Remarks at the Regular Press Conference for the Second Half of FY20232023/11/29
JERA Co., Inc. (“JERA”) held a regular press conference by Hisahide Okuda, President, Director, CEO and COO on Wednesday29 November. The press conference was held in Japanese and the below is an English translation version.
1.Agenda
• measures to address supply and demand during the FY2023 winter season,
• progress in achieving JERA Zero CO2 Emissions 2050, and
• new value creation through the power of imaginative innovation.
Material :
Document 1 Press Release: Measures to Address the Heavy-Load Winter Season for FY2023
Document 2 Briefing Materials for the Regular Press Conference
Document 3 The brochure outlining Hekinan Thermal Power Station safety measures (Japanese only)
2.Remarks
There are three things I’d like to talk about today:
1. measures to address supply and demand during the FY2023 winter season,
2. progress in achieving JERA Zero CO2 Emissions 2050, and
3. new value creation through the power of imaginative innovation.
(1) Measures to Address Supply and Demand During the FY2023 Winter Season
Supply and Demand Outlook for the FY2023 Winter Season
I’ll start by talking about measures to address supply and demand for the FY2023 winter season.
As you can see in your hand-outs, we have issued a press release on this topic, but my discussion today will follow the briefing materials that have been distributed. Please turn to Page 3.
The Ministry of Economy, Trade, and Industry’s Basic Policy Subcommittee on Electricity and Gas met on 31 October and indicated that it projected this winter’s reserve margin would exceed 3%, the minimum necessary to ensure stable supply.
JERA, however, is taking nothing for granted. We will be doing our utmost to secure both kilowatts and kilowatt hours in order to ensure a stable supply.
Measures to Secure Kilowatts
First, please turn to Page 4 for the measures we are taking to secure kilowatts.
JERA is moving steadily forward in replacing older thermal power plants with state-of-the-art facilities. Six units, totaling 4.32 million kilowatts, whose replacement has already been completed have begun commercial operation.
Looking to 2024, we will continue moving forward with an additional 2.99 million kilowatts in replacement. We believe that moving decisively in this way to upgrade power sources is an important part of ensuring safety.
In addition, the start of commercial operation of Yokosuka Thermal Power Plant’s Unit 2 is scheduled for Febrary 2024, but we are considering whether we can accelerate the start of commercial operation in order to contribute to this winter’s supply capacity.
Measures to Secure kWh (Fuel)
Next, please turn to Page 5 for the measures we are taking to secure kilowatt hours (fuel).
During the last winter season, a combination of factors such as a warmer-than-usual winter in Europe and Japan and lower demand for LNG due to China’s “Zero COVID” policy meant that the LNG market was undisrupted, enabling us to maintain a stable supply despite the situation in Ukraine.
The current outlook for this winter, based on factors such as the forecast of a warm winter in Japan, the tendency toward high reserves in Europe, and the delays in restarting the Chinese economy, anticipates an easing of the supply-demand situation.
Nevertheless, since overall global supply has not grown, there is the potential for LNG production issues on the supply side—a problem at any LNG plant would cause prices to jump. We believe, therefore, that the environment for LNG procurement remains unpredictable.
Turning to LNG fundamentals, although demand for LNG is growing—particularly in Europe—LNG supply is not expected to catch up to that demand until around 2025, leading to a tight supply-and-demand situation.
At JERA, in addition to building an LNG portfolio that combines long-term, short-term, and spot contracts, we also secure a stable fuel supply by flexibly optimizing procurement and resale through JERA Global Markets.
In addition, operation of the Strategic Buffer LNG (SBL) framework begins this winter. Please turn to Page 6.
Under this framework, business entities designated by the Ministry of Economy, Trade, and Industry to supply SBL will secure roughly one carrier worth of surplus LNG per month between December and February to be supplied to domestic operators when needed as determined by METI.
JERA was approved as an authorized supplier of SBL on 24 November. Going forward, by supplying our stock of SBL in accordance with requests from the Ministry of Economy, Trade, and Industry, we will continue to do our utmost to secure a stable fuel supply and to contribute to Japan’s energy security.
JERA has a strong sense of social responsibility regarding the stable supply of energy and, as Japan’s largest power generation company, will make every effort to ensure a stable supply this winter.
(2) Progress in Achieving “JERA Zero CO2 Emissions 2050”
Progress in Demonstrating 20% Fuel Substitution with Ammonia
Next, I’d like to talk about our progress in achieving JERA Zero CO2 Emissions 2050.
Let me start by reiterating our policy on decarbonization. JERA aims to help achieve a world in which everyone has dependable access to clean energy at an affordable price.
As we aim for stable supply and decarbonization, it is critical to have as many options available as possible.
Countries and regions vary in their stage of economic development, geographical conditions, and geopolitical situation. Therefore, creating a world of stable supply and decarbonization requires skillfully combining options to fit the conditions in each country.
Starting from the idea that our role is not to provide a single prescription for all but rather to offer a variety of prescriptions tailored to each country, we are moving forward with decarbonization initiatives.
One example of this is our efforts to aim for decarbonization, stable supply, and economic growth not through renewable energy alone but through renewables in combination with zero-emissions thermal and storage battery projects.
We are making steady progress in substituting hydrogen-based fuels such as ammonia for fossil fuels in thermal power generation. Please turn to Page 8.
Progress on demonstration testing aimed at 20% fuel substitution with ammonia, to be conducted at Hekinan Thermal Power Station Unit 4, has been moving smoothly toward a start during this fiscal year, roughly a year earlier than when first announced.
In terms of safety, too, we are implementing comprehensive measures related to both tangibles and intangibles. Your materials should include the brochure we produced outlining our safety measures and, as we begin demonstration testing, we will continue to communicate with local communities to gain their confidence and understanding.
Power generation using hydrogen-based fuels could help solve the global decarbonization problem, and I hope it will spread widely from Hekinan Thermal Power Station in Aichi Prefecture both throughout Japan and to the world.
Progress on 50%+ Fuel Substitution with Ammonia
We are also making steady progress as we aim to move beyond 20% fuel substitution with ammonia to 50%+ substitution. Please turn to Pages 9 and 10.
Prospects for burner development are, overall, good for both IHI and Mitsubishi Heavy Industries. Going forward, after conducting demonstration testing using an actual unit by FY2028, we aim to achieve commercial operation using 50%+ substitution by the early 2030s.
Building and Expanding the Hydrogen and Ammonia Supply Chain
Next, please turn to Page 11. A huge volume of ammonia will be required so, separate from the existing supply chain for fertilizer ammonia, we need to build a new supply chain for fuel ammonia.
In the areas of production and procurement, up until now we have considered cooperation with both Yara and CF Industries related to developing large-scale production of blue ammonia and procuring fuel ammonia for Hekinan Thermal Power Station Unit 4. We hope to continue pursuing cooperation with many other companies as we seek to expand the volume of ammonia used going forward.
In the transportation area, we are cooperating with both NYK and Mitsui O.S.K Lines with the aim of establishing shipping methods, including the development of large-volume ammonia carriers.
Working with Toyota Motor Corporation to Build a Large-Scale Energy Storage System using Reclaimed Electric Vehicle Batteries
Although things are progressing smoothly with the transition to hydrogen-based fuel, including the supply chain, JERA is also working hard on renewable energy and storage batteries.
Please turn to Page 12. Today I’d like to talk about the progress made in our collaboration with Toyota Motor Corporation to reuse electric vehicle drive batteries.
Going forward, the spread of electric vehicles is expected to bring increased use of batteries, but the drive batteries in electric vehicles reach their end of life after a certain period. We would like to reclaim those used batteries for utilization in the electricity business.
Specifically, we want to gather reclaimed batteries that can still be used, connect them to the power grid as batteries of a certain scale, and use them to further the adoption of renewable energy and for frequency stabilization.
The variable quality of used batteries creates problems for supplying stable power. We are working together with Toyota Motor Corporation to jointly develop technology to establish a large-scale storage battery system capable of stable, waste-free charging and discharging in response to supply and demand from the grid, even when using reclaimed electric vehicle batteries that vary widely in performance and capacity.
Last fiscal year we confirmed that the system could connect to the high-voltage grid and are currently moving forward with verification of connection to the extra-high-voltage grid. We aim to introduce a system capable of supplying approximately 100,000 kWh of electricity by the mid 2020s.
In addition, with a view to expanding such Japan-based initiatives, we are applying for patents both in Japan and overseas and will consider developing the business globally.
Starting with the intellectual property generated through carbon neutral initiatives such as our efforts to develop a storage battery business that effectively utilizes reclaimed electric vehicle drive batteries, we will lead the way to a circular economy.
Aiming for Global Decarbonization Together with Asia
We are also accelerating our support for decarbonization in Asian countries. Please turn to Page 13.
Most recently, we have launched:
- a collaboration with Vietnam Electricity (EVN) to draw up a decarbonization roadmap, and
- joint research with JGC Holdings Corporation (JGC) and the Indonesian state electricity company (PLN) on a project to introduce and commercialize carbon capture and storage (CCS) for thermal power.
With these projects and others, we are collaborating on decarbonization with a growing number of Asian countries including Bangladesh, Thailand, Malaysia, the Philippines, Vietnam, Indonesia, and Singapore.
Please turn to Page 14. JERA invested in Aboitiz Power in the Philippines in 2021 and initiated a human resources exchange program with them in July as a concrete collaboration in operations and maintenance.
JERA sends three engineers to Aboitiz Power’s power stations while Aboitiz Power sends three engineers to JERA’s Hekinan Thermal Power Station. Learning from one another, we seek to elevate the technical capability of both companies.
(3) New Value Creation Through the Power of Imaginative Innovation
Finally, I’d like to talk about new value creation through the power of imaginative innovation.
Since assuming my current position, I have spoken of my hope that by combining a strong sense of social responsibility with the power of imaginative innovation we could transcend the framework of an energy company to offer society new options that would make it more sustainable.
JERA is grounded in a strong sense of social responsibility as an energy company. Under this responsibility, the power of imaginative innovation is indispensable for continuing to create value.
In closing today I’d like to share some of our initiatives that cultivate a corporate culture that sustains everyday innovation.
Femtech
To foster imaginative innovation, I believe it is important to create an environment in which diverse people can work happily and feel secure.
Please turn to Page 16. Through JERA Ventures, we invested in the Nextblue II fund, Asia’s first to specialize in the Femtech domain.
By having JERA employees and their families test Femtech products and services, we both support the cultivation and spread of Femtech domain technology and offer female employees a diverse range of options.
Such initiatives have received a great deal of attention and positive feedback from outside the company.
Our management is leading by example to spur the creation of an equitable environment in which all employees can maximize their potential.
Collaboration with the Research Center for Advanced Science and Technology at the University of Tokyo
Our initiatives aimed at creating value also extend beyond the company. Please turn to Page 17.
Recently, in collaboration with the Research Center for Advanced Science and Technology at the University of Tokyo we have decided to launch a STEAM education program called the Youth Koyasan Conference.
The launch of the program came about because in our discussions with professors at the University of Tokyo, we found that we shared an awareness that human resource development focused on value creation is essential to achieving innovation.
Specifically, the program gathers a few dozen students from both ordinary and art-focused schools and offers them a place on Koyasan to learn, experience, and discuss a wide range of fields such as technology, the social sciences, the arts, and philosophy.
To make it through a time of rapid scientific and technological progress like the present day, one in which the future is difficult to predict, we need people who are not only intelligent but also have a developed sensibility cultivated through learning in artistic fields such as the fine arts and the liberal arts and gives them high-level problem-solving abilities.
We hope that this program will help nurture people with such skills and lead to progress in innovation and new value creation in Japan.
Diverse talent is the source of imaginative innovation, and it is crucial that we continue to be an appealing company that draws good people.
I will personally lead the way in resetting my familiar values and preconceived notions to create an unprecedented virtuous cycle of unique value creation.
Thank you.