―― Speaking candidly, I’m very interested to hear more about what kind of benefits JERA brings to Japan?
Domestically, we offer smarter power generation. There are two efficiencies here. The first is that we deliver electricity when it is needed, in the amount that is needed, both reliably and inexpensively. We predict that the progress of electricity liberalization and the spread of renewable energy are going to lead to greater fluctuations in electricity demand. Our ability to cope with fluctuations will enable us to achieve efficient power generation and to deliver high-quality electricity reliably and at a lower price than our competitors.
―― With electricity liberalization, consumers today can choose where they get their electricity.
That’s right. The second efficiency is our contribution to reducing CO2 emissions and other burdens on the environment by replacing aging thermal power generation equipment with state-of-the-art, high-efficiency thermal power generation equipment. Developed nations have a responsibility to keep CO2 emissions in check; this is the way the world is going. By making power generation more efficient, we hope to make a real contribution to reducing both the burden on the environment and the cost of energy in Japan.
―― Having seen your press release from last month (11 October 2016: “JERA to Acquire EDF Trading’s Coal and Freight Business”), I am curious to know more about JERA’s coal trading business.
For an electric company, fuel is something to procure—something to be bought. We’re creating a framework that will enable us to sell fuel, too. Fuel prices and volumes are constantly fluctuating. With a product like this, there are times when quickly selling in reaction to the market can be profitable. Coal, a fossil fuel, is rapidly becoming a commodity.
But the aim of trading is not only to make a profit. It also functions to stabilize price and volume. By selling as well as buying, we can level out fluctuations in fuel price and volume, a necessary aspect of providing a stable supply of fuel.
JERA Trading Singapore (JERATS) is directly involved in this trading business. A company we took over from Chubu Electric in October 2015, JERATS has been involved in coal trading before and knows the business well. As we cultivate know-how through coal trading centered on JERATS, we hope to apply this to trading other fuels such as LNG in the future.
―― I see. Personally, my impression of coal is that of an energy source from a bygone time.
Coal is strongly associated with the post-war energy revolution so I imagine most Japanese people feel the same way. (Laughs) But even today, in the twenty-first century, coal remains the main source of thermal power generation worldwide. Coal accounts for 30% of the electricity generated in Japan, 40% in the United States, 45% in Germany, and 75% in China.
Coal is cheaper than LNG and oil. There are vast reserves and many countries produce it. It is easy to handle and to store. As a fuel for thermal power generation, it is a far superior resource in terms of cost. It does have its disadvantages, though.
―― The fact that coal produces more CO2 emissions than fuels like LNG, right?
Exactly. That is why developed countries are moving in the direction of reducing their use of coal. On the other hand, for emerging countries that need inexpensive electricity to develop economically, coal is an essential option. JERA will take suitable steps to meet the needs of coal customers globally, principally in Asia where increased coal consumption is expected but also in Europe and the Middle East. The basic agreement announced the other day to create a global coal business is, I believe, something that our partner proposed precisely because JERA is seeking to globalize. JERA is also working to reduce both the burden on the environment and energy costs.
―― Reflecting on the situation with electric power generation in Japan, the country’s mainstay thermal power generation involves many forms of power generation, with LNG at the top but also coal and oil.
This is a matter of necessity. In a country like Japan that has scarce energy resources of its own, we need to have many options for generating electric power. A country like the United States that has a varied “resource portfolio” of oil, coal, and natural gas, sourced domestically and in volume, can talk about withdrawing from coal. Germany has scarce domestic resources but is able to choose among a number of suppliers by using Europe’s extensive network of power lines and pipelines. The drive to reduce the use of coal as a way to reduce CO2 emissions differs from country to country based on these sort of geographical factors.
We will replace existing TEPCO Fuel & Power and Chubu thermal power plants as well as build new facilities developing highly market competitive power in a timely manner. With the introduction of state-of-the art, high-efficiency equipment, we will also mitigate environmental burdens. Our know-how acquired through development and operation overseas will be reflected in our domestic business, enhancing our competitiveness.
Hitachinaka Generation Co., Inc.