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The Hindu
27-05-2025
- Business
- The Hindu
Japan poised to sweeten offshore wind rules as players get cold feet
Japan is likely to sweeten terms for developers to build a massive offshore wind farm sector, industry insiders say, as it looks to put its energy ambitions back on track against a worldwide slump of projects hit by soaring costs and delays. The government aims to have 45 gigawatts of offshore wind capacity by 2040, which is essential to cutting the country's dependence on imported coal and gas for power generation, reducing its carbon emissions and bolstering national security. But its plans have stalled following three major rounds of auctions to develop capacity. Trading house Mitsubishi, the winner in the government's first auction in 2021, cautioned in February that surging costs had forced it to review its plans. It has yet to start construction on any projects. Mitsubishi's warning, along with booking over $300 million in offshore wind losses, followed a decision by Denmark's Orsted to pull out of Japan last year in a global restructuring. 'Shell, too, recently cut its team focused on Japan offshore wind,' three industry sources said, 'as it scales back low-carbon operations'. Shell declined to comment on its offshore wind operations, but said it "continuously evaluates opportunities to optimise its global portfolio". Looking to defy the troubles plaguing renewables globally as operators scrap or shrink projects in Europe, the U.S. and Asia, the government is holding talks with industry players, who are pressing for a number of measures to reduce risks and help cut costs on their projects. "This is a very new industry in Japan and there's a huge learning process taking place on all sides. The key thing is the receptiveness of the government to work with industry," said Yuriy Humber, CEO of K.K. Yuri Group, a Tokyo-based research and consulting firm. Among potential changes, authorities are considering extending project durations to 40 years from the current 30 years and clarifying cabotage laws to allow non-Japanese flagged ships to operate in offshore wind farm areas, according to government documents and sources with direct knowledge. Industry players are also pushing for capacity auctions that would enable utility and industrial buyers to lock in power under multi-year contracts instead of annual contracts. In addition, the offshore wind industry wants the government to provide big industrial users with tax relief or subsidies in exchange for signing long-term wind power purchase deals, the sources said, which may be a long-shot given already high government support to households dealing with rising prices. Reuters spoke to six industry sources involved in the discussions between the offshore wind players and Japan's industry ministry, or METI, and the land ministry. They all spoke on condition of anonymity as the talks are confidential. Japan's biggest business lobby, Keidanren, whose members include major power users, was not immediately available for comment on the tax support. The government is also considering switching the tariff system for those who won the first major auction round to a "feed in premium" (FIP) from "feed in tariff" (FIT), allowing Mitsubishi to benefit from market prices, sources and government documents said. That rule is already in place for the second auction and onwards. 'The proposed switch to FIP from FIT, which has yet to be approved, is a clarification of the rules and not a revision,' said a METI official in charge of the offshore wind sector. The official did not comment further on potential rule changes. Uneven start Thus far, Japan has auctioned around a tenth of the offshore wind capacity it aims to have. Despite coming late to offshore wind, Tokyo lured many foreign players drawn by its ambition to raise the country's energy self-sufficiency. In the first round, Mitsubishi led domestic consortia in winning the right to build three offshore wind farms, with subsequent rounds won by local and foreign operators including Germany's RWE, Spain's Iberdrola and BP . Mitsubishi already faces at least a couple of years delay in farm launches, industry sources say, against its original plan for them to start operating between 2028 and 2030. The company said it is closely monitoring discussions with METI on possible rule changes and is reviewing its business plans "taking into consideration the direction of such discussion/revision." 'Acknowledging that the rollout of renewables and other low-carbon solutions may not be hitting targets,' METI in February said 'Japan may need to increase liquefied natural gas imports by more than 10% to some 74 million metric tons by 2040, reversing the downward trend as the data center and semiconductor industries drive power demand'. Despite not winning any sites in the initial offshore wind rounds, some foreign operators including Equinor and Total have maintained their presence in Japan. Both companies did not reply to Reuters requests for comment. "Those that want to come in later when things are more straightforward may simply have to pay the premium for doing that," said Mr. Humber.
Zawya
31-01-2025
- Business
- Zawya
Resource-poor Japan was girding for an AI energy surge. DeepSeek raised the stakes.
TOKYO - Weeks after Japan revealed details of a landmark energy plan partly designed to keep up with an expected AI surge, the shock rise of Chinese startup DeepSeek has upended conventional wisdom over the sector's future power demands. It was only last year that Tokyo abandoned its long-held forecasts that its future electricity needs would dwindle with its ageing population, and began accounting for higher AI-driven usage from data centres and microchip makers. In late December, the government released a draft of its basic energy plan, a major policy document reviewed about every three years, projecting electricity generation would rise between 10-20% by 2040 and citing those factors. While Tokyo will not likely hurry to rejig its forecasts, DeepSeek's seemingly leaner models have triggered a broad rethink of AI energy needs that the world's most resource-poor major economy would be remiss to ignore, analysts say. "It would be risky (for Japan) not to take this seriously," said Andrew DeWit, professor at Rikkyo University's School of Economic Policy Studies in Tokyo. DeepSeek last week launched a free AI assistant that it says uses less data at a fraction of the cost of incumbent services. By Monday, it had overtaken U.S. rival ChatGPT in downloads from Apple's App Store, triggering a global selloff in tech shares. Power producers, whose stock prices had outperformed on expectations of ballooning electricity demands needed to scale AI technologies, also took a hit as investors weighed DeepSeek's seemingly more energy-efficient models. But as analysts parse DeepSeek's potential impact, an alternative view has emerged: its success may lower the barrier to entry in a sector dominated by Silicon Valley giants and catalyse higher overall electricity demand from new AI entrants. This is a potential headache for Japan, which produces just 13% of its energy needs from domestic sources, the second lowest ratio of all 38 OECD countries, besting only Luxembourg. "If AI proves to be cheaper to develop than currently expected, that would accelerate its mass introduction rather than slow it. If anything, it would increase power demand in the country," said Yuriy Humber, CEO of K.K. Yuri Group, an energy research and consulting firm based in Tokyo. "Japanese officials have taken their time to adjust power demand forecasts even though the AI boom was apparent two years ago. I expect they will monitor the new developments carefully," he said. The trade ministry, which oversees the country's long-term energy planning, did not immediately respond to a request for comment. A senior official at the ministry, speaking on condition of anonymity, said he had been briefed on DeepSeek in December and concluded that, while impressive, the technology did not advance existing systems. He said he thought markets had over-reacted. Tepco, Japan's biggest power company by sales, said it was monitoring DeepSeek's potential impact on power demand closely but has yet to assess its full effects. 'BITTER LEARNING' Japan's grid monitor had for years predicted future electricity demand would decline gradually due to the adoption of energy-efficient equipment and a shrinking population. But in 2024, it revised its outlook to reflect an overall increase, largely driven by an expected 5.14 million kWh of new power demand from data centres and chip plants by 2034. Senior government officials have also cited AI-related energy needs as a reason to restart nuclear reactors, a sensitive subject in a country that suffered one of the world's worst nuclear disasters when the Fukushima plant was crippled by a massive earthquake and tsunami in 2011. Mika Ohbayashi, director at Renewable Energy Institute in Tokyo, said that DeepSeek's emergence was a "clear indication" that AI may become more efficient and demand less power. She criticised Japanese officials linking AI energy needs to the promotion of nuclear power, and said the government needs to do more to develop renewable energy instead. The jury is out over whether DeepSeek's models could trigger more or less AI energy demands in the future, and analysts say its technology needs to be rigorously stress tested before countries rush to change their plans. But Japan has had a bitter experience of getting its energy preparations for technology wrong in the past, said Rikkyo University's DeWit, pointing to the years before its economic bubble burst in the late 1980s. "Japan was a chip leader at the time and they figured they were going to become number one and they built out the power system. And of course, as they entered the 90s as the bubble collapsed, that power demand did not eventuate. "They've had a bitter learning. So it behoves the policy makers to take this seriously," he said. (Reporting by John Geddie and Katya Golubkova; Additional reporting by Tim Kelly and Yuka Obayashi; Editing by Kim Coghill)
Reuters
30-01-2025
- Business
- Reuters
Resource-poor Japan was girding for an AI energy surge. DeepSeek raised the stakes.
TOKYO, Jan 31 (Reuters) - Weeks after Japan revealed details of a landmark energy plan partly designed to keep up with an expected AI surge, the shock rise of Chinese startup DeepSeek has upended conventional wisdom over the sector's future power demands. It was only last year that Tokyo abandoned its long-held forecasts that its future electricity needs would dwindle with its ageing population, and began accounting for higher AI-driven usage from data centres and microchip makers. In late December, the government released a draft of its basic energy plan, a major policy document reviewed about every three years, projecting electricity generation would rise between 10-20% by 2040 and citing those factors. While Tokyo will not likely hurry to rejig its forecasts, DeepSeek's seemingly leaner models have triggered a broad rethink of AI energy needs that the world's most resource-poor major economy would be remiss to ignore, analysts say. "It would be risky (for Japan) not to take this seriously," said Andrew DeWit, professor at Rikkyo University's School of Economic Policy Studies in Tokyo. DeepSeek last week launched a free AI assistant that it says uses less data at a fraction of the cost of incumbent services. By Monday, it had overtaken U.S. rival ChatGPT in downloads from Apple's App Store, triggering a global selloff in tech shares. Power producers, whose stock prices had outperformed on expectations of ballooning electricity demands needed to scale AI technologies, also took a hit as investors weighed DeepSeek's seemingly more energy-efficient models. But as analysts parse DeepSeek's potential impact, an alternative view has emerged: its success may lower the barrier to entry in a sector dominated by Silicon Valley giants and catalyse higher overall electricity demand from new AI entrants. This is a potential headache for Japan, which produces just 13% of its energy needs from domestic sources, the second lowest ratio of all 38 OECD countries, besting only Luxembourg. "If AI proves to be cheaper to develop than currently expected, that would accelerate its mass introduction rather than slow it. If anything, it would increase power demand in the country," said Yuriy Humber, CEO of K.K. Yuri Group, an energy research and consulting firm based in Tokyo. "Japanese officials have taken their time to adjust power demand forecasts even though the AI boom was apparent two years ago. I expect they will monitor the new developments carefully," he said. The trade ministry, which oversees the country's long-term energy planning, did not immediately respond to a request for comment. A senior official at the ministry, speaking on condition of anonymity, said he had been briefed on DeepSeek in December and concluded that, while impressive, the technology did not advance existing systems. He said he thought markets had over-reacted. Tepco, Japan's biggest power company by sales, said it was monitoring DeepSeek's potential impact on power demand closely but has yet to assess its full effects. 'BITTER LEARNING' Japan's grid monitor had for years predicted future electricity demand would decline gradually due to the adoption of energy-efficient equipment and a shrinking population. But in 2024, it revised its outlook to reflect an overall increase, largely driven by an expected 5.14 million kWh of new power demand from data centres and chip plants by 2034. Senior government officials have also cited AI-related energy needs as a reason to restart nuclear reactors, a sensitive subject in a country that suffered one of the world's worst nuclear disasters when the Fukushima plant was crippled by a massive earthquake and tsunami in 2011. Mika Ohbayashi, director at Renewable Energy Institute in Tokyo, said that DeepSeek's emergence was a "clear indication" that AI may become more efficient and demand less power. She criticised Japanese officials linking AI energy needs to the promotion of nuclear power, and said the government needs to do more to develop renewable energy instead. The jury is out over whether DeepSeek's models could trigger more or less AI energy demands in the future, and analysts say its technology needs to be rigorously stress tested before countries rush to change their plans. But Japan has had a bitter experience of getting its energy preparations for technology wrong in the past, said Rikkyo University's DeWit, pointing to the years before its economic bubble burst in the late 1980s. "Japan was a chip leader at the time and they figured they were going to become number one and they built out the power system. And of course, as they entered the 90s as the bubble collapsed, that power demand did not eventuate. "They've had a bitter learning. So it behoves the policy makers to take this seriously," he said.
