Japan must prevent gas lockout: Shell

OREANDA-NEWS. June 04, 2015. Japan must ensure that natural gas plays an important role in the country's power mix to avoid a similar scenario to Europe, where coal and renewables generation has risen, Shell said today at the World Gas Conference.

"Without good policies, a coal-plus-renewables system could also emerge in northeast Asia," Shell chief executive Ben van Beurden said.

"Take Japan. Here, we see an energy market liberalisation. We also see generous subsidies for renewables, the removal of regulatory obstacles to coal-fired plants, and uncertainty about the future of nuclear power after Fukushima. This, and the lack of a carbon pricing mechanism, sets the stage for coal plus renewables," he said.

Japan has been considering it future electricity mix since the Fukushima reactor meltdown in 2011, and is likely to become less reliant on nuclear power. Participants at the conference have criticised European energy policy, which has led to an increase in renewables capacity as well as high coal burn for power generation. Delegates said the European model has led to high costs because of the subsidies for renewables, as well as high emissions because coal-fired generation is cheaper than gas-fired output.

In a separate session, the president-director of Shell Netherlands, Dick Benschop, said Japan should set a cap on the proportion of coal in its energy mix to prevent an expensive policy U-turn later.

Policy failures need to be addressed to prevent new and highly efficient gas-fired plants from becoming "locked out" of the generation mix, Benschop said.

Countries setting their energy policy need to focus equally on three areas — emissions, cost and security of supply, rather than just concentrating on one of these issues, he added.

Coal remains the dominant energy source in Asia-Pacific because of its low cost compared with gas and oil. And it could be the biggest opportunity for gas because of the region's dependence on coal, ExxonMobil US president of gas and power marketing Robert Franklin said.

In some countries, concerns over air pollutions are also reducing coal demand, with Chinese thermal coal imports in the first four months of this year falling by 41pc year on year to 46.95mn t. But Japan imported 29.68mn t of thermal coal in the first three months of this year, up by 1.24mn t or 4.4pc from a year earlier.