Japan’s Priorities for NRETs st Meeting of the Expert Group on New and Renewable Energy Technologies October 13-15, 2003 Shanghai, PRC Mr. Yoshihiro ITOH Chief Officer International Projects Dept. New Energy and Industrial Technology Development Organization (NEDO)

1. Japan’s New and Renewable Energy Targets 2. Policies for Development and Introduction of NRETs 3. RPS-Background, Outline, Explanation 4. ‘Biomass Nippon Strategy’ 5. NEDO’s Role in Japan’s New Energy Scheme 6. Measures to Overcome Grid-Connection Obstacles 2Outline

- 19,100 (about 3%) - 6,900 (about 1.2%) New Energy Total (Ratio of total primary energy supply) Unused Energy (Including Cooling by Snow & Ice) -4,940-4,460 Black Liquor, Waste Wood, etc Biomass Thermal Biomass Generation Waste Thermal 4,1705,5201,1101,250Waste Power 3,0001, Wind Power -4, Solar Thermal 4,8201, Photovoltaic (Solar Power) MW1,000 x klMW1,000 x kl Installed Cap.Oil Equiv.Installed Cap.Oil Equiv. FY 2010 Target on New Energy Introduction (Revised) FY 200 １ Results Energy Sources Total primary energy supply (in million kl) 588 Mkl- about 602 Mkl - 1. Japan’s New and Renewable Energy Targets 3

(Budget for FY2003: about \43.4 billion ≒ US$347 million) Fundamental investigation Development for practical application (Budget for FY2003: about \18.8 billion ≒ US$150 million) Field test Demonstrative research (Budget for FY2003: about \94.6 billion ≒ US$757 million) Creation of initial demand for inducing market independency Creation of environment suitable for introducing leading-edge new energy systems Financial support (Tax system, Fiscal investment and Loans) The Green Purchase Law Enlightenment and public information activities New market development mechanism ～ RPS (Renewable Portfolio Standard) ←Additional Measure Ⅰ． Technological Development Ⅱ． Demonstrative Testing Ⅲ. Introduction Promotion (full utilization of market mechanism) (in million US$) 1,5681,4491, Budget (in 100 million \) FY2003FY2002FY2001FY2000FY1999FY1998 Fiscal year ,1591,254 ※ US$1 ＝ \125 ※ 2. Policies for Development and Introduction of NRETs 4

3-1. Background on the Introduction of RPS Japanese government decided to introduce a new measure making use of the market mechanism -Renewable Portfolio Standard (RPS)-. Difficulty in achieving the new 2010 target with only current measures. To promote power generation by renewable energy, legislation in US, Europe, etc., had already been introduced/enacted for various systems. Establishment of the Law Concerning the Use of New Energy by Electric Utilities (June 2002) Necessity of studying the introduction of a new system adapted for Japan. - Certain effectiveness of new measure - Wide choice of sources for electric power company - Incentive for cost reduction - Maintenance of free competition in the energy market - Effect of financial burden on government, etc. 【 Considerations 】 Background Conclusion 5

3-2. System Outline--Law Concerning the Use of New Energy by Electric Utilities National Government New Energy Generator Electricity Retailer (A) ( certificate trading) Electricity Retailer (B) Requiring use of a certain amount of electricity by New Energy Accreditation of facilities for New Energy power generation Electricity supply Consumers Electricity supply by New Energy FY TWh The target for 2010 is 12.2 TWh, which would comprise 1.35% of national electric supply. Solar Wind Biomass Small/Medium Hydro (to 1 MW) Geothermal Dec. 2002Apr

3-3. Basic Explanation of the RPS System The national government obliges each electric power company to use a certain amount of electricity arising from New Energy, according to its sales of electricity. An electric power company can select the most advantageous way among the following to carry out its obligation; a) generating by oneself b) purchasing from others c) causing other electric company to subrogate the obligation The national government verifies electric power companies’ use of electricity arising from New Energy each fiscal year. 7

4-1. Biomass Nippon Strategy 8 Background 1. Prevention of Global Warming --carbon-neutral energy source; mitigate CO 2 emissions-- 2. Creation of a ‘Recycling-Oriented Society’ --more effective use of finite resources-- 3. Fostering of New and Competitive Strategic Industries --trailblazing business model to revive industrial competitiveness-- 4. Activation of Agriculture, Forestry, Fishery Industries and the Associated Rural Communities --effective use of abundant biomass in farm villages-- [

4-2. Biomass Nippon Strategy 9 Specific Targets Recycling-Oriented Society (based on regional factors) Biomass Production Biomass Collection Biomass Transformation Biomass Utilization National perception Global approach

4-3. Biomass Nippon Strategy 10 GOALS 1) Evolutionary Direction Today—Waste Biomass ca. 2010—Unused Biomass ca. 2020—Energy Crops ca. 2050—New Crops 2) Developmental Direction Construction of a Biomass Refinery Cascaded Utilization of Biomass Specific goals to be established, e.g. energy conversion efficiency, cost target of process equipment/systems, clear target level of biomass utilization….

4-4. Biomass Nippon Strategy 11 Promotion of Biomass Utilization  Establishment of: Biomass Information Headquarters (information clearinghouse) and ‘Biomass Nippon Comprehensive Strategy Promotion Council’  Study of new legislation  R&D for designing a social system in which efficient utilization of biomass is encouraged; demonstrative testing  Comprehensive package of measures in model communities under a coordinated program headed by relevant government offices  Evaluation of possible merits and demerits to establishing new competitive conditions for biodiesel fuels

4-5. Biomass Nippon Strategy 12 Production-Collection-Transport  Formulation of an efficient collection/transportation system  Exploration of possible means to expand the boundaries of the recycling qualification of waste biomass which shall meet certain requirements; e.g. the biomass should not decompose so easily  To produce biomass efficiently by utilizing special zones for structural reform

4-6. Biomass Nippon Strategy Conversion  Development/promotion of conversion technologies  Support of the establishment of a ‘model facility’  Exploration of means to simplify the approval procedure required for the installation of waste treatment facilities intended for handling biomass with similar properties 13

4-7. Biomass Nippon Strategy Post-Conversion Utilization  Investigation of a procedure to be applied to biomass-derived plastic materials as specific procurement items covered by the Green Purchasing Law  Arrangements so that biomass power generation can be handled in the same manner as other kinds of new energy under the New Energy Law  Promotion of agriculture which is oriented toward environmental conservation  Facilitation of power supply by means of distributed power sources, including biomass power generation  Quality evaluation of biomass-derived automotive fuels, assessment of their safety and environmental performance, and driving tests on those fuels as well as evaluation of the merits and demerits of their introduction into Japan 14

5. NEDO’s Role in Japan’s New Energy Scheme 15

6-1. Measures to Overcome Grid-Connection Obstacles 16 Demonstrative Research on Combined Power Generation Systems (PV + Biogas)Objectives  Early commercial application of a system that maximizes the utilization of RE to promote mass introduction  Establishment of an effective system on the demand side  Resolution of instable PV power generation  Demonstration of a combined system in which instable energy is transferred and utilized to produce stable, renewable energy, while stable PV energy is directly supplied to the grid

6-2. Measures to Overcome Grid-Connection Obstacles 17 Demonstrative Research on Combined Power Generation Systems (PV + Biogas) Power Generation PV 50kW; Biogas 60kW Site: Sihanoukville, Cambodia

～／－ 110kV/10 kV Bulk PVAmorphous PV Switch Transformer Medium-Voltage Power Line System Design 6-3. Measures to Overcome Grid-Connection Obstacles Demonstrative Research on High-Efficiency PV Power Generation Systems Site: Beijing City, PRC Total Power Generation: 180kW 18

6-4. Measures to Overcome Grid-Connection Obstacles Demonstrative Research on Combined Power Generation Systems (PV + Wind + Advanced Battery) ＰＶＰＶ Turbine Adv. Batt. Mini Grid System Design Site: Gansu Prov., PRC PV Power Generation: 100kW Wind Power Generation: 100kW 19

6-5. Measures to Overcome Grid-Connection Obstacles Demonstrative Research on Combined Power Generation Systems (Water-cooled PV + DG + Advanced Battery) Water-cooled PV Adv. Batt. DG Ballast Load Mini Grid System Design Site: Xinjiang Prov., PRC PV Power Generation: 60kW DG Power Generation: 100kW 20

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