IEEJ © 2014
Economic and Energy Outlook of Japan toward FY2015
– Energy risk casts a shadow over the recovery of the Japanese economy –
25th July 2014
YANAGISAWA Akira, T. Yoshioka, H. Suzuki, R. Ikarii, S. Iwata, Y. Shibata and K. Ito
The Energy Data and Modelling Center
The Institute of Energy Economics, Japan
The 416th Forum on Research Work
IEEJ © 2014
Context
Outlook toward FY2015 • Macro economy and production
activities • Primary energy supply • Final energy consumption • Energy sales • Renewable power generation
Special topics • Sensibility analysis of nuclear power
generation • Impact analysis of rises in oil and
LNG prices • Impact analysis of depreciation of
the yen
1
Background Japanese economy is showing signs of growth due to Abenomics, improvements of people mind, Japanese company’s management efficiency, etc. in greater or less degree. On the other hand, there are some risks about energy situation like unstable electric power supply and demand, soaring fossil fuel costs, high risks at introducing too much solar photovoltaics at renewable energy. In addition to that, there is a geopolitical risk under the tense situation in the Middle East and Ukraine and there are many problems to solve.
It is indispensable to solve these problems for a sustainable growth of Japanese economy. It is suited to use quantitative information for analysing problem we faced or for considering energy mix. We projected Japanese economy, energy supply and demand and analysed the effect for various case toward FY2015.
IEEJ © 2014
Major assumptions in the Reference Scenario
World economy (real GDP growth rates) toward FY2015 United States: 2.5% or more European Union: 1.0% or more Asia: More than 6% despite of slowdown
in China, India, etc.
Taxes Consumption tax (VAT): Raised to 10% in
October 2015 from 8%
Oil, LNG and coal import CIF prices Referring to Kobayashi, Kutani and Sagawa “Outlook on the International Oil, Natural Gas and Coal Situation,” etc.
May 2014 FY2014 FY2015 Oil: $109/bbl 110 108 LNG: $850/t 821 776 Steam coal: $99/t 101 110
Exchange rate JPY102/$ on average throughout the
second half of 2014 and later
Nuclear power generation The first plants restart in early autumn.
The second group restarts in early 2015, followed by other plants with two to six months of interval.
Seven plants restart by the end of FY2014 generating 14 TWh of electricity.
19 plants generate 124 TWh of electricity in FY2015.
Electricity supply and demand Tighter than in the last summer Each electric utility will secure a reserve
capacity of at least 3% by saving and interchange of electricity (based on a government’s report).
Climate conditions Cooler summer and chillier winter in
FY2014 than the previous year. FY2015 is almost similar with FY2014.
2
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Japanese economy will recover gradually
The economy grows by 0.9% in FY2014 with strong investments and exports despite of the rise in tax.
The growth in FY2015 surpasses potential growth rate with recover of private consumption supported by better employment situation.
Real GDP, prices and employments
3
4.3%3.9%
3.6% 3.5%
0.7%
2.3%
0.9%
1.6%
-0.3%
0.9%
0.6%
1.0%
0%
1%
2%
3%
4%
5%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
2012 2013 2014 2015
Totallyunemploymentrate (right axis)
Real GDP(y-t-y)
Consumer price(y-t-y, excl.tax effects)
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Energy saving offsets energy demand increases caused by economic growth TPES decreases slightly before levelling off substantially in FY2015. Oil dips below 200 Mtoe for the first time in 46 years, lowering oil
dependency to 40%. Natural gas hits a new high in FY2014 followed by rapid decrease by 10% in the next year.
Primary energy supply by energy source Primary energy supply
4
514
491
485486
485487
480
490
500
510
520
201020112012201320142015
Mto
e
-8.8
+3.0
+2.7
+1.0
-9.5
-12.1
-3.2
+3.5
+23.2
-20 -10 0 +10 +20
Oil
Natural gas
Coal
Hydro
New energies,etc.
Nuclear
Year-to-year changes (Mtoe)2014 2015
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Final energy consumption neither increases nor decreases in total, but... TFEC stays in around 331 Mtoe for three years in a row. It is less than
before the earthquake in FY2010 by 4%. Whilst industry records a new high after the earthquake, energy
conservation in transport continues. Buildings will cease to fall. Final energy consumption by sector Final energy consumption
5
344
334
330
331331 331
325
330
335
340
345
201020112012201320142015
Mto
e
-0.8
-0.1
-0.1
-0.7
-0.1
+0.9
-1.5 -1.0 -0.5 0.0 +0.5 +1.0
Transport
Residential
Commercial
Industry
Year-to-year changes (Mtoe)
2014 2015
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Increases in electricity sales become distinct
The sales increases for three years in a row although they are less than before the earthquake by 5-6% due to electricity saving.
“Power,” mainly for industry, hits a new high after the earthquake. “Lighting,” mainly for household, turns to increase in 3Q2015.
Electricity sales by use Electricity sales
6
927
879
871 871 873877
860
880
900
920
201020112012201320142015
TWh
-1.8
+0.3
+0.3
+2.7
+0.4
+3.3
-2 0 +2 +4 +6
Lightingcontracts
Power contractsfor small-scaleindustrial users
Power contractsfor commercial
users
Large-scaleindustrial users
Year-to-year changes (TWh)
2014 2015
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LNG-fired power generation accounts for 50% in FY2014 Share of coal-fired generation also increases to 29%. Thermal power
generation in total, however, is slightly below than the peak in FY2013. LNG generates 20% more electricity in FY2015 than before the
earthquake although share of thermal power generation shrinks to 76%. Power generation mix for utilities
7 Note: Electricity purchased is not included.
23% 24% 25% 28% 29% 27%
32%43%
48%49% 50%
42%
6%
13%
17% 13% 10%
6%31%
12%2% 1% 2%
15%
8% 9% 8% 8% 9% 9%
0%
20%
40%
60%
80%
100%
2010 2011 2012 2013 2014 2015
New energiesHydro
Nuclear
Oil, etc.
LNG
Coal
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City gas sales rewrite the record high for the fifth straight year Sales for industrial uses increase for the sixth straight year of growth,
topping 20 billion m3. The industrial share of city gas reaches 55%. Whilst other uses hits the highest except for just before the
earthquake, residential keeps a long downward trend in principle. City gas sales City gas sales by use
8
35.3
35.9
36.3
36.7
37.5
38.0
35
36
37
38
39
2010 2011 2012 2013 2014 2015
Bill
ion
m3
+0.1
+0.8
+0.1
+0.1
+0.4
-0.2 0 +0.2+0.4+0.6+0.8+1.0+1.2
Others
Commercial
Residential
Industrial
Year-to-year changes (Billion m3)
2014 2015
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Fuel oil sales decrease by 6 GL a year
Whilst naphtha and diesel oil sales show relatively firm, heavy fuel oil C for power generation diminishes.
Gasoline drops to 53 GL, which is the lowest level since FY1996. The total sales may fall below 180 GL for the first time in a half of century by FY2016.
Fuel oil sales Fuel oil sales by products
9
196 196198
194
188
182
188
181
178 179
176173
170
175
180
185
190
195
200
201020112012201320142015
GL
Total fuel oil
Fuel oil other than heavy fuel oil Cfor electric utilities
-3.3
-0.8
-0.6
-0.6
-4.5
-0.8
-0.6
-8 -6 -4 -2 0
Heavy fuel oil C
Gasoline
Heavy fuel oil A
Kerosene
Naphtha
Diesel oil
Year-to-year changes (GL)
2014 2015
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Business plan, which may include regrouping refineries, will be submitted by October The current petroleum market is tightened due to capacity reduction
to meet the law “Sophisticated Methods of Energy Supply Structures.” Additional capacity reduction by 400 kb/d may be needed to meet the
new standard (draft) depending on measures. Crude oil throughput and refinery capacity
10
3.453.333.18
4.47
3.95
0
1
2
3
4
5
2005 2007 2009 2011 2013 2015
Mb/
d
Heavy fuel oil for electric utilitiesOthers
Refinery capacity
Crude oil throughput
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Both introduction of renewables and their burdens on consumers increase dramatically
11
Installed capacity of renewable power generation increases to 54.9 GW, or 16% of total capacity, by the end of FY2015 generating 10% of power.
Cumulative burdens related to FIT amount JPY63 trillion over 20 years for 89 GW of authorised capacity, which correspond to JPY3,600/MWh.
Cumulative burdens by FIT (for authorised as of March 2014)
Installed capacity of renewables
7.3
18.2
28.6
6.6
7.6 8.6
3.34.1
3.50
5
10
15
20
25
30
2011 2012 2013 2014 2015
GW
As of the end of fiscal year
Solar PV for non-residence
Solar PV for residence
Wind
Biomass
Surcharges43.9
Surcharges(for operating)JPY7.5 trillion
Power grid [batteries]
+18.1Power grid
[backup by fossil fuel-fired power generation]
+1.4
JPY63.4 trillion
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A risk for the recovering Japan: Expanding gaps of energy costs Massive use and high prices of fossil fuels result in heavy burden of
import spending, which is comparable with just after the oil crises. Although the burden reduces slightly in FY2015, the situation may not
be improved significantly depending conditions. Ratio of net import spending of fossil fuels against nominal GDP
12
3.8%
5.9%5.7%
5.1%
2.7%3.0%
1.8%
1.3%
0.8%
Just after the first oilcrisis, 4.9%
Just after the second oil
crisis, 5.9%
0%
1%
2%
3%
4%
5%
6%
2010 2011 2012 2013 2014 2015
JapanChinaUnited States
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Japan – a vulnerable country against rises in international energy prices
Impacts by rises in oil and LNG prices
Real GDP and gross national income reduce by 0.2% and 0.3%, respectively due to price rises of oil by $10/bbl and of LNG by $50/t.
The impacts reach also non-energy intensive industry and household.
Topic 2
13
Brent price 115
106
108
104
106
108
110
112
114
116
2/6 16/6 30/6 14/7
$/bb
l
+0.2%
-0.3%
-0.3%
-0.2%
-0.8%
-0.2%
-0.0%
-0.4%
-0.8%
-0.4%
-0.3%
-0.5%
-0.8%
-0.2%
-0.2%
-1.0% -0.5% 0.0%
Fuel oil sales
City gas sales
Electricity sales
Transport
Industry
Buildings
Final energy consumption
Oil
Natural gas
Coal
Primary energy supply
Consumer prices
Industrial production
GNP per capita
Real GDP
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Depreciation of the yen is a centaur: it stimulates economy and raises prices
Depreciation of the yen by JPY10/$ expands Japanese economy by 0.4% although the effect is obscure compared with the past.
Effects by economic expansion and by price rises offset each other, resulting in almost no changes in energy consumption in total.
Impacts on exports by depreciation of the yen by JPY10/$
Topic 3
14
Impacts by depreciation of the yen by JPY10/$ (FY2015)
-0.5%
+0.2%
+0.2%
+0.0%
+0.3%
+0.7%
+0.4%
-0.5% 0.0% +0.5%
Fuel oil sales
City gas sales
Electricity sales
Primary energy supply
Consumer prices
Industrial production
Real GDP
Metal products
Chemicals
Others
Transport equipment
Electrical Machinery
Machinery
0
200
400
600
800
0% 20% 40% 60%
Incr
ease
s in
real
exp
orts
(JPY
2005
bill
ion)
Ratio of price down
Last time
This time
IEEJ © 2014 15
To cope with rigorousness and rapidness in nuclear power plant assessment brings huge merit
Fossil fuel import spending decreases by JPY1.4 trillion if nuclear power generation increases by 120 TWh. Real GDP and gross national income increase by 0.14% and 0.23%, respectively.
Power generation cost decreases by JPY1,600/MWh, reducing the risk of further electricity price hike.
Topic 1
Impacts of nuclear power plants’ restart
Nuclear power generation
(TWh)
Power generation
cost (JPY/kWh)
Fossil fuel import
spending (JPY trillion)
CO2 emissions (Mt)
LNG imports (Mt)
Contact: [email protected]
8.2
13.0
12.3
11.3
10.7
10.2
8
9
10
11
12
13
14
2010 2014 201518.1
27.326.7
25.825.324.8
18
20
22
24
26
28
30
2010 2014 2015
288
0
42
124
162
210
0
50
100
150
200
250
300
2010 2014 2015
71
91
89
80
77
70
65
70
75
80
85
90
95
2010 2014 2015
1,123
1,193
1,171
1,133
1,115
1,095
1,080
1,100
1,120
1,140
1,160
1,180
1,200
1,220
2010 2014 2015
No Operation
Low-level
Mid-level
High-level
Full Operation