2. With only two out of 48 nuclear reactors in
operation, Japan’s energy mix has to change
and experts are pushing lower calorific coal
as a necessity in meeting the country’s
energy needs.
3. Great potential for Indonesia as
Japan’s coal attitude changes
Japan will move from higher quality coal to lower calorific value coal as the country’s
reduced nuclear power capacity has caused energy prices to soar
Japan is one of the largest coal importers in the world. In 2010, the country imported
128, 957 tons of coal. This places Japan just above China, which imported 128,560
and both countries are well ahead of Korea, India and Taiwan.
“Japan is a mature market in terms of coal demand,” said Toshimi Tsuchiya, director of
Chubu Energy Trading in Singapore. This means that no significant demand increase is
expected.
While there will be little demand increase in the future, Tsuchiya was adamant that
the quality of coal Japan imports needs to be of lower calorific value because of
soaring costs.
Indonesia is well-known in the mining industry for its lower calorific value coal and
has the potential to supply Japan as its coal dynamics change.
4. Earthquake changes power policy
Earthquake changes power policy
Previously it was inconceivable to imagine planning and building new coal-fired
stations in Japan because of government policy. The government has been strict in
ensuring that it meets its global warming promises.
Since the devastating earthquake that hit Japan in March 2011, only two out of the 48
nuclear reactors are in operation. The capacity has been covered by thermal power
generation, including coal.
The earthquake has caused the Japanese government to re-evaluate its energy policy. This
has meant a shift away from nuclear generation.
5. Earthquake changes power policy
“The introduction of renewables and energy conservation proposed by the
government are not enough to cover the drop off effect from diminished nuclear
generation capacities,” said Tsuchiya.
Coal fired power plants are the realistic choice to meet Japan’s power needs.
The government is also recognising this reality as it has eased the Environmental
Impact Assessment, which is necessary for building new coal fired power plants.
The assessment’s criteria have become more transparent and the time for the
assessment to be completed has been reduced from three years to one year.
This makes it highly likely that new coal-fired stations will emerge in Japan.
6. Turning to lower grade coal
The nuclear shutdown has meant that fuel costs have soared and Japanese
power utilities are raising their tariffs. Fuel cost is now amounting to 40% of the
tariff and a cost reduction is not only in the nation’s interest, but necessary.
Japan is different to its neighbours, Korea and Taiwan, as these countries are
price sensitive and focus on generic coals. Japan is brand oriented and conscious
of the security of supply.
For example, the Australian free on board (FOB) Japanese price for 6000 net as
received (NAR) coal averaged $105M/T in 2011 and 2012. While 5500 NAR coal
for Korea and Taiwan averaged $87M/T over the same period. The price
difference is larger than calorific value.
7. Turning to lower grade coal
Japan’s power utilities will now need to change their behaviours because of this
strong cost pressure. The price differences with other countries will also need to
be more aligned.
Power stations will move towards using lower grade coals. “This is especially true
as a market dependent on high Japanese prices is not sustainable” said Tsuchiya.
Tsuchiya reiterated that Japan needs to be proactive in new coal trials and
investments for facilities. They also need to enhance stockyard capacity and
maximise availability of blending facilities.
It is expected that new coal fired stations, which focus on lower grade coal will
emerge in Japan. This is where Indonesia could play a pivotal role in supplying
lower grade coal to meet Japan’s price cutting needs.
8. Find out more about Japan’s
changing coal procurement
dynamics by downloading the
Coaltrans East Asia Networking
Forum brochure here.
