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Japan Oil Use Likely to Remain High through Summer

Japan – a resource constrained, island economy that has long been challenged by its lack of natural resources.  Japan is a major importer of food supplies, basic commodities, and especially energy resources including coal, oil and liquefied natural gas (LNG).

Following the Fukushima crisis, which essentially eliminated Japan’s nuclear power production abilities, Japan’s use of oil has dramatically increased.  According to data from J.P. Morgan Global Commodity Research, February saw Japan’s oil use (for power generation) spike by 520 kbd yoy; an amount roughly the equivalent to China’s projected 2012 oil demand growth (500 kbd).

Looking ahead to the summer months, Japan is making a concerted effort to prevent power shortages and blackouts.  Will oil consumption rise as a result? Many analysts agree that oil use in power is the single largest demand-side uncertainty during the summer peak demand period of July and August.

Even though selected nuclear reactors are scheduled to go back into operation come summer, it is unlikely that the additional power generation will make a dent in Japan’s summertime oil consumption levels.  It is estimated that only 6 of Japan’s 54 closed reactors will be opened by the summer.  Japanese utilities could still burn up to 800kbd of oil for power generation during July and August, despite the inclusion of these reactors.

Furthermore, the Fukushima crisis has altered the way Japan structures its power production, particularly as related to oil.  Prior to the accident, oil supplies were largely allocated for peak demand periods, when power plants had to ramp up to satisfy the highest levels of consumer electricity use.  Now, oil is often utilized for peak and mid-range use, resulting in a larger, more consistent demand profile.

Oil’s involvement in this earlier process stage has kept demand levels up.  Summer heat will result in heavy demand for air-conditioning, thus amplifying the daily demand peaks.  Oil will be relied upon to meet demand and avoid power outages.

Many uncertainties remain.  Weather patterns (such as major heat waves) could complicate matters or ease the burden.  Implementation (or lack thereof) of power conservation measures may also have an impact on usage.

As part of our macro investment strategy, we keep a close eye on energy resource consumption patterns around the globe and take note of changing trends.  Learn more about our sector focus by clicking here.

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New Japanese turbine design to drastically reduce cost of wind power

A technology breakthrough from Japan’s Kyushu University may result in steep declines in the cost of wind power, bringing it below that of nuclear energy.

The innovative new design, called the ‘wind lens’, could result in triple the power output of a conventional wind turbine. Falling component costs have already helped to reduce the price per MW of wind power, but with this new technology advance that trend could accelerate.

In some places in the United States, such as the TWE Carbon Valley project in Wyoming, wind power is already cheaper than coal – $80 per MWh for wind vs. $90 per MWh for coal.  What’s more, government subsidies are not necessary to achieve this cost differential.

With its nearly 2.2 million square kilometers of high wind potential locations, the United States has been called the “Saudi Arabia of wind.”  In terms of total wind energy potential, the United States ranks #3 in the world, says the International Clean Energy Analysis (ICEA).

Click here for an in-depth, interactive look into the energy resources of the United States, courtesy of the ICEA

 
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Posted by on October 11, 2011 in Clean Energy, Wind

 

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Japanese Parliament Approves New Investments in Solar & Renewables

Japan, in the words of Prime Minister Naoto Kan, must “wean itself off of nuclear energy” and expand domestic renewable energy resources such as solar, wind, biomass and geothermal.

This week, the Japanese lower house of parliament approved legislation to promote new investment in these new energy technologies.  This decision is a big step towards Japan’s new energy policy following the disaster at the Fukushima Daiichi nuclear plant.  The bill furthers the Prime Minister’s goal of increasing the use of renewable energy to supply Japan’s power needs – without relying on nuclear.

The new laws would make it mandatory for utilities to buy electricity generated from solar, wind, biomass, geothermal and small hydro power plants at current pricing rates for up to the next two decades, passing costs onto end consumers.  Certain exemptions would be included for particularly energy-intensive industries.  Upon approval by Japan’s upper parliamentary house, the new law could go into effect by July of 2012.

Of all the renewable energy industries supported by the bill, solar is expected to receive the initial boost.  It is estimated that with passage of the new bill, Japan’s solar capacity could grow to 100,000MW by 2015, up from 40,000MW today, as corporations and local governments install large-scale solar installations.

Read more here…

 

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LNG Demand Reaches New Highs in China & Japan

The month of June saw dramatically increased demand for liquefied natural gas (LNG) in both China and Japan.

Japan, still reeling from the Fukushima nuclear crisis, has a serious power deficit as a result of nuclear reactors damaged during the earthquake or taken offline for safety reviews.  Prior to March of this year, nuclear power formerly supplied 30% of all Japanese energy.

Japan was already the world’s leading LNG importer, but since the spring its imports have risen higher.  Current import levels rose 10.6% year on year during June, the third straight month of increases.

LNG has been used as an important fuel substitute for nuclear power.  Industry experts say in the event of total nuclear closure, 20 additional tons of LNG would be tacked on to yearly Japanese demand, which last year reached 70 million tons.

However, Japan may find some resource competition coming from its neighbor China.  Industrial power demands have grown, prompting additional LNG imports.  In June, imports were 4.3% higher than the previous high in December 2010, when the nation imported 1.03 million tons to meet winter heating needs.

PetroChina has opened a new LNG receiving terminal in the eastern province of Jiangsu and expects increase gas imports to help ease power shortages in some provinces.  Tony Regan, analyst for Tri-Zen International remarks “we might be seeing this great leap forward in the [Chinese] gas market.”

Chinese import levels are predicted to rise to 13 million tons in 2011 from 9.3 million in 2010.  By the end of the decade, China will likely surpass South Korea to become the world’s second largest LNG importer.

Read more here…

 
 

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Japan Discovers Vast Rare Earth Deposit in Pacific

In an important news update, Japan has discovered vast deposits of rare earth minerals along the floorbed of the Pacific Ocean. Located in an international zone stretching east and west of Hawaii as far as Tahiti, scientists say these minerals can be extracted easily.

Rare earth minerals are crucial components in the manufacturing of clean energy and high tech devices around the world.  This space has been wrought with tension as global manufacturers become increasingly concerned with China’s domination of nearly the entire market.  Export quotas imposed by Beijing have prompted many hi-tech nations such as Japan and the United States to accelerate the search and development of alternative rare earth resource sites.

“The [Pacific] deposits have a heavy concentration of rare earths,” says Yasuhiro Kato, associate professor of earth science at University of Tokyo.  “Just one square kilometer of deposits will be able to provide one-fifth of the current global annual consumption.”

The total amount contained in this new discovery is estimated at 80-100 billion tons of rare earth minerals.  This find would nearly double total global reserves; which were previously estimated by the U.S. Geological Survey at 110 million tons spread across deposits in China, Russia and the United States.

These particular seabed deposits are rich in the heavier rare earths used extensively in flat-screen TVs, LED lighting and hybrid cars.  The team of Japanese scientists say mineral extraction can be successfully completed with simple pumping processes.

This is a significant discovery, particularly for Japan.  A heavy user of rare earths, Japan was previously stung with an embargo by China following a diplomatic dispute.  It has actively been trying to break dependence on Chinese supplies, and with this new discovery, it just might have succeeded.

Read more here…

 

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Japan Looks Towards Solar Expansion

Solar energy is expanding rapidly in Japan.

Political leaders have been lending support.  Japanese Prime Minister Naoto Kan aims to put solar panels on10 million rooftops by 2030.  Other leading government officials have been encouraging use of a Feed-in-Tariff (FIT) to encourages fast-track solar energy development.

Germany’s FIT has been a major contributing factor to its leadership in the global solar market.  Japan adopted a similar FIT in Nov 2009, and has since made alterations to maximize use of the program.  Recently, Japan increased rates for non-residential solar installations to US $0.48/kWh, which has sparked interest from global conglomerates like Mitsubishi.  Taking advantage of these policies, Mitsubishi plans to build large scale plants throughout the country. If this trend continues, the solar industry in Japan, the world’s third largest economy, could see a significant boost.

According to a scenario put forth by University of Tokyo professor Ryoichi Komiyama, if Japan targeted 30GW of new solar, the market for solar panel production and installation could grow to as much as $261 billion with a FIT in place. Putting this into perspective, 30GW is nearly 3/4 of the total amount of solar installed globally over the past decade.

This may only be the beginning.  Japan’s environment ministry has estimated the potential for commercial solar projects in the nation could, in theory, grow to 150GW – 10 times that of Germany.

We are closely watching the policy developments in Japan as the nation retools its energy policy following the Fukushima plant disaster, and expect to see continuing opportunities for clean energy.

 
 

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Rare Earths Rise as China Hoardes Valuable Supplies

Rare earth element prices have risen dramatically over the past few weeks as companies have begun “hoarding” supplies.

Attempting to make sense of the recent spike, analysts note many companies are buying and holding on tightly to their rare earth investments with the expectation of future price increases.

This speculation has contributed to the recent rally, which has been particularly notable in some of the heavier rare earth elements.

The 17 rare earth elements are used extensively in a wide variety of high tech and clean energy technologies including electric vehicles, fluorescent lights and wind turbines.  China produces over 90% of global rare earths and dominates this lucrative market.

The Chinese govenment’s fluctuating restrictions on rare earth export quotas has been a major cause for concern in the market, particularly amongst high tech and clean energy manufacturers in the United States and Japan, the world’s largest rare earth importers.  in 2010, China cut rare earth export quotas by 40% and, following a political dispute, temporarily halted shipments to Japan.

Click here to watch a BBC Video on Rare earths mining:  China’s 21st Century gold rush

China has been successful in capturing much of the rare earth market thanks to many years of mining under rather loose environmental standards.  However, Chinese regulators have begun to tighten up their mining standards and shut down illegal mines.  As these efforts continue, it is likely much of China’s rare earth producing power will be concentrated into fewer, but larger, state-owned mines.

Anticipating sustained increases in demand, particularly as it’s domestic clean energy industry grows, China instituted a stockpiling program in 2010 to ensure that it retains sufficient domestic rare earth supplies.  Eventually, China aims to store 200,000 tons of rare earth elements – nearly twice its annual production.

Uncertainty over high prices and China’s future rare earth policies has prompted increased mining activity for rare earths in many other parts of the world, including the United States and Australia.  Rare earth supplies are crucial to the energy security of the United States, says the U.S. Department of Energy (DOE), which published a Strategic Plan for developing and acquiring alternative resources without increasing dependence on China.

Learn more – read our FAQ:  “What are rare earth metals?”

 

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