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(c) JETRO Japan Economic Report, April-May 2006
Wind Power on the Increase in Japan
Summary
High oil prices have spurred interest in new energy sources in Japan. Wind power has showed the
most promising results, and Japan is now the eighth-largest generator of wind power in the world.
However, Japan lags behind countries like Germany and Spain in usage. Japanese manufacturers are
also far behind foreign counterparts in the production of windmills and other hardware. Accordingly,
there is great business potential in both sales and hardware maintenance.
1. World’s Eighth-Largest Generator of Wind Power
Energy sources can be classified into into oil and its
alternatives. Popular traditional alternatives are coal,
natural gas, atomic energy, hydroelectricity and
geothermal energy. Newer sources include wind power,
photovoltaic power, biomass power, waste power and
wave power. Among these, sources making use of heat
include solar, biomass, waste thermal power, and various
types of temperature-difference energy.
The Law Concerning Promotion of the Use of New
Energy defines new energy as the “production,
generation, and utilization of new energies, specifically
those whose diffusion has been hampered by economic
restrictions, and will contribute to the promotion of oil
alternatives.” The Agency for Natural Resources and
Energy indicated that in fiscal 2002 these new energy
sources represented the equivalent of 7.64 million kl of crude oil, or 1.2% of the nation’s total
primary energy supply. The target for fiscal 2010 is to increase this to 19.1 million kl of crude oil
equivalent, or 3% of the total energy supply (White Paper on Energy, 2005).
Compared to fossil fuels, new alternatives usually produce very little carbon dioxide, thus
placing less impact on the environment. Using new alternative energy in place of fossil fuels would
certainly help ease environmental problems.
Wind power has seen the most significant development in Japan in recent years. As of the end of
March 2005, 924 turbines were in operation, with a total capacity if 926,575 kW. This was a 4.7-fold
increase in turbines and an 11.2-fold increase in capacity compared to five years earlier (198 turbines
and 82,637 kW). Windpower Monthly (http://windpower-monthly.com) rated Japan eighth in wind
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(c) JETRO Japan Economic Report, April-May 2006
power generation capacity, following the Netherlands. However, there is still an enormous difference
between Japan’s capacity of just under 1 million kW and the capacity of Germany, the world’s
largest producer at 16.62 million kW, and Spain, the second-largest at 8.26 million kW.
Since the 1990s, the Ministry of Economy, Trade and Industry’s Agency for Natural Resources
and Energy has implemented a variety of measures to promote new energies. In FY05, the agency
invested 48.4 billion yen in technological development, 27.1 billion yen in testing, and 74.4 billion
yen in promotion, including support for enterprises. For FY06 (from April 1, 2006) the government
budgeted 156.6 billion yen for new energies, which includes the new energy budget of the Ministry
of the Environment. Over the past decade, the budget for new energies has tripled.
2. More Large Turbines
The Special Measures Law Concerning the Use of New Energy by Electric Utilities
(“Renewable Portfolio Standard Law”), which became effective in 2003, has given considerable
impetus to the diffusion of new energy technologies by compelling electric utilities to offer a fixed
minimum amount of electricity generated with new energy sources (wind, solar, geothermal,
small/midsize hydroelectric plants or biomass). It also stipulates that by 2010 at least 1.35% of the
energy supplied (12.2 billion kWh in total) must be generated with such sources.
Meanwhile, utilities have been working to reduce costs and increase efficiency by developing
new technologies. For example, wind power efficiency is being increased through larger facilities.
Turbines with 30-meter blades, capable of generating 2,000 to 3,000 kW, now account for the
majority in use. Yasushi Nagami, Deputy Director of the New and Renewable Energy Division of the
Agency for Natural Resources and Energy, explains: “In the majority of cases, rather than using
localized winds, wind power generation relies on prevailing westerly winds. Regions with an ocean
to the west are best, which is why Hokkaido, Tohoku and Kyushu are have more facilities.”
Areas with an average wind speed of 6 m/sec or higher are ideal for wind power generation. The
installation of 30-meter blades (usually one per turbine) basically requires proximity to a road to
enable vehicle access. Proximity to an electrical grid is also crucial to easily access the electricity
being generated. Accordingly, most wind power generation facilities in Japan are located in coastal
areas with higher populations.
3. Profitability Within 8 to 10 Years
As of March 2006, Eco Power Co., Ltd. (founded in 1997) had 109 wind power facilities, with a
total capacity of 105,810 kW, in 28 locations throughout the nation, mostly in coastal areas of
Hokkaido and Tohoku. Parent company Ebara Corporation is a major manufacturer of pumps and
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(c) JETRO Japan Economic Report, April-May 2006
sewage equipment (owned 21% by Kansai Electric Power), and designs and constructs the facilities.
Eco Power manages the overall business, and Wind Service Corporation (an Ebara Group company)
is responsible for maintenance.
Eco Power’s construction cost for wind power facilities is about 200,000 yen/kW. Electricity is
sold to power companies for around 10 yen/kWh, and 15- to 17-year contracts are standard. As a
result, the facilities become profitable in about 8 to 10 years of operation.
Toshio Katano, President of Eco Power, says: “We are allowed to sell electricity to any company,
but since our prices are higher, only the utilities buy from us. Utilities in wind-power generation
areas are already buying the full amount required by the RPS Law, so conditions are tough for us.”
According to Eco Power, Tokyo Electric Power, Chubu Electric Power and Kansai Electric
Power have not yet purchased the amounts of alternative-energy electric power stipulated by the
RPS Law, so the company sees potential in targeting these three utilities.
4. Aiming for Stable Supply
The cost of wind generation is lower than any other form of new energy, but remains higher than
thermal or nuclear power generation. However, this is being resolved by increasing efficiency
through larger facilities and further technological development. A more serious problem, though, is
connection to the electric power grid.
Power output from wind generation is generally unstable. Strong winds generate high output, but
if the wind stops, power generation also stops. There are concerns that if generators with such a
significant variation in output are connected to the grid in large numbers, the balance of supply
would be temporarily disrupted and AC cycles would be affected all over the grid. Utilities make
great efforts to avoid instability to ensure stable power supply. This is why some utilities are
reluctant to use wind power. Hokkaido Electric Power, Tohoku Electric Power and others have even
placed limits on the amount of wind-generated electrical power they will accept.
One solution is to use storage batteries at wind generation facilities. Some power companies
plan to accept electricity from facilities using batteries, but batteries mean higher construction costs
and more costly electricity, so this represents a significant challenge.
5. Equipment from Overseas Manufacturers
There are no restrictions on foreign-capitalized enterprises in Japan’s wind power generation
market. The overwhelming majority of hardware (blades, etc.) is imported, the exact opposite of the
situation in Japan’s solar power generation field. In FY04, there were 4.2 times more foreign-made
turbines (746) in use than Japanese-made (178). Most major foreign manufacturers, including Vestas
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(c) JETRO Japan Economic Report, April-May 2006
(Denmark), GE (U.S.) and Enercon (Germany), are active in the Japanese market.
Vestech Japan Corporation was established in 2000 by Toyota Tsusho Corporation as a wholly
owned company to be the Japanese import agent for Vestas, the world’s top wind power generation
equipment manufacturer. Vestas makes the largest share of equipment used in Japan. Vestech Japan
and its group companies provide complete service, from locating sites and conducting wind surveys
to installation, generation and maintenance. Vestech Services Corporation, which provides
maintenance, is 32% capitalized by Vestas. Teruyuki Mori, Managing Director of Vestech Japan,
explains, “Getting maintenance staff from Denmark to Japan takes time and money. From this point,
maintenance will be our core business, but the Japanese side doesn’t have sufficient expertise, so we
decided to invest directly in the company.”
Europe, blessed with steady winds of appropriate strength, has a long history of harnessing the
wind, as symbolized by Holland’s windmills. Europe has also made efforts to implement
environmental measures from early on. As a result, it has the world’s most advanced wind power
technology.
Eco Power also uses a large amount of equipment manufactured by Vestas. President Toshio
Katano states, “It’s impossible to manufacture the equipment, control boxes and so on without
understanding wind power generation. The European manufacturers with long experience make
excellent equipment, but it’s not necessarily ideal for Japanese conditions.”
6. Localization for Greater Market Share
There appears to be potential in the market for more localized products. Japan is prone to severe
electrical storms and typhoons, which are comparatively rare in Europe. European equipment is not
designed for electrical storms and typhoons, which in Japan often cause severe damage and
breakdowns. Designing equipment specifically for Japanese conditions is one way a company could
expand its market share in Japan.
“In the beginning, Vestas didn’t think that the Japanese market would become very large,”
notes Mori, “but it’s looking now as if it will continue to grow in the future. There is even talk of
having wind power facilities offshore by 2010. This area of business has good potential.”
References
・Agency for Natural Resources and Energy
http://www.enecho.meti.go.jp
・Eco Power Co., Ltd
http://www.eco-power.co.jp
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・Vestech Japan Corporation
http://www.vestech.co.jp
(c) JETRO Japan Economic Report, April-May 2006