Cost of Electricity/Hydrogen $500 $2,400
Infrastructure Warehouse Space $1,900 $500
Forklift Maintenance $2,800 $2,800
Battery/ Fuel Cell Maintenance $3.600 $2,200
Total Cost of Annual Ownership $19,700 $17,800


If one only looked at the total costs of the forklift plus drive unit, the fuel cell unit is more expensive.  Add in the cost of charging batteries, the cost of hydrogen and the charging/fueling infrastructure, the fuel cell looks that much worse. Now factor in the productivity costs or gains: the labor cost for refueling a fuel cell is far less than that of a battery unit; the warehouse costs are far less, as is the maintenance costs of the drive units.  At this level of analysis, the fuel cell drive is the clear winner, although it represents a discrete set of values.  An analysis which looks at the sensitivity of each of these parameters underscores the clear choice of the fuel cell drive unit.

Source: NREL

There are other increases to productivity for the fuel cell that these analyses do not capture.  Over a normal shift, the battery loses capacity such that near the end of a shift it cannot lift the same amount of material to the same heights.  Fuel cell units retain their power as long as they have fuel available.  In some cases, more electric drives need to be purchased to compensate for long battery recharge times and the diminished capacity of units over shifts.  Finally, while the costs of battery maintenance are included above, the environmental cost of battery disposal are not.  Fuel cell units do not have that problem.

A similar analysis can be performed for remote telecom site backup.  In this case, the fuel could either be a liquid (operating a methanol fuel cell), or compressed hydrogen.  Diesel generators or battery units require maintenance, with very high labor costs attributed to simply getting to the site and returning.  A fuel cell unit, once installed and made ready for operation, eliminates a considerable amount of potential labor costs.  In addition, it does its work without emissions and without noise.

Gallon of Gas Equivalent

The GGE metric, when applied to hydrogen fuel cells, is one of the most inappropriate attempts to compare one type of fuel system with another.  Clearly it was created on the assumption that it would be easy for the general public to understand.  All it does is obfuscate reality.  GGE works as a comparison basis when we are talking about fuel use in an internal combustion engine which resides in a vehicle that was designed with an internal combustion engine.  Period.  The only time GGE would apply to a hydrogen fueled vehicle would be if hydrogen was being combusted in a conventional engine.  Further, GGE by definition relies on petroleum economics to set price and petroleum market dynamics have nothing to do with the cost of hydrogen.  A fuel cell vehicle is designed to accommodate a fuel cell and make best use of its attributes.  It is far more efficient than combustion engines and makes best use of the available electricity to incorporate features not found in today’s vehicles.

The introduction of fuel cell vehicles offers the opportunity for end users to think about their transportation quite differently from what is on the road today.  Instead we persist in talking about these new vehicles in terms that do not fit.  Most egregious is the continued use of GGE as a filter to determine where R&D funding should go for hydrogen vehicles and refueling infrastructure.  For several years, if someone guessed that a particular project or concept could not beat $3.50 GGE it was rejected.  Achieving lowest cost is certainly a goal but using the wrong yardstick is just plain stupid.

A far more appropriate metric for comparing new and emerging vehicles (and the R&D associated with them) is cost per distance.  This metric would apply to fuel cells and to electric vehicles.

Emerging Energy Metrics

As new forms of energy emerge in this new energy economy as much care needs to be taken in their evaluation to assure that we take fully into account the change in perspective that comes with them.  The risk in using old methods to consider new concepts is that we miss altogether their potential.

[i] Ramsden, Ted USDOE “An Evaluation of the Total Cost of Ownership of Fuel Cell-Powered Material Handling Equipment” NREL/TP-5600-56408. April 2013

Contrarian Approach to Fuel Cell Powered Forklifts and Scooters in Taiwan 燃料电池发展的逆向操作:台湾叉车及摩托车

The worldwide population of motor scooters is approaching 130 million. China alone produced over 40 million gasoline powered motor scooters in 2011. Many of these engines emit 8 to 30 times the hydrocarbons and particulates emitted by automobiles. Several companies are developing fuel cell powered scooters to reduce these enormous emissions. Fuel cells are devices that make electricity from hydrogen and oxygen, emitting water vapor as the exhaust. When hydrogen is produced from renewable sources, or even from natural gas the emissions are far less than those resulting from oil refining and combustion. Fuel cell powered scooters run on that electricity.


Two years ago I wrote about a very forward thinking fuel cell technology company in Taiwan (, Asia Pacific Fuel Cell Technologies, Ltd. (APFCT). The company had just rolled out its first major demonstration of fuel cell powered scooters.

两年前我在台湾为一家非常具有前瞻性的燃料电池公司 – 亚太燃料电池科技公司写了一篇文章(。该公司当时刚举行其首次大型燃料电池摩拖车的示范运行。

What was unique about the company and its scooters was the approach APFCT took to fueling. APFCT designed their system with simplicity and consumer convenience in mind. Instead of taking the path of nearly all fuel cell transportation devices that require the refilling of an onboard cylinder with highly compressed hydrogen, the APFCT units use small canisters that store hydrogen in metal hydride powder. Instead of driving the vehicle to a fueling station and waiting for a cylinder to be filled the user simply takes their empty canisters to a vendor who exchanges them for filled canisters (with about the same internal pressure as a racing bike tire).


In its first demonstration APFCT put 80 scooters on the road at a beach resort in southern Taiwan. Tourists were permitted to use the scooters for free. When they ran out of hydrogen all they needed to do was to take the empty canisters to any 7–Eleven convenience store, repair shop or police station for exchange. Why 7-Eleven? Taiwan has the fifth largest number of 7-Eleven stores in the world, behind the U.S., Japan, Thailand and South Korea. There is a 7-Eleven within walking distance of almost any place in Taiwan.


APFCT has continued to build upon this hydride storage fueling model over the last two years. It has tested a number of different vehicles, all of which use identical canisters. Those with larger hydrogen demands simply require more canisters for operation.


Scooters 2.0


Last November, APFCT began a second scooter demonstration in Taiwan with the city government of Taipei. In this demonstration 20 scooters have been deployed for use in environmental auditing site inspections and surveying by city officials.


101 scooters

APFCT’s current scooter model has a range of approximately 80 km.


glacier color scooter

Fueling costs can be very economic – in the Taipei demonstration, the local cost of electricity to generate the hydrogen results in a canisters exchange cost of NTD 30 (about USD 1).

充氢成本可以是经济实惠的 – 在台湾示范运行中储氢罐交换价格为新台币30元 (约一块美金),此价格包括当地产氢所使用的电力及物流费。

rear canisters

chen fueling

APFCT says this current model would sell for about NTD 90,000, about USD 3,000. That’s not quite a commercial price, but getting close. Assuming a successful demonstration, orders from city governments and the public could generate sufficient volume to get the price down, which would make APFCT fuel cell scooter be competitive with gasoline powered scooters.


Fork Lifts


APFCT has migrated its consumer friendly fueling system to a forklift application. They recently completed a demonstration of 5 forklifts in a distribution center in Taiwan operated by the RC Mart chain.


forklift front


Forklifts are an area of significant growth for fuel cells and one of the few applications that are commercially economic. Globally, there are at least 5,000 forklifts in operation at large distribution centers. These forklifts were all originally electric drive battery units. Their electric drives were all replaced with a fuel cell power system. The fuel cell systems themselves are somewhat expensive, however when one compares their total cost of ownership of the swapped out system with that of an electric drive, fuel cell systems are cheaper to operate and increase worker productivity.


The following chart provides a quick cost comparison between the two systems. In this case, a Class III forklift is used, which is a smaller unit where the operator rides on the truck.


TCO chart

Source: APFCT, Worthington Sawtelle LLC, National Renewable Energy Laboratory

Annualized cost

图片来源: APFCT, Worthington Sawtelle LLC, National Renewable Energy Laboratory

The bottom line here is that even though their fueling infrastructure and electricity costs are less, the battery driven units require significant labor for charging and refueling. What the chart does not show is that more battery units are required for a three shift day than fuel cell units; one battery unit must always be charging.


Virtually all fuel cell options for forklifts use high pressure hydrogen storage linked to a fuel cell with high internal pressures. Notice that in the high pressure bar above, all but the cost of hydrogen are likely to be relatively constant. The economics of the system depend almost entirely on the cost of hydrogen fuel. All systems currently in operation get their hydrogen delivered to a dispensing station in the distribution center from tube truck deliveries. The cost of that hydrogen increases with distance from the hydrogen production facility. Because of these high costs, a few operators are considering the installation of small natural gas reformers to generate hydrogen on-site from natural gas, which is relatively inexpensive in today’s market.


APFCT, characteristically, has developed a much different solution to this application, one which enhances its already winning cost analysis. The APFCT unit is shown as the third bar in the chart above, labeled “Low Pressure Fuel Cell.” This forklift design uses four fuel canisters that are identical to the ones used in the scooter. But unlike most other fuel cell forklifts, the APFCT unit uses a low internal pressure fuel cell. Lower internal pressures are less susceptible to membrane failure and have less moving parts. In the picture below the cabinets by this unit are the refuelers. Fuel canisters are placed in a rack in the unit and refilled with hydrogen being released from water through electrolysis.

亚太燃料电池一如既往地为叉车发展出与众不同的解决方案,图表成本分析中也显示了此解决方案的优势。亚太的叉车系统列在图表中的第三条,标有“低压燃料电池” 。该叉车设计采用四个储氢罐,与燃料电池摩托车所使用的储氢罐是相同的。和大多数燃料电池叉车不同的是,亚太使用了低内压的燃料电池。较低的内部压力使质子交换膜较不易损坏且运动部件较少。在图中位于叉车旁边的柜子内置有充氢机。充氢机可透过电解水制氢将氢气充填至氢气罐。

Next Steps


The best technology does not always make it in the marketplace, however. APFCT’s fueling approach offers a number of clear advantages over what is now regarded as conventional. Nonetheless, a number of alternative methods to store and dispense hydrogen in transportation applications have been attempted and then largely abandoned – usually due to the fact that such commercialization decisions are heavily influenced by the automobile manufacturers. It remains to be seen if APFCT can overcome the momentum already gained by others who are thoroughly invested in the high pressure cylinder on-board hydrogen storage model.

有时最好的技术并不容易商业化,亚太的低压储氢方式提供了许多明显的优势。尽管如此,目前已有部份储氢和配氢的替代方法都已经尝试过后并放弃 – 通常是由于此类替代方案的商业化主要是由汽车制造商所决策。让我们拭目以待,看亚太是否能克服多数使用高压储氢罐的主流,让低压金属储氢成为通往氢经济的快捷方式。

Energy subsidies | Levelling the Subsidy Playing Field (Guest Post)

Originally published at JBS News by John Brian ShannonJohn Brian Shannon

By now, we’re all aware of the threat to the well-being of life on this planet posed by our massive and continued use of fossil fuels and the various ways we might attempt to reduce the rate of CO2 increase in our atmosphere.

Divestment in the fossil fuel industry is one popular method under discussion to lower our massive carbon additions to our atmosphere

The case for divestment generally flows along these lines;
By making investment in fossil fuels seem unethical, investors will gradually move away from fossil fuels into other investments, leaving behind a smaller but hardcore cohort of fossil fuel investors.

Resulting (in theory) in a gradual decline in the total global investment in fossil fuels, thereby lowering consumption and CO2 additions to the atmosphere. So the thinking goes.

It worked well in the case of tobacco, a few decades back. Over time, fewer people wanted their names or fund associated with the tobacco industry — so much so, that the tobacco industry is now a mere shadow of its former self.

Interestingly, Solaris (a hybridized tobacco plant) is being grown and processed into biofuel to power South African Airways (SAA) jets. They expect all flights to be fully powered by tobacco biofuel within a few years, cutting their CO2 emissions in half. Read more about that here.

Another way to curtail carbon emissions is to remove the massive fossil fuel subsidies

In 2014, the total global fossil fuel subsidy amounted to $548 billion dollars according to the IISD (International Institute for Sustainable Development) although it was projected to hit $600 billion before the oil price crash began in September. The global fossil fuel subsidy amount totalled $550 billion dollars in 2013. For 2012, it totalled $525 billion dollars. (These aren’t secret numbers, they’re easily viewed at the IEA and major news sites such as Reuters and Bloomberg)

Yes, removing those subsidies would do much to lower our carbon emissions as many oil and gas wells, pipelines, refineries and port facilities would suddenly become hugely uneconomic.

We don’t recognize them for the white elephants they are, because they are obscured by mountains of cash.

And there are powerful lobby groups dedicated to keeping those massive subsidies in place.

Ergo, those subsidies likely aren’t going away, anytime soon.

Reducing our CO2 footprint via a carbon tax scheme

But for all of the talk… not much has happened.

The fossil fuel industry will spin this for decades, trying to get the world to come to contretemps on the *exact dollar amount* of fossil fuel damage to the environment.

Long before any agreement is reached we will be as lobsters in a pot due to global warming.

And know that there are powerful lobby groups dedicated to keeping a carbon tax from ever seeing the light of day.

The Third Option: Levelling the Subsidy Playing Field

  • Continue fossil fuel subsidies at the same level and not institute a carbon tax.
  • Quickly ramp-up renewable energy subsidies to match existing fossil fuel subsidies.

Both divestment in fossil fuels and reducing fossil fuel subsidies attempt to lower our total CO2 emissions by (1) reducing fossil fuel industry revenues while (2) a carbon tax attempts to lower our total CO2 use/emissions by increasing spending for the fossil fuel industry

I prefer (3) a revenue-neutral and spending-neutral solution (from the oil company’s perspective)to lower our CO2 use/emissions.

So far, there are no (known) powerful fossil fuel lobby groups dedicated to preventing renewable energy from receiving the same annual subsidy levels as the fossil fuel industry.

Imagine how hypocritical the fossil fuel industry would look if it attempted to block renewable energy subsidies set to the same level as fossil fuel subsidies.

Renewable energy received 1/4 of the total global subsidy amount enjoyed by fossil fuel (2014)

Global Energy Subsidies 2014. (billions USD). Image courtesy of IISD.

Were governments to decide that renewable energy could receive the same global, annual subsidy as the fossil fuel industry, a number of things would begin to happen;

  • Say goodbye to high unemployment.
  • Say goodbye to the dirtiest fossil projects.
  • Immediate lowering of CO2 emissions.
  • Less imported foreign oil.
  • Cleaner air in cities.
  • Sharp decline in healthcare costs.
  • Democratization of energy through all socio-economic groups.


Even discounting the global externality cost of fossil fuel (which some commentators have placed at up to $2 trillion per year) the global, annual $548 billion fossil fuel subsidy promotes an unfair marketplace advantage.

But instead of punishing the fossil fuel industry for supplying us with reliable energy for decades (by taking away ‘their’ subsidies) or by placing on them the burden of a huge carbon tax (one that reflects the true cost of the fossil fuel externality) I suggest that we simply match the renewable energy subsidy to the fossil subsidy… and let both compete on a level playing field in the international marketplace.

Assuming a level playing field; May the best competitor win!

By matching renewable energy subsidies to fossil fuel subsidies, ‘Energy Darwinism’ will reward the better energy solution

My opinion is that renewable energy will win hands down and that we will exceed our clean air goals over time — and stop global warming in its tracks.

Not only that, but we will create hundreds of thousands of clean energy jobs and accrue other benefits during the transition to renewable energy. We will also lower healthcare spending, agricultural damage, and lower damage to steel and concrete infrastructure from acid rain.

In the best-case future: ‘Oil & Gas companies’ will simply become known as ‘Energy companies’

Investors will simply migrate from fossil fuel energy stock, to renewable energy stock, within the same energy company or group of energy companies.

At the advent of scheduled airline transportation nearly a century ago, the smart railway companies bought existing airlines (or created their own airlines) and kept their traditional investors and gained new ones.

Likewise, smart oil and gas companies, should now buy existing renewable energy companies (or create their own renewable energy companies) and keep their traditional investors and gain new ones.

Related Articles:

The post Energy subsidies | Levelling the Subsidy Playing Field appeared first on kleef&co.

Keystone XL: Run the Numbers, It’s a Bad Business Decision

Only a portion of current inventories of Canadian tar sands oil might make economic sense to pipe through Keystone XL; there is a high probability that new extraction projects or upgrades to existing projects will have delivered cost well in excess of what the market will bear.   An investor in the Keystone XL pipeline is making a very risky bet without a potentially large return.  While the environmental concerns against Keystone certainly have merit, it makes no sense to construct simply on the basis of economics.  Just run the numbers.

There are a number of key metrics that, when looked at in the aggregate, lead to this damning conclusion:

  • Tar sands equivalent world market price
  • Longer term oil price forecast

Cost of Extraction Relative to Market Price

In November 2014, Scotiabank projected the breakeven costs for Saskatchewan Bitumen and Oil Sands projects using a 9% after tax return, as shown in the chart below.

breakeven tar sands

Source: Scotiabank Economics

Bitumen and tar sands sourced oil trade at a lower price than with crude oil.  The discount varies depending on the source of the oil.  Tar sands oil prices must be converted to their conventional oil equivalent price.  Typically, Canadian tar sands are compared with West Texas Intermediate (WTI) crude pricing.  The table below presents the Canadian Energy Research Institute (CERI) WTI Equivalent supply costs in 2011.

Supply Cost at Field (CND/bbl) WTI Equivalent (CND/bbl)
Primary 30.22 56.61
Saskatchewan Bitumen 47.57 77.85
Integrated Mining & Upgraded Projects 99.02 99.4

Source: CERI

These are weighted averages.  The actual differential between extraction costs and WTI Equivalent is much broader than the differentials shown above, depending on the individual project.  A fair assumption for the amount to be added to the tar sands supply cost to get to WTI Equivalent, according to CERI, is $15 per barrel.  That number, however, excludes transportation costs to get the oil from upper Canada to Gulf port refineries.  An approximate cost using Keystone from Hardisty, Saskatchewan, to the Gulf Coast was estimated by the Canadian Association of Petroleum Producers at $7.95 per barrel.  Shipping by rail is about $7/bbl more.

Amazingly, this is the entire rationale for Keystone XL – a $7/bbl savings!

But lets assume Keystone does get built.  The market viability of a tar sands oil produced in Canada can be easily determined:

Tar Sands Oil Breakeven Price for Market Comparison =

Cost of Extraction + $15/bbl discount + $7.95/bbl transport costs

Using this equation we can take the three approximate production cost estimates shown in the first figure and develop the breakeven world market equivalent prices.

World price needed to break even, $/bbl
Saskatchewan Bitumen 87.95
Legacy Oil Sands Projects 75.95
New Projects and Upgrades 110.95


World Oil Prices


The chart below plots each project type’s breakeven world market price relative to West Texas Intermediate.  Over the last 28 years, new tar sands projects and upgrades to existing projects would never have been economic.

breakeven wti

Source: Energy Information Administration

Saskatchewan Bitumen and Legacy projects only became consistently economic in 2010 but neither are economic at current market price.

The Bet

Keystone only works over the long term when WTI and global prices sustainably exceed $110/bbl.  That’s the bet.

In the short term, futures traders seem willing to bet on a case where prices never exceed $70/bbl through December 2023.  Today’s settlement prices are shown below.


futures lsc

Source: CME Group

Only tar sands oil from legacy projects have any probability of being economic at their cost of production, FOB Gulf Coast.  That’s the simplistic approach.

Other analysts, notably Gail Tverberg, see feedback loops that auger for continued lower prices for oil.  Her chart below compares price, supply and major economic events.  The price rise began at the same time as Quantitative Easing (QE1 on the chart); the price decline occurred as QE was tapered down (turning around artificially low interest rates) and when Chinese debt controls began (reducing the volume of Chinese debt).  These events had the effect of slowing global growth, reducing demand for energy commodities and causing their costs to decline.  Slower growth means less demand for oil and therefore lower oil prices. Tverberg sees increased debt defaults (especially in oil extraction); rising interest rates, rising unemployment and increased recession.  These and other effects make a strong case for oil prices to remain low.



The market seems to be coming to the same conclusion.  A number of large oil companies have cancelled or postponed tar sands extraction projects in the last several months, in part due to an increased perception of project risk, including Statoil, Shell, SunCor Energy and Total.

The Takeaway

This brief look at the problem of Keystone only considered one narrow issue – the economics of the delivered oil. The breakeven prices for tar sands oil projects are known: how they might fair in the volatile world oil market is not. History has clearly shown us that long term oil price forecasts are always wrong.  What is possible, however, is developing the probability of a trend. Absent a major disruption in oil supply or a miraculous turn around in the world’s economies resulting in sustained growth, the most likely trend is a continuation of low oil prices. If the oil cannot be sold at an economic price, why pipe it south?  Indeed, if is not economic to begin with, is there not a high risk the pipeline ultimately sits idle and unused?  An investment in the Keystone XL Pipeline looks to be a really bad bet.  Just run the numbers!

Bloom “Box”: Reverse Engineering the Economics

Last July Bloom Energy announced the placement of a 200 kW “Energy Server” (Bloom’s preferred language for “generator”) at Keio University in Japan, another at a large Softbank building in Fukuoka (Softbank is a major Japanese mobile phone service provider), as well as the creation of a 50/50 joint venture with Softbank to establish Bloom Energy Japan, Ltd.  These announcements were all part of the steady drumbeat of Bloom unit installations.  About the same time, however, Bloom issued a white paper where the President of Bloom Energy Japan, Miwa Shigerumotu, provided some insight into their pricing structure.  Below is a picture of the Bloom installation at the Softbank building.


Source: Bloom Energy Japan, Ltd.

As with other installations, Bloom is selling the product of the product, rather than just a piece of equipment.  The customers receive full output of the units with no upfront costs, paying a fixed rate of 25 yen/kWh, or about USD 0.21/kWh.  This rate is fixed at 10 years, with no fuel adjustment clauses.  In the white paper Mr. Miwa acknowledges that 25 yen is high relative to current prices, but goes on to say that the days of predictable electricity prices are over.  From April 2010 to April 2014, electricity prices in Japan rose an average of 10% annually.  He argues that paying a premium of about 5 yen now will be more than balanced out longer term when compared with the volatile and escalating conventional electricity cost.  His bottom line: a Bloom Energy Server provides price hedging and risk mitigation.

Fair enough, but is Bloom likely making money here or just initiating a loss leader program to pave the way for future sales?  We can get a very approximate sense of the implied cost of the unit with some reverse economic calculations.

The most significant variable cost to Bloom is fuel price.  The Bloom units are running on liquefied natural gas (LNG), which is not an inexpensive commodity in Japan.  The chart below gives some perspective to Japanese LNG pricing relative to the US and UK (Blue is US Henry Hub; Green is the UK and Red is Japan).  Last winter Japan LNG was at about $19/MM Btu.

Rice Univ

Source: National Gas Price in Asia, Rice University

The figure above overlays the timing of the Fukushima disaster and the closure of the Japanese nuclear fleet, which clearly had a major impact on price (and on the price increases noted above by Mr. Miwa).  Longer term, however, most analysts do not foresee a return to UK- or US-like pricing in Japan.   The Economist forecasts a decline in Japanese LNG price over time.


Whereas the IMF foresees a relatively constant price for the next several years.



Forecasting LNG prices in Japan is further complicated by the fact that, at least historically, Japanese LNG prices have been strongly correlated to world oil prices.  It remains to be seen if OPEC’s production announcement keeps oil prices stable in the short term but resulting in an increase when many now uncompetitive shale projects fail to survive, reducing supply.

For the purposes of this approximation, we’ll assume a fuel cost range for our Bloom units between $10 and $19/MM Btu.  We’ll also assume that Bloom internally financed the capital cost for these units at about a 2% interest rate.

Along with some other assumptions about O&M costs and taxes, the following break even maximum costs of capital as a function of fuel cost assumptions can be calculated.

Fuel Cost, $/MMBtu $/kW installed to achieve 10 year levelized cost of electricity equal to USD 0.21/kWh*
10 $9,000
15 $6,800
19 $5,000

When the first Bloom units were sold, industry estimates for their cost was on the order of $30,000 kW to $40,000/kW.  Perhaps 100 have been sold in the interim.  Given that starting point, it seems very unlikely that 100 units could result in economies of scale that would reduce cost by a factor of 5 or 6, as would be necessary for these two examples.

Even given all of the necessary caveats about the very approximate nature of the estimates and assumptions made above, loss leading is the market introduction strategy for Bloom in Japan.


*21 cents uses the current exchange rate – at the time the transaction was completed earlier this year the rate would have been nearly 25 cents US.  Perhaps this is why there was a report last month that the current rate is 28 yen/kWh.

“Open Sourcing” of Fuel Cell Technology: A Call to Action

“Ideas are works of bricolage.  They are, inevitably, networks of other ideas.

.. the strange thing is that the past two centuries .. wisdom about innovation has pursued the exact opposite argument .. by assuming…in the long run, innovation will increase if you put restrictions on the spread of new ideas, because those restrictions will allow the creators to collect large financial rewards from their inventions. And those rewards will then attract other innovators to follow in their path.

The problem with these closed environments is that they make it more difficult to explore the adjacent possible, because they reduce the overall network of minds that can potentially engage with a problem and they reduce the unplanned collisions between ideas originating in different fields.”

Stephen Johnson, WSJ, The Genius of the Tinkerer, September 25, 2010.


During my tenure as president of a PEM fuel cell development company it occurred to me that all of the other development firms might be attempting to solve, in varying degrees, the same challenges we faced in improving bipolar plates, reducing the size and increasing the efficiency of reformers, minimizing amounts of expensive catalysts necessary, boosting electrical efficiency, etc.  If my conjecture was correct, it meant that, at least within the US industry, groups of people in 10 or 20 companies were trying to accomplish the same objectives.  Of course, they all probably believed that they were close to the Holy Grail, that their IP was superior, that their work would result in enormous returns down the road.  I suspected, however, they the differences in technology among all these companies were more likely to be infinitesimally small.

That was 12 years ago.  At a recent conference I heard the same generic issues raised, still unsolved, and in a market where we have created and dashed investor expectations on more than one occasion.  So the idea reemerged.

What if we were free to share ideas and not waste time, money and resources behind artificial walls built out of a hubris that each one of us had the silver bullet, the world beating answer, the killer app?

Open Sourcing

Certainly most people have heard about “open source” software where the basics of a software platform are available to anyone to build upon.  Not many people, though, are aware of the fact that the concept of open sourcing ideas, intellectual property and know how is neither solely related to software nor a new concept.  In fact application of this concept was crucial to the evolution of the US auto industry (Ford challenged a monopolistic patent in 1911 and freely collaborated with others through the 30’s), the advanced state of US aviation at the start of WWII (Curtiss challenged Wright’s monopolistic patents, ultimately resulting in the US forcing a settlement and a sharing of technology through WWII), and the rapid advancements in this country in semiconductors beginning in the 50’s when patents and intellectual property rights were largely ignored (see Texas Instruments and Fairchild Semiconductors).  There are many more non-IT examples.

So What Are We Talking About and Why Do It?

I’m going to borrow heavily here from a paper written by HP[1] that aptly summarized why this makes sense to do and what the benefits might be.

The Concept

First, what are we talking about?  The following chart was constructed to graphically show how components of a software system might be merged.  Take a look at this and think “Fuel Cell Systems.”


Let’s start with the three grouped ovals.  Replace “Project” with “Company 1, 2, ..n” and replace “un-shared independently developed software” with “technology challenges common to all Companies that the Companies believe only they can solve.”  The white areas of the independent ovals are things genuinely unique to the Companies.  Now look at the single circular figure on the right.  The Companies each have their own unique qualities within the large circle of “Fuel Cell Systems” but the big black core is all of the shared IP.

The Benefits

It doesn’t take rocket science to quickly grasp what a difference this approach might make in moving the entire industry forward.  Let me paraphrase the HP paper’s summary of benefits in fuel cell terms:

  • A readily available potpourri of basic system component technology that can be built upon and used as starting point;
  • Improved quality levels of shared technology as authors’ reputations are at stake;
  • Shared, community debugging; and,
  • Faster development schedules with technology leveraged among several products.

Imagine how much reinvention of the same wheel across 20 companies could be avoided.

The Downside

Of course, there’s the downside.  In every one of these companies there is at least one key person who has inventor’s syndrome.  The affliction that says absolute and total restrictions on my intellectual property is the only path to the overwhelming array of riches I will gain when my twist on the technology gets out there, since no one else out there has anything close and they are not as smart as me.  Usually there is a lawyer appended to this person’s anatomy somewhere.

One Size Does Not Fit All

Will it work across all fuel cell technologies?  Theoretically, yes, but realistically we’d want to have many participants.  The best place to start is PEM, but SOFC could also be a contender.

The Risk

Given the current state of our business sector that is suffering from:

  • At least two and perhaps three cycles where several companies in the sector raised thoroughly unrealistic expectations within the financial community that were never achieved, resulting in very limited investor appetite in hydrogen energy;
  • A Department of Energy that seems to have dismissed fuel cells and hydrogen from its R&D agenda; and
  • A global community that is overtaking the US industry because within certain countries the functional equivalent of open sourcing is happening

It doesn’t seem there is much to lose by trying.

The Recommended Path

Form a subscription based not-for profit organization whose sole purpose is to provide real and virtual opportunities to share ideas and information and do so in a way that does not run afoul of anti-trust laws or generate IP litigation.  This can take the form of databases, conferences, workshops, wiki collaboration on the web, networking and probably 10 other ways that do not immediately come to mind.

Can it be done?

Yep. It has been done before and it continues to be done in other industries.  Wright and Curtiss are a great historical example.  So are Texas Instruments and Fairchild Semiconductors.  Many very large firms have come to embrace it, including Procter & Gamble.

Provided we have a critical mass of interest, sufficient funding to engage the proper counsel to avoid the pitfalls and manage the operation and its communications vehicles, and enough open minded company managements to make it work.


Call me. Gerry Runte (207( 361-7143 or email  If there is sufficient interest we can begin to lay out a plan on how we want to pull this off.

[1] Dinkelacker, and Garg “Corporate Source: Applying Open Source Concepts to a Corporate Environment,” HPL-2001-135, May 31st , 2001

Fuel Cells in the (Japanese) Home!

Many in the US are unaware of the fact that residential fuel cells are being routinely sold in Japan, especially in new home construction.  They are called ENE-FARM or “energy farms” that produce about 750 W of electricity with heat recovery.  The ENE-FARM fuel cells are all Proton Exchange Membrane (PEM) technology, but solid oxide based units are en route.They are especially popular in homes with radiant floor heat.  24,000 units were sold in 2012; nearly 18,000 were sold in the first half of 2013.  At the end of 2013, about 50,000 units were in operation across the country.   Some of that more recent demand was fueled by Fukushima, but more on that later.  The national government has a goal of 1.4 million units by 2020 and 5.3 million by 2030. If the economics continue to achieve economies of scale, those goals will easily be exceeded.  Let me walk you through the promotional material used by a gas company near where I live.


Shizuoka Gas’s offering happens to be a Panasonic model that came out in 2013.  It consists of two boxes: the fuel cell, which includes the reformer, fuel cell stack and inverter; and the hot water unit which includes waste heat recovery, storage and a backup heat source.  The figure below shows the boxes and their control panels.



Fuel Cell

Electrical Output 750 kW
Exhaust heat output 1.08 kW
Electrical Efficiency (HHV/LHV) 35.2% / 39.0%
Heat Recovery Efficiency (HHV/LHV) 50.6% / 56.0%
Dimensions 1.85 m x 0.4 m x 0.4 m (6 ft x 1.3 ft x 1.3 ft)
Gas consumption (HHV / LHV) 2.1 kW/1.9 kW
Noise level 33 dB
Weight 95 kg (209 pounds)

Hot Water Storage Unit

Hot water temperature 60 o C (140 o F)
Storage Capacity 147 liters (39 gallons)
Dimensions 1.85 m x 0..56 m x 0.4 m (6 ft x 1.8 ft x 1.3 ft)
Weight 209 kg (460 pounds)

Hot Water Supply and Backup Unit

Heat source Instantaneous latent hear recovery
Hot water supply capacity 41.9 kW
Heating capacity 17.4 kW
Maximum gas consumption 64.8 kW
Dimensions 0.75 m x 0..48 m x 0.25 m (2.5 ft x 1.6 ft x 0.8 ft)
Weight 44 kg (97 pounds)
Noise 49 dB


Shizuoka Gas offers free maintenance for 60,000 hours or 10 years.

“Learning” Operation

This particular unit has the ability to analyze the demand pattern for hot water and electricity in the home, and then adjust its operation accordingly.  In the event that an unusual call for hot water occurs the backup water heater engages.  The picture below shows the demand for electricity at the top and the demand for hot water at the bottom.  The middle, pink section, shows the learned state of the water storage unit that anticipates need.

learning storage


Overall Efficiency

Everyone appreciates the rationale for a gas company to sell gas appliances, but it goes farther than simple demand creation.  Japan has no source of natural gas and relies on imported LNG instead. Combusting LNG for power generation yields the typical mid-thirties efficiencies.  Reforming LNG at the end user location however, gives much better results.  This is how Shizuoka Gas explains it:

Conventional Generation Efficiency

con eff

Adding the ENE-FARM to the Equation

fc eff


The suggested retail price for the system is around ¥2 million installed.  That’s about $20,000 – and about 2/3 the 2009 cost.  After subsidies, however, most consumers end up at or less than ¥1 million, or $10,000.  Annual savings are on the order of $600/year, so the simple payback is around 17 years.  Clearly this is still for environmentally conscious upscale consumers, but there are plenty of them in Japan.

Taking it all a step further..

SHIZGAS (as Shizuoka Gas likes to be called) is promoting a solar PV/fuel cell cogen system that clips the peak that the fuel cell can’t handle with an installation like this:



Here is the schematic of the house:




But they’ve gone much farther than a simple concept and built a 22 unit subdivision called Eco Life Square Mishima Kiyozumi.  It’s been completed since 2011.

4-11-2014 5-26-26 PM



Eleven years ago I was involved with a small fuel cell development company that was pursuing a residential fuel cell.  When I joined it became very clear that such a first product for the technology was a bridge too far, way too far, and we reoriented ourselves to a commercial scale unit, the first prototype of which was a naphtha fueled PEM unit that operated at a gas station to make hot water for car washes and provide backup power in the case of an emergency.  Ironically the Japanese firm that tested that unit, ENEOS, now offers an ENE-FARM system (not derived from our technology however).

Residential fuel cells for the US may still, indeed, be a bridge too far, but they are becoming well established in Japan, and in part, because of Fukushima.  Residential customers, albeit wealthy residential customers, want the ability to have more predictable electricity costs and the ability to self-generate, having experienced power shortages, outages and higher costs.  Also, unlike the US, there is a very strong ethic here to mitigate carbon.  While not carbon neutral, fuel cell efficiencies do mitigate LNG fired central generation emissions.

Japan’s Basic Energy Plan: Not All About Nukes

On February 26 the Japanese government published its latest Basic Energy Plan (BEP) for review and approval by the Cabinet.  Approval is expected, sometime this month.  The foreign headlines tended to focus almost exclusively on its statement that nuclear power remains an important source of energy.  This new BEP should have come as no surprise, given earlier commentary by the Abe government.  A more detailed read, however, reveals a far more nuanced story for nuclear as well as discussions of some interesting new developments.

Nuclear Impact

At the time of the Great Eastern Japan Earthquake and Tsunami in March 2011 Japan had 50 operational reactors ranging in age from 43 to 5 years.   They provided a little over 44 GW to the Japanese grid, or about 27% of total electricity generation.  Another 4 units were at some stage of construction, and another four units had been planned.  The then effective BEP had a goal of 50 % nuclear power generation by 2030.  All operational reactors have been shut down and construction halted on new units since the tsunami.

In September of 2012, the then current government issued a strategy statement that had as its goal the phase out of nuclear power by 2039.  This “statement” did not amend the current BEP prior to the Fukushima incident, and further, when the new government of the Liberal Democratic Party took over in late 2012, the Prime Minister, Mr. Abe, made it clear that it did not support a phase out.  The official BEPs, before and after the disaster, have never reflected a “no nukes” position.

There were changes to the text discussing nuclear, however.  Its introductory paragraph goes to great lengths to make clear the severity of Fukushima.  Roughly translated, it says:

“Nuclear energy policy must take into consideration an honest understanding and appraisal of the Fukushima Daichi nuclear plant accident.  The accident raised worldwide awareness of the risks of nuclear power.  Distrust and anxiety among the general public is stronger than ever against nuclear power and against the government and businesses who promote it. 140,000 people have had to be evacuated and there is international anxiety over water purity and pollution from the accident.  In addition to delays in information regarding the accident and delays in selecting final disposal sites and delays in the reprocessing plant feed this distrust. Interest in energy issues has become extremely high in the country and many want to eliminate nuclear power generation altogether. At a minimized scale, nuclear power is still necessary, but the government must address the public concerns.”

There is also an extensive section specific to the steps to be taken at Fukushima during its “30 to 40 year” decontamination and decommissioning.

Japan’s Problem

The following chart, which was provided at the end of this latest draft Plan, clearly illustrates Japan’s problem (click on image to enlarge).

JPN Load

The two bars to the right show the makeup of electricity supply in 2010 and 2012.  Halting nuclear power generation resulted in a near tripling of oil and a 25% increase in natural gas/LPG use.  These measures, especially oil consumption, have impacted Japan’s balance of payments, retail rates and greenhouse gas emissions.

Revised Overall Plan

Chapter 1, “Challenges to our energy supply and demand structure;” Chapter 2 “A new perspective on energy policy;” Chapter 4 “(R&D, strategic energy technology development;” and Chapter 5 “Deepen communication with all levels of civil society” were unchanged.  Chapter 3, discussing long term measures to address energy supply and demand, received considerable edits, as shown in the table below.  Section 4 of this chapter constitutes the full discussion of nuclear power.  (Text in blue remained the same; subheadings under unchanged sections are not shown for brevity.)


2/26/2014 Draft Table of Contents

Chapter 3 Long term, comprehensive and systematic measures to address energy supply and demand

  1. Promotion of a comprehensive policy for secure, stale and secure energy  resources
    1. Promotion of upstream advance and strengthen relationships with new resources supplying countries in North America, Russia, Africa, etc.
    2. Strengthening the foundations of resource procurement current environment
    3. Improvement of resource procurement conditions for energy cost reduction
    4. Promoting the development of domestic resources such as methane hydrates
    5. Strengthening promotion of recycling is essential to ensure a stable supply of mineral resources and reserves system, etc.
  2. Implement an energy-saving society through smart, flexible consumption
    1. Strengthening of energy conservation in each Ministry
    2. Use of demand response to promote the efficiency of energy supply
  3. Accelerate medium-to long-term renewable energy with the aim of self-reliance be introduced
    1. Strengthening of efforts to accelerate the introduction of wind power and geothermal
    2. Promote the use of renewable energy in the distributed energy system
    3. Role of feed-in tariffs
    4. Promotion of a variety of deployment with a focus on renewable thermal energy
    5. Promotion of renewable energy industry in Fukushima Center
  4. Rebuild nuclear energy policy
    1. Starting point of the nuclear policy–a sincere remorse Tokyo electric power Fukushima Daiichi nuclear power station
    2. Fukushima rehabilitation and reconstruction measures
    3. Establishment of a stable business environment and continuous improvement in the safety of nuclear power
    4. Efforts to steadily promote measures without delay to the future
    5. Build trust relationship public , local governments , with the international community
  5. Improve the environment for the efficient use of fossil fuel
  6. Promotion of supply structural reforms to remove market barriers
  7. Strengthening and toughening of domestic energy supply networks
    1. Strengthen response to the crisis of supply disruptions from abroad by oil reserves, etc.
    2. Strengthen response to domestic crises.
  8. Changes to the secondary energy structure to contribute to the supply and global warming
  9. Growth strategy based on the generation of integrated energy companies through market integration and energy realization
  10. Comprehensive energy international cooperation development


The following are highlights from the new sections of Chapter 3.

Section 1

  • Invest in upstream development by Japanese companies through aggressive diplomacy on the part of the National Institute of Oil, Gas and Metals (JOGM) and provide loan guarantees through public and private sector cooperation.
  • Establish floating form LNG production storage and shipping facilities
  • Strategic investigation of mining shallow water hydrothermal vents for rare minerals in Sea of Okinawa
  • Apply for mining permits outside of Japan Economic Zone through the International Seabed authority, including rare earth minerals off Marcus Island and manganese nodules near Hawaii.
  • Commercialize methane hydrate production by 2018.
  • Assess 6,000 sq. km annually through 2018 for oil reserves.

Section 3

  • Speed up the environmental assessment and on the electrical business law regulatory science to promote more geothermal and wind power generation.
  • Embrace renewable energy in areas between transmission lines.
  • Promote the development of special purpose companies aiming for return on investment relating to transmission line maintenance.
  • In the newly established regional management promotion agency, adjust the frequency variations in wide-area systems to accommodate the increased use of renewable energy that cause fluctuations in the electric power system.
  • Absorb fluctuating renewable energy along with a large storage batteries and hydrogen activities.
  • Demonstrate large storage batteries for introduction demonstration to substations, etc. and with international standardization.
  • Through R&D seek to reduce large battery costs by half by 2020.
  • The increased use of offshore wind power is indispensable.
  • Seek to achieve world’s first  commercial floating offshore wind power unit and promote empirical research to being conducted off the coast of Nagasaki, as soon as 2018.
  • In the 17 months since their introduction in November 2012, feed in tariffs have increased renewable generation by 30%.

Section 4

  • Accelerate efforts to ratify the Convention on Supplementary Compensation for Nuclear Damage (CSC).
  • Expand capability to store spent nuclear fuel; promote the use of MOX fuel and reprocessing.The text specifically calls for timely commissioning of the Rokkasho reprocessing plant and restart of the Monju sodium cooled fast reactor. Monju cost $200 million a year to maintain and has been subject to many shutdowns and safety violations since it began operation in 1994. While there may be begrudging public support for the restart of a few reactors most editorials question the need for generating more plutonium and want to see the Monju shuttered.


It’s really unfortunate that this and earlier drafts of the BEP have not been translated into English.  What I’ve done here is synthesize a number of translation routines and combined that with my own perspective.  Surely I’ve missed a great deal without a complete translation.  Regardless, it is clear that the summaries of this document in the world press did not do it justice and perhaps were tinged with a lot of optimism.  Relicensing of the idle reactors will not be simple and at best guess between 10 and 12 might make the grade.   In addition those that do survive the process will not be operating any time soon.  The Nuclear Regulatory Authority is reportedly bogged down in paperwork and still trying to work through a process that is not fully defined.  Recent editorials in the Asahi Shimbun and The Japan Times make it clear that public sentiment, except perhaps in and around Tokyo, is not entirely behind nuclear restart.  The BEP itself makes clear that local authorities will have a lot of influence on restart decisions.

In the meantime, the other portions of the BEP have catapulted Japan into a much more supportive climate for renewables and, it seems, especially with regard to smart grid, T&D automation and demand response.