Renewables Update

Grid Access Requests Denial - Transparency and Neutrality are Essential in Grid Operation
The column was originally written in Japanese on 24 September 2014.

7 October 2014 Mika Ohbayashi, Director, Japan Renewable Energy Foundation

On September 24, Kyushu Electric Power Co. Ltd. announced they would suspend any negotiations for purchase of all types of renewable energy other than residential solar PVs, which is less than 10kW, in their all business area, withholding responses to any grid access requests. The utility says the measure has been adopted to put negotiations on hold for several months and make a review during the period. With the rapid growth of variable power sources under the current Feed-in Tariff systems, mainly Solar PVs, the power company would have difficulty in balancing supply and demand in their business area, which might hinder stability in their electricity supply.

According to Kyushu Electric’s statement, once grid access was granted to the entire amount of power on the applications filed as of July-end, the total grid connection would amount to 12.6 GW, larger than their minimum daytime demand, 8 GW. This number may seem large enough to upset the power company.

However, despite more than 12 GW of capacity that has started the negotiation on grid connection so far, we only see a little more than 3 GW of variable renewable power sources actually in place. Under such circumstances, the abrupt withholding of responses is unreasonable in the ordinary business sense and will bring great confusion to the renewable energy business.

Indeed, the law of the Japan’s Feed-in Tariff system allows utilities to refuse requests of renewable electricity producers for grid access “when securing a smooth supply of electricity by said the utility is likely to be disturbed.” However, you must keep in mind the principle that the right to refuse should be exercised with the greatest restraint, only in exceptional cases, for the fundamental purpose of the law, which is the deployment of renewables. Power companies must be accountable, in the most serious sense of the word, to renewable energy operators and electricity users.

In Japan, the greatest obstacle that hinders renewable energy operators in their effort to promote renewables lies in utilities’ refusal of access to the grid. They may avoid explicit rejection, and instead give an indirect refusal to renewable operators by charging them huge construction expenses for grid access or notifying them of years of construction period. The wind power business has been operating with restrictions placed on their grid access for almost 20 years, resulting in Japan having so far introduced a much smaller capacity than other countries for its current technological capability and wind potential. Wind power has been introduced only to a level that utilities approve.

In its statement, Kyushu Electric says they will consider “operating pumped-storage hydropower plants and taking advantage of interconnection lines between regions,” but it has been quite a long time since such measures were adopted by countries and regions in Europe and the US, that have been playing a leading role in the integration of renewables. They make effective use of weather data for forecasting the amount of electricity to be produced, with great success in introducing a huge capacity for renewable energy. You may say the power company’s announcement this time reflects their failure to make systematic efforts to use renewables in an effective manner.

In the electricity business, the transmission sector has especially great roles to play for public welfare, as seen in the fact that some compare it to a “road,” requiring fairness and transparency in operation. At present, transmission grids are owned and operated by regionally monopolized utilities, private-sector entities. Rather than just waiting for unbundling, we should start immediately discussing how grids should be administered for further expansion of renewables.

Kyushu Electric should not leave what it will spend several months considering solely for in-house discussion, but invite the Organization for Cross-regional Coordination of Transmission Operators, renewable energy operators, and the government to participate. Minister of Economy, Trade and Industry is authorized by the law to give guidance or make recommendations to utilities when regarding it as necessary to ensure smooth connection. I believe METI has the obligation to review what Kyushu Electric considers and have it disclosed.

For the deployment of renewables, not only the introduction of the Feed-in Tariff but also effective use of interconnection lines between regions, innovation in grid operation techniques, and other initiatives are essential – the point Japan Renewable Energy Foundation has always made in policy recommendations. To allow renewables to expand irrespective of any events, such as this announcement, studies should get started immediately with a broad range of stakeholders as participants to examine from the medium and long-term viewpoints what should be done for improving transmission grid operation and how to share development costs.