handouts for a lecture for the Stockholm School of Economics at the Embassy of Sweden in Tokyo, describing today's status of Japan's energy and electricity markets, how we arrived at today's situation, and how Japan's electricity markets are likely to develop as a consequence of electricity market deregulation.

1. (c) www.eurotechnology.com fasol@eurotechnology.com June 18, 2014
JAPAN’S ELECTRICITY AND
NEW ENERGY POLICY
Gerhard Fasol PhD
contact: http://www.eurotechnology.com/connect/
Embassy of Sweden,Tokyo June 18, 2014
Stockholm School of Economics, EIJS

2. (c) www.eurotechnology.com fasol@eurotechnology.com June 18, 2014
JAPAN’S ENERGY - MYTHSVS REALITY
•Nature governs energy - nature cannot be fooled
•Where are we and why?
•Japan’s energy structure frozen since 1952- March 11, 2011
•Primary energy: 96% imported, does not need to be
•Myth vs Reality, Mantra vs Smart
•Psychology of judgment and decision making
•“Regulatory capture”
•Why Japan pays so much for LNG vs shale gas
•Where do we go forward?
•Grid developments
•Liberalization, democratization, localization
•Renewable energy
•Energy plan of Feb. 11, 2014

3. (c) www.eurotechnology.com fasol@eurotechnology.com June 18, 2014
NATURE GOVERNS ENERGY
•I have energy in my DNA: Ludwig Boltzmann created much of the
laws and tools to work with energy
•http://www.eurotechnology.com/events/ludwig-boltzmann-
symposia/
•“For a successful technology, reality must take precedence over
public relations, for nature cannot be fooled” (Richard Feynman)
•Fukushima was caused by “regulatory capture”:
•Parliamentary committee chaired by Kiyoshi Kurokawa
•“Groupthink can kill”: http://www.eurotechnology.com/
2014/03/09/kiyoshi-kurokawa-groupthink-can-kill/
•http://www.shugiintv.go.jp/jp/index.php?
ex=VL&deli_id=41488&media_type=

4. (c) www.eurotechnology.com fasol@eurotechnology.com June 18, 2014
CAUSE OF FUKUSHIMA NUCLEAR ACCIDENT
•Regulatory capture caused the Fukushima accident
•result of Parliamentary commission (Chair: Kiyoshi Kurokawa)
•not a Japanese phenomenon
•theory of regulatory capture: George Stigler (Nobel Prize 1982)
“EconomicTheory of Regulation”
•Psychology of judgment and decision making
•Daniel Kahneman (2002 Nobel Prize in Economic Science)
•eminent US philosopher about Daniel Kahneman:“I am not
interested in the psychology of stupidity”

5. (c) www.eurotechnology.com fasol@eurotechnology.com June 18, 2014
HISTORY OF JAPAN’S ELECTRICAL POWER INDUSTRY
Year action
February 15, 1883 Tokyo Dentou KK receives Government license, starts business in July 5,1886
1893
Tokyo Dentou KK introduces 50Hz equipment from AEG (of Germany)
Osaka Dentou KK introduces 60Hz equipment from GE (of USA)
1896 33 electricity utility companies
700 electricity utility companies
1938-1939 Japan’s electricity industry nationalized
March 1942
Nihon Hassouden KK (Nippatsu) created (generation + transmission)
9 distribution companies
May 1, 1951
US occupation government orders dissolution of Nihon Hassouden KK (Nippatsu), 9
regional electricity monopolies created,1972 + Okinawa Power Co
March 1, 1961
construction of first Japanese nuclear power plant (Tokai Nuclear Power Plant, UK
Magnox type) starts (power generation starts 1966, decommissioned in 1998)
Source: Eurotechnology-Japan Report “Japan’s Energy Sector”
http://www.eurotechnology.com/store/j_energy/

6. (c) www.eurotechnology.com fasol@eurotechnology.com June 18, 2014
NEW ENERGY CONTRIBUTIONTOTHE POWER MIX, PRE-2011
Before March 11, 2011, Japan’s regional power monopolies had an unwritten rule to keep “new energy” (ie. renewable
energies such as wind, solar, geo-thermal, wave power, bio-mass, but excepting water power) below 1% of the power mix.
Water power was excepted, and Japan’s water power contribution is on the order of 10% overall.
Hokkaido Tohoku Tepco Chubu Hokuriku Kansai Chugoku Shikoku Kyushu Okinawa J Power
0
0.2
0.4
0.6
0.8
1.
1.2
1.4
newenergygenerationcapacity
new energy generation
capacity before March 11, 2011
0.7
1.3
0.05
0.1
0.9
0.03 0.02 0.03
1.1
0
0.09
c2012EurotechnologyJapanKK
www.eurotechnology.com
Source: Eurotechnology-Japan Report “Renewable Energy in Japan”
http://www.eurotechnology.com/store/j_renewable/

7. (c) www.eurotechnology.com fasol@eurotechnology.com June 18, 2014
WHY DOES JAPAN PAY SO MUCH FOR LNG?
Japan pays more than 5% of GDP for energy imports
Graphics/analysis source: http://www.eurotechnology.com/store/j_energy/
1990 2000 2010
5000
10000
15000
20000
25000
30000
importsYENBillionyear
Oil, coal, LPG, LNG
imports YEN Billion FY
Oil
Coal
LPG
LNG
Lehman
shock
US$ 100 Billion 2.2 of GDP
US$ 200 Billion 4.4 of GDP
US$ 300 Billion 6.7 of GDP
FY April March
source Ministry of Finance of Japan
c2013EurotechnologyJapanKK
www.eurotechnology.com
Jan 2008 Jan 2009 Jan 2010 Jan 2011 Jan 2012 Jan 2013
0
500
1000
1500
2000
2500
3000
3500
importsYENBillionmonth
Oil, coal, LPG, LNG
imports YEN Billion month
Oil
Coal
LPG
LNG
Lehman
shock
March 11
2011
US$ 10 Billion
US$ 20 Billion
US$ 30 Billion
Jan 2011 Jan 2013: 34.0 increase
source Ministry of Finance of Japan
c2013EurotechnologyJapanKK
www.eurotechnology.com

8. (c) www.eurotechnology.com fasol@eurotechnology.com June 18, 2014
WHY DOES JAPAN PAY SO MUCH FOR LNG?
Japan pays far more for LNG per unit than US costs or EU - why?
• not one single reason:
• liquifaction + transport
• political reasons
• timing
• negotiation know-how
• competition reasons
• project management
• etc
Graphics/analysis source: http://www.eurotechnology.com/store/j_energy/
2008 2010 2012 2014 2016
0
50000
100000
150000
JapanpriceYENmetricton
US$ 500 metric ton
US$ 1000 metric ton
LNG
LPG
Price for LNG and LPG in Japan YEN metric ton
Source: Japanese Ministry of Finance
Lehman
bankruptcy
Sept 15, 2008
March 11
2011
c2013EurotechnologyJapanKK
www.eurotechnology.com
2008 2010 2012 2014
0
5
10
15
20
25
NaturalGaspricesUS$MillionBTU
3.4 cent kWh
6.8 cent kWh
March 11, 2011
Japan LNG
USA LNG
Export
USA pipeline
Import
EU
Natural Gas prices US$ Million BTU
c2012EurotechnologyJapanKK
www.eurotechnology.com

9. (c) www.eurotechnology.com fasol@eurotechnology.com June 18, 2014
WHERE DO WE GO FORWARD?
•Grid developments
•Liberalization, democratization, localization
•Renewable energy
•Energy plan of Feb. 11, 2014

10. (c) www.eurotechnology.com fasol@eurotechnology.com June 18, 2014
MORE INFORMATION
•The Economist interview onYouTube:
•http://youtu.be/yHjy4Wnlstc
•Japan’s energy landscape
•http://www.eurotechnology.com/store/j_energy/
•Renewable energy in Japan
•http://www.eurotechnology.com/store/j_renewable/
Some articles:
•The Economist,April 8, 2013,“Life without nukes”,
http://www.economist.com/blogs/babbage/2013/04/energy
•IEEE Spectrum, May 6, 2013,“Japan’s utilities suffer staggering
losses”, http://spectrum.ieee.org/energywise/energy/nuclear/japans-
utilities-suffer-staggering-losses

11. (c) www.eurotechnology.com fasol@eurotechnology.com June 18, 2014
CONTACT AND MORE INFORMATION
Gerhard Fasol
• contact: http://www.eurotechnology.com/connect/
• Eurotechnology Japan KK, Founder and CEO
• http://www.eurotechnology.com/
• GMO Cloud KK, external/independent Member of the Board of Directors
• http://ir.gmocloud.com/company/profile/
• Ludwig Boltzmann Forum, Creator and Curator
• http://www.boltzmann.com/events/symposia/
More information:
•http://www.eurotechnology.com/store/j_energy/
•http://www.eurotechnology.com/store/j_renewable/
•http://www.eurotechnology.com/japan-energy/