Satc Japan

Stranded Assets and Thermal Coal in Japan:
An analysis of environment-related risk exposure

Working Paper
May 2016
Authors: Ben Caldecott | Gerard Dericks | Daniel J. Tulloch | Lucas Kruitwagen | Irem Kok
About the Sustainable Finance Programme

The Sustainable Finance Programme at the University of Oxfords Smith School of Enterprise and the
Environment was established in 2012 (originally as the Stranded Assets Programme) to understand how
finance and investment intersects with the environment and sustainability.
We seek to understand the requirements, challenges, and opportunities associated with a reallocation of
capital towards investments aligned with global environmental sustainability. We seek to understand
environment-related risk and opportunity, both in different sectors and systemically; how such factors are
emerging and how they positively or negatively affect asset values; how such factors might be interrelated
or correlated; their materiality (in terms of scale, impact, timing, and likelihood); who will be affected; and
what affected groups can do to pre-emptively manage risk.
We recognise that the production of high-quality research on environment-related factors is a necessary,
though insufficient, condition for these factors to be successfully integrated into decision-making.
Consequently, we also research the barriers that might prevent integration, whether in financial
institutions, companies, governments, or regulators, and develop responses to address them. We also
develop the data, analytics, frameworks, and models required to enable the integration of this information
into decision-making.
The Programme is based in a world leading university with a global reach and reputation. We work with
leading practitioners from across the investment chain (including actuaries, asset owners, asset managers,
accountants, banks, data providers, investment consultants, lawyers, ratings agencies, stock exchanges),
with firms and their management, and with experts from a wide range of related subject areas (including
finance, economics, management, geography, anthropology, climate science, law, area studies, psychology)
within the University of Oxford and beyond.
Since 2012 we have conducted pioneering research on stranded assets and remain the only academic
institution conducting work in a significant and coordinated way on the topic. We have created the
Stranded Assets Research Network, which brings together researchers, research institutions, and
practitioners working on these and related issues internationally to share expertise. We have also created
the Stranded Assets Forums, which are a series of private workshops to explore the issues involved.
Stranded Assets and Thermal Coal in Japan Working Paper May 2016
Global Advisory Council

The Sustainable Finance Programme is led by Ben Caldecott and its work is guided by the Global
Sustainable Finance Advisory Council chaired by Professor Gordon L. Clark, Director of the Oxford Smith
School. Members currently include:
Jane Ambachtsheer, Partner and Global Head of Responsible Investment, Mercer Investment
Rob Bailey, Research Director, Energy, Environment and Resources, Chatham House
Vicki Bakhshi, Head of Governance & Sustainable Investment, BMO Global Asset Management (EMEA)
Morgan Bazilian, Affiliate Professor, The Royal Institute of Technology of Sweden
Robin Bidwell, Group President, ERM
David Blood, Co-Founder and Senior Partner, Generation IM
Yvo de Boer, Director-General, Global Green Growth Institute
Susan Burns, Founder and CEO, Global Footprint Network
James Cameron, Chairman, Overseas Development Institute
Diana Fox Carney, Pi Capital
Mike Clark, Institute and Faculty of Actuaries, also Director, Responsible Investment, Russell Investments
Rowan Douglas, Head, Capital Science and Policy Practice, Willis Towers Watson
Professor Robert Eccles, Professor of Management Practice, Harvard Business School
Jessica Fries, Executive Chairman, The Prince's Accounting for Sustainability Project (A4S)
Professor Charles Godfray, Director, Oxford Martin Programme on the Future of Food
Ben Goldsmith, CEO, Menhaden Capital
Connie Hedegaard, Chair, KR Foundation, and former European Commissioner for Climate Action
Thomas Heller, Executive Director, Climate Policy Initiative
Anthony Hobley, CEO, Carbon Tracker Initiative
Catherine Howarth, CEO, ShareAction
Michael Jacobs, Senior Advisor, IDDRI
Zoe Knight, Head, Climate Change Centre of Excellence, HSBC
Bernice Lee, Director, Climate Change and Resource Initiatives, World Economic Forum
Bob Litterman, Senior Partner and Chairman of Risk Committee, Kepos Capital
Mindy Lubber, President, Ceres
Nick Mabey, CEO, E3G
Richard Mattison, CEO, Trucost
David Nussbaum, CEO, WWF-UK
Stephanie Pfeifer, CEO, Institutional Investors Group on Climate Change
Julian Poulter, Executive Director, Asset Owners Disclosure Project
Fiona Reynolds, Managing Director, UN Principles for Responsible Investment
Nick Robins, Co-Director, UNEP Inquiry into a Sustainable Financial System
Paul Simpson, CEO, Carbon Disclosure Project
Andrew Steer, President and CEO, World Resources Institute
James Thornton, CEO, ClientEarth
Simon Upton, Director, Environment Directorate, OECD
Steve Waygood, Chief Responsible Investment Officer, Aviva Investors
Peter Wheeler, Executive Vice President, The Nature Conservancy (TNC)
Michael Wilkins, Managing Director, Infrastructure Finance Ratings, Standard & Poors
Baroness Worthington, Director, Sandbag
Simon Zadek, Co-Director, UNEP Inquiry into a Sustainable Financial System
Dimitri Zenghelis, Principal Research Fellow, Grantham Institute, London School of Economics
About the Authors

Ben Caldecott is Director of the Sustainable Finance Programme. The Sustainable Finance Programme
incorporates and builds on the Stranded Assets Programme that he founded in 2012. He is concurrently an
Adviser to The Prince of Waless Accounting for Sustainability Project, an Academic Visitor at the Bank of
England, and a Visiting Scholar at Stanford University.
Gerard Dericks is a Postdoctoral Research Associate in the Sustainable Finance Programme. Prior to
joining the Smith School he was an analyst at Property Market Analysis LLP and research consultant for
Policy Exchange in London. He holds a PhD and MSc from the London School of Economics and a BA from
Ritsumeikan University.
Daniel J. Tulloch is a Postdoctoral Research Associate in the Sustainable Finance Programme. Daniel holds
a PhD in finance at the University of Otago, New Zealand. He also holds an MSc in International
Accounting and Financial Management from the University of East Anglia, Norwich.
Lucas Kruitwagen is a Research Assistant in the Sustainable Finance Programme. He is also a Visiting
Researcher at Imperial College London where his MSc thesis won the research prize. He holds a BEng from
McGill University where he was a Loran Scholar.
Irem Kok is a Research Assistant for the Sustainable Finance Programme. She is a doctoral candidate and a
Clarendon Scholar at the University of Oxford. She holds a BA in Philosophy and Economics, an MA in
Political Science from Bogazici University, and an MSc from the University of Oxford with a WeidenfeldHoffmann Scholarship.
Acknowledgements
We would like to thank the European Climate Foundation and Growald Family Fund for providing grants
to support our research.
We are particularly grateful to Simon Abele (University of Oxford), Kimiko Hirata (Kiko Network), Ted
Nace (CoalSwarm), Yuri Okubo (Renewable Energy Institute), Mika Ohbayashi (Renewable Energy
Institute), and Kevin Ummel (International Institute for Applied Systems Analysis) for their help and
support throughout the research process.
University of Oxford Disclaimer

The Chancellor, Masters, and Scholars of the University of Oxford make no representations and provide no
warranties in relation to any aspect of this publication, including regarding the advisability of investing in
any particular company or investment fund or other vehicle. While we have obtained information believed
to be reliable, neither the University, nor any of its employees, students, or appointees, shall be liable for
any claims or losses of any nature in connection with information contained in this document, including
but not limited to, lost profits or punitive or consequential damages.
Table of Contents
ABOUT THE SUSTAINABLE FINANCE PROGRAMME ......................................................................... 2
GLOBAL ADVISORY COUNCIL ........................................................................................................... 3
ABOUT THE AUTHORS ....................................................................................................................... 4
ACKNOWLEDGEMENTS ...................................................................................................................... 4
UNIVERSITY OF OXFORD DISCLAIMER .............................................................................................. 4
KEY FINDINGS .................................................................................................................................. 6
EXECUTIVE SUMMARY .................................................................................................................. 8
METHODOLOGY ................................................................................................................................. 9
UTILITY EXPOSURE TO LRHS ........................................................................................................... 10
UTILITY EXPOSURE TO NRHS .......................................................................................................... 13
SCALE OF POTENTIAL ASSET STRANDING ....................................................................................... 16
UTILITY CASE STUDIES...................................................................................................................... 17
1
INTRODUCTION ..................................................................................................................... 25
JAPANESE ELECTRICITY MARKET STRUCTURE .................................................................... 26
MARKET REFORM .................................................................................................................. 28
JAPANS GENERATING OPTIONS AND THE TOHOKU EARTHQUAKE .................................. 28
COAL-FIRED POWER IN JAPAN ............................................................................................. 31
INVESTMENT RISK HYPOTHESES .................................................................................... 33

FINANCIAL ANALYSIS ........................................................................................................... 33
ENVIRONMENT-RELATED RISK HYPOTHESES ..................................................................... 41
SUMMARY OF COMPANIES OWNING OPERATING, UNDER CONSTRUCTION, AND PLANNED
COAL PLANTS ................................................................................................................................... 78
3 POTENTIAL SCALE OF STRANDED ASSETS FACING COAL-FIRED POWER

STATIONS IN JAPAN..................................................................................................................... 80
UTILITY CASE STUDIES .......................................................................................................... 82
4
CONCLUSION ........................................................................................................................... 89
REFERENCE LIST ..................................................................................................................... 91

APPENDIX A: DATASET PREPARATION........................................................................................... 96
APPENDIX B: FINANCIAL DATA ...................................................................................................... 98
APPENDIX C: SUMMARY OF COAL PLANT DATA......................................................................... 101
Key findings
The future for Japans power generators is highly uncertain, particularly for heavily polluting
thermal generators such as coal. Factors including climate change policy and renewables subsidies,
the prospect of nuclear restarts, energy efficiency, and macroeconomic factors like low levels of
population and GDP growth, will all affect power demand and supply in ways that would likely
harm the economics of coal-fired power stations in Japan.
Despite the highly uncertain context for coal-fired generation, the government has encouraged a
major expansion of coal-fired generating capacity. As a result, the number of coal plants under
development has increased rapidly in the past few years. Although there are currently four coal
plants under construction with a combined capacity of 1.9 GW, there are now 49 planned plants
comprising a significant 28 GW at various stages of planning.
The amount of planned and under construction coal-fired generating capacity greatly exceeds the
capacity required to replace the retiring fleet - by 191%. This may result in overcapacity and
combined with competition from other forms of generation capacity with lower marginal costs (e.g.
nuclear and renewables), lead to significant asset stranding of coal generation assets.
To examine the scale of potential stranded coal assets in Japan, we used three illustrative scenarios
where existing and planned coal-fired power stations are stranded over 5-year, 10-year, and 15year periods. We selected these three periods to reflect the different speeds and scales at which the
risk factors identified in this report could realistically materialise. While highly illustrative, these
scenarios highlight the potential impact of stranded coal assets on the utility sector in Japan,
particularly from coal-fired power plants that are planned, but not currently under construction.
We find that stranded coal assets could be 6,857bn - 8,924bn ($61.6bn - $80.2bn), equivalent to
22.6% - 29.4% of the current market capitalization, and 4.5%-5.9% of total assets, of Japans power
utilities. This highlights the risks of continuing to proceed with the planning and development of
new coal-fired power plants in Japan.
In the 5-year scenario, where coal-fired power stations become stranded assets by 2021, the total
value of stranded coal assets are estimated to be 8,453 billion ($76bn). In the 10-year scenario,
where coal-fired power stations become stranded assets by 2026, the total value of stranded coal
assets are estimated to be 8,924 billion ($80.2bn), of which 6,223 billion ($55.9bn) are plants built
after 2016. Finally, in the 15-year scenario where coal-fired power stations become stranded assets
by 2031, the total value of stranded coal assets are estimated to be 6,857 billion ($61.6bn), of which
5,307 billion ($47.69bn) are plants built after 2016.
We judge that the five-year, ten-year, and 15-year scenarios are a suitable time horizon to consider
given the pace of change in the global energy system. Renewables deployment has increased from
10% of global capacity to 15%in the last five years,1 the cost of onshore wind and solar PV has
fallen by 39% and 41% respectively over the same period, and sales of electric vehicles have grown
by 1,031%.2 Disruption appears to be accelerating as tipping points are reached and the idea that
BNEF (2015) global trends in renewable energy investment 2015

Office of Energy Efficiency & Renewable Energy (2016) Fact #918: march 28, 2016 global plug-in light vehicle sales increased by
about 80% in 2015' [Online] Available at: http://energy.gov/eere/vehicles/fact-918-march-28-2016-global-plug-light-vehicle-salesincreased-about-80-2015
1
2
the power sector will remain relatively static and safe for new thermal coal assets is counter to the
evidence we see internationally across the G20.
At the company-level, we prepared five case studies of selected utilities. These were for: 1) J-Power;
2) Tokyo Electric Power Co; 3) Chubu Electric Power Co Inc; 4) Kyushu Electric Power Co; and 5)
Kansai Electric Power Co. In these case studies we examine the sensitivity of these companies to
the risks outlined in this report, and estimate potential scale of asset stranding specifically
attributable to them.
We find that Tokyo Electric Power Co has the highest exposure to asset stranding in absolute value
for the five-year, ten-year, and 15-year scenarios of the five comparator companies. Tokyo Electric
Power Co also has some of the highest exposure to environment-related risk, especially for planned
or under construction power stations. J-Power has the most exposure to asset stranding relative to
total assets (>20%).
Given significant proposed coal expansion on the one hand and growing environment-related risks
on the other, companies, investors, and policymakers should examine the exposure of Japans
existing and proposed coal-fired power plants to the risk of asset stranding. Stranded coal assets
would affect utility returns for investors; impair the ability of utilities to service outstanding debt
obligations; and create stranded assets that have to be absorbed by taxpayers and ratepayers.
Moreover, new coal-fired power stations will generate significant negative externalities for the
duration of their shorter than anticipated lives, particularly in terms of carbon emissions that cause
climate change, as well as air pollution that harms human health.
Executive summary
To our knowledge this is the most up-to-date and comprehensive analysis of the exposure of coal-fired
power stations in Japan to environment-related risks that can create stranded assets. Stranded assets are
assets that have suffered from unanticipated or premature write-downs, devaluations, or conversion to
liabilities.3 The environment-related risks facing coal-fired power stations are substantial and could be
significant drivers of asset stranding. They span physical environmental impacts, the societal responses to
such environmental impacts (for example, new policies and technological change), and new legal liabilities
that may arise from either of the former.
By examining the environment-related risks facing coal-fired power stations, creating appropriate
measures to differentiate the exposure of different assets to these risks, and linking this analysis to
company ownership, debt issuance, and capital expenditure plans, our research is designed to help inform
decision-making in relation to Japans power sector. In particular, our research can help to inform specific
investor actions related to risk management, screening, voting, engagement, and disinvestment. The
datasets that underpin our analysis, as well as the analysis itself, also enable new lines of academic research
and inquiry.
The Tohoku Earthquake and associated Fukushima Daiichi disaster caused a dramatic shift in Japanese
energy policy. As a result of the nuclear meltdowns at Fukushima, public confidence in nuclear power
dissolved rapidly, causing the government to shut down all of Japans nuclear reactors pending significant
safety reviews. Gas, oil, and coal-fired power stations compensated for the drop in supply, while the rapid
rise of renewables, particularly solar PV, has been ongoing since the disaster. Consequently, the future for
Japans power generators is highly uncertain, particularly for heavily polluting thermal generators such as
coal. Factors including climate change policy and renewables subsidies, the prospect of nuclear restarts,
energy efficiency, and macroeconomic factors like low levels of population and GDP growth, will all affect
power demand and supply in ways that would likely harm the economics of coal-fired power stations in
Japan.
Despite this highly uncertain context for coal-fired generation the government has encouraged a major
expansion of coal-fired generating capacity. As recently as 2013, Japan had only four new coal plants
planned.4 However the new Basic Energy Plan decided by Cabinet Council in April 2014 re-evaluated coal
and saw it having a much more important role for baseload power generation. Utilities have since been
rushing to develop new coal-fired power plants with the governments approval and support.
As a result, the number of coal plants under development has increased rapidly in the past few years.
Although there are currently four coal plants under construction with a combined capacity of 1.9GW, there
are now 49 planned plants comprising a significant 28GW at various stages of planning. By contrast gasfired plants have 16GW under construction and 21GW planned. Since Japans coal fleet is the youngest of
all types of thermal generation and is on average five years younger than gas, this represents a very
significant push to increase coals share in Japans generation mix.5
See Caldecott, B., et al. (2013). Stranded Assets in Agriculture: Protecting Value from Environment-Related Risks.
See Guay, J., Fukushima and the Japanese Coal Myth, Huffington Post, 2013.
5 See Figure 5.
3
4
Table 1: Replacement of retiring capacity by fuel type

[GW]
Coal
Gas
Retiring Capacity
through 2026, estimate
10.3
37.1
Under Construction and

Planned Capacity, actual
30.0
37.1
Replacement
Ratio
291%
100%
To better understand how significant this extra coal capacity is, we compared the amount of coal and gas
generating capacity currently under construction or in planning with the amount of capacity required to
maintain total capacity at current levels (see Table 1). The amount of planned and under construction coalfired generating capacity greatly exceeds the capacity required to replace the retiring fleet by 191%. This
may result in overcapacity and combined with competition from other forms of generation capacity with
lower marginal costs (e.g. nuclear and renewables), lead to significant asset stranding of coal generation
assets.
Given significant proposed coal expansion on the one hand and growing environment-related risks on the
other, companies, investors, and policymakers should examine the exposure of Japans existing and
proposed coal-fired power plants to the risk of asset stranding. Stranded coal assets would affect utility
returns for investors; impair the ability of utilities to service outstanding debt obligations; and create
stranded assets that have to be absorbed by taxpayers and ratepayers. Moreover, new coal-fired power
stations will generate significant negative externalities for the duration of their shorter than anticipated
lives, particularly in terms of carbon emissions that cause climate change, as well as air pollution that
harms human health.
Methodology
The approach we have used here is based on the methods pioneered in a previous report of the Sustainable
Finance Programme of the University of Oxfords Smith School of Enterprise and the Environment (the
Oxford Smith School) from March 2015, entitled Stranded Assets and Subcritical Coal: the risk to companies
and investors.6 This methodology was significantly expanded in the landmark publication Stranded Assets
and Thermal Coal: An analysis of environment-related risks7, published by the Oxford Smith School in February
2016. This report uses similar data and methods to provide a high-resolution examination of the
environment-related risks facing Japans thermal coal assets.
Understanding how environment-related factors interact and affect a company requires a detailed
examination of the companys specific asset base. For all of Japans utilities, we have analysed the attributes
of their coal-fired power stations and integrated and cross-referenced this data with indicators of
environment-related risk to develop asset-specific analyses of risk exposure. We then aggregate these
analyses to the company level to provide company-wide assessments of environment-related risk exposure.
We also integrate capital expenditure pipeline and company debt issuance into these analyses to identify
companies with the most significant risk exposure in their capex pipeline. The datasets used to underpin
our analysis are described in Appendix A.
Our approach requires us to take a view on what the environment-related risks facing coal-fired power
stations could be and how they could affect asset values. We call these Local Risk Hypotheses (LRHs) or
National Risk Hypotheses (NRHs) based on whether the risk factor in question affects all assets in Japan in
a similar way, or if risk exposure is specific to the local environment. Water stress, for example, varies
See Caldecott, B., Dericks, G., & Mitchell, J. (2015). Stranded Assets and Subcritical Coal: The Risk to Companies and Investors.
See Caldecott, B., Kruitwagen, L., Dericks, G., et al. (2016). Stranded Assets and Thermal Coal: An Analysis of Environment-Related Risk
Exposure.
6
7
across the country and so is an LRH, whereas country-wide changes to renewables policy support is an
NRH. The list of these LRHs and NRHs can be found below in Table 2 with a brief description.
Table 2: Local Risk Hypotheses (LRHs) and National Risk Hypotheses (NRHs)
#
NAME
Coal-Fired Power Utilities
LRH-1
LRH-2
LRH-3
LRH-4
LRH-5
LRH-6
LRH-7
NRH-1
NRH-2
NRH-3
NRH-4
NRH-5
NRH-6
NRH-7
NRH-8
NRH-9
NRH-10
Carbon Intensity
Plant Age
Local Air Pollution
Water Stress
CCS Retrofitability
Future Heat Stress
Nuclear Restart Risk
Future Electricity Demand
Renewables Resource
Renewables Policy Support
Decentralised Renewables and the Utility Death
Spiral
Growth of Utility-Scale Renewables Generation
Growth of Gas-Fired Generation
Falling Utilisation Rates
Regulatory Water Stress
CCS Legal Environment
Nuclear Restarts
SOURCE
CARMA/CoalSwarm/Oxford Smith School
CARMA/CoalSwarm/WEPP
Boys et al. (2014)/NASAs SEDAC
WRIs Aqueduct
CARMA/CoalSwarm/WEPP/Geogreen
IPCC AR5
CoalSwarm/WEPP
Oxford Smith School
Oxford Smith School
EYs Renewables Attractiveness Index
Oxford Smith School
BP/REN21
IEA
Oxford Smith School
WRIs Aqueduct
Global CCS Institute
Oxford Smith School
Utility exposure to LRHs

The Local Risk Hypotheses we apply and measure Japans coal-fired power stations against are outlined
here:
LRH-1: Carbon Intensity
The more carbon intensive a coal-fired power station, the more likely it is to be negatively impacted by
climate policy, whether carbon pricing, emissions performance standards, or other similar measures. More
carbon-intensive power stations are more exposed to transitional risk from climate change mitigation
policy. Carbon intensity is assessed for each power station in kg.CO2/MWh.
LRH-2: Plant Age
Older power stations create risks for owners in a number of ways. First, ageing power stations are more
vulnerable to regulations that might force their closure. Second, utilities with significant ageing generation
portfolios have a higher risk of being required to cover site remediation costs after power station closures
and outstanding worker liabilities (i.e. pension costs). Finally, older power stations are more susceptible to
unplanned shutdowns and maintenance needs, resulting in the costs of repairs and secondary losses or
opportunity costs of underperformance on contracted power delivery. Plant age is taken as the year of
completed construction.
10
LRH-3: Local Air Pollution

Coal-fired power stations in locations with high population density and serious local air pollution are more
at risk of being regulated and required to either install emission abatement technologies or cease operation.
Thus, owners of assets in areas of high population density and high local pollution will have a greater risk
of bearing the financial impacts of such possibilities. Local air pollution is assessed using PM2.5 as a proxy
and is measured in g/m3.
LRH-4: Water Stress
The hypothesis is that power stations located in areas with higher physical baseline water stress or in areas
with water conflict or regulatory uncertainty are at higher risk of being forced to reduce or cease operation,
of losing licence to operate, or of having profits impaired by water pricing. These risks can be mitigated to
an extent by the use of closed-cycle, hybrid, or dry cooling technology. Water stress is the fraction of
extracted renewable water resources in a given water basin.
LRH-5: CCS Retrofitability
Coal-fired power stations not suitable for the retrofit of carbon capture and storage (CCS) technology may
be at more risk of premature closure. These power stations do not have the option of CCS retrofit in the
case of strong GHG mitigation requirements on coal-fired power utilities, enforced either by targeted
policy or carbon pricing. CCS retrofitability is assessed based on a number of criteria given in Section 2.2.1.
LRH-6: Future Heat Stress
The hypothesis is that physical climate change will exacerbate heat stress on power stations. Higher
ambient local temperatures decrease power station efficiency and exacerbate water stress, which causes
physical risks, such as forced closure or reduced operation, and social risks, such as unrest and increased
potential for regulation. Future heat stress is measured in oC in 2035 above preindustrial levels.
LRH-7: Regional Nuclear Restart Capacity
Nuclear restarts and new builds pose a significant risk for Japans utility companies. This risk is especially
concerning for coal-fired power stations built primarily to replace lost nuclear capacity. New coal-fired
power stations in regions that have the greatest potential nuclear capacity are more likely to be affected by
an expansion of nuclear restarts. Nuclear restart capacity is measured in MW of regional restartable nuclear
capacity.
11
2.48
3.34
3.97
3.14
1.95
7.41
2.54
6.89
4.07
0.83
0.56
1.73
2.37
1.67
1.56
1.49
0.85
NA
1.06
1.08
1.21
NA
1.09
0.69
NA
0.75
1.19
1.60
0.46
0.25
1.00
0.86
0.79
1.01
NA
1.09
0.12
0.37
0.24
0.67
0.83
2.03
1.85
NA
0.64
NA
1.00
NA
NA
NA
NA
0.51
0.00
0.30
1.43
1.17
1.21
0.73
0.86
0.83
1.03
1.23
0.70
0.63
1.22
1.38
1.59
0.91
2.08
0.72
1.02
1.35
NA
1.53
0.89
0.87
NA
1.67
1.89
NA
1.54
1.01
0.96
1.06
1.76
0.85
1.15
1.45
1.68
NA
0.98
3.11
2.51
2.49
1.51
1.18
1.19
2.59
NA
1.20
NA
0.95
NA
NA
NA
NA
1.34
3.92
1.39
0.83
0.63
3.77
2.47
0.41
2.36
NA
NA
NA
NA
7.19
17.80
1.35
3.58
1.24
5.38
3.76
17.91
NA
NA
4.57
10.54
NA
2.46
9.83
NA
12.24
5.69
NA
12.99
55.68
6.15
4.96
10.83
18.12
NA
NA
92.65
3.46
34.36
10.24
6.14
NA
NA
NA
22.35
NA
9.04
NA
NA
NA
NA
6.68
NA
34.43
2.80
6
24
37
38
1
31
1
22
39
23
17
15
21
9
1
20
14
13
16
19
33
1
39
11
27
8
32
34
35
30
18
1
6
25
28
12
29
26
36
10
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
24
27
6
6
2
15
12
18
29
9
15
21
21
38
15
13
24
1
29
32
39
9
40
6
18
9
34
13
35
23
5
3
37
18
32
3
26
29
28
35
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
7
22
11
8
37
28
10
27
39
38
12
9
23
14
25
13
33
1
19
21
34
30
18
36
5
2
16
24
29
35
17
31
3
15
26
4
6
40
32
20
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
RANK*
3
1
9
40
16
1
15
1
33
1
9
1
23
1
31
31
37
40
18
1
29
33
29
26
13
34
38
40
26
1
26
27
25
1
40
1
19
25
9
40
4
40
5
1
17
1
13
1
35
29
24
1
2
1
39
1
8
40
26
1
1
1
5
1
22
1
19
28
33
1
21
1
32
1
12
30
5
1
36
32
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
13
36
34
13
2
9
7
28
1
2
15
16
9
17
9
24
8
26
33
36
9
28
28
4
23
17
17
36
36
6
35
28
17
27
5
17
17
40
28
25
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
LRH-7: NUCLEAR
RESTARTS
LRH-6: FUTURE
HEAT STRESS
LRH-5: CCS
RETROFITABILITY
LRH-4: WATER
STRESS
LRH-#: LOCAL AIR

POLLUTION
LRH-1: CARBON
INTENSITY
(EBITDA-CAPEX)
/ INTEREST
CURRENT RATIO
OPR
CON
PLN
[GWh]
[MW]
[MW] [MW]
60,352
8,414
84
4,020
25,360
5,900
540
5,357
36,273
4,901
0
600
23,106
4,208
84
1,445
30,610
4,100
0
2,030
17,231
3,646
1,000
667
18,492
2,903
0
0
15,868
2,500
0
0
5,507
1,800
0
3,462
8,753
1,475
0
1,300
6,739
1,443
0
320
7,994
1,395
0
0
7,040
1,106
0
500
1,730
883
0
0
4,912
754
0
0
2,473
680
100
508
3,474
667
0
0
789
647
0
0
1,700
406
0
292
1,415
283
0
0
1,689
281
0
0
1,659
175
0
0
721
170
0
0
870
149
110
500
822
149
0
0
652
124
0
333
438
78
0
124
416
76
0
667
344
61
0
0
364
50
0
120
267
50
0
0
279
48
0
0
206
39
0
0
25
32
0
70
8
26
0
0
143
24
0
0
74
17
0
0
33
9
0
0
33
9
0
0
1
0
0
1,500
0
0
0
400
0
0
0
750
0
0
0
390
0
0
0
110
0
0
0
56
0
0
0
500
0
0
0
56
0
0
0
56
0
0
0
100
0
0
0
0
0
0
0
180
0
0
0
1,100
0
0
0
15
0
0
0
15
0
0
0
500
DEBT / EQUITE
COAL-FIRED
GENERATION
J-POWER
TOKYO ELECTRIC POWER CO
TOHOKU ELECTRIC POWER CO
CHUGOKU ELECTRIC POWER CO
CHUBU ELECTRIC POWER CO INC
KYUSHU ELECTRIC POWER CO
HOKURIKU ELECTRIC POWER CO
HOKKAIDO ELECTRIC POWER CO INC
KANSAI ELECTRIC POWER CO
KOBE STEEL LTD
NIPPON STEEL & SUMITOMO METAL
SUMITOMO CORP
SHIKOKU ELECTRIC POWER CO
TOKUYAMA CORP
OKINAWA ELECTRIC POWER CO
NIPPON PAPER INDUSTRIES CO LTD
TOSOH CORP
KASHIMA-KITA ELEC POWER CORP
MITSUBISHI CORP
OJI PAPER CO LTD
TAIHEIYO CEMENT CORP
MIIKE THERMAL POWER CO
MITSUI & CO LTD
OSAKA GAS CO LTD
TOKAI KYODO ELEC POWER CO
JFE STEEL CORP
SHOWA DENKO KK
IDEMITSU KOSAN CO LTD
ITOCHU ENEX CO LTD
ASAHI KASEI GROUP
CHUETSU PULP INDUSTRY CO LTD
TOSHIBA CORP
MAZDA
TEIJIN LTD
HOKUREN NOKYO RENGOKAI
NIPPON MINING HOLDINGS CO LTD
KURARAY COMPANY LTD
MATSUSHIMA COAL MINING CO LTD
DAICEL CHEMICAL INDUSTRIES CO
TOKYO GAS
UBE INDUSTRIES
MARUBENI CORP
ORIX CORP
ABL CO LTD.
AIR WATER INC.
CHIBA PREFECTURE
HIROSHIMA GAS
HOKUZAI TRANSPORT
IDI INFRASTRUCTURES F-POWER
JAPAN ENERGY PARTNERS
JOBAN JOINT POWER CO
MAEDA CORPORATION
MEIKO TRANS
SEIKA CORPORATION
TONEN GENERAL SEKIYU
COAL-FIRED
CAPACITY
LRH-2: PLANT AGE
Table 3 Summary of financial and environment-related risk exposure

SUMMARY OF RISK EXPOSURE
26
15
26
26
21
15
1
24
21
21
13
14
40
7
40
29
5
7
19
15
40
29
24
4
7
7
29
15
40
1
35
29
7
20
3
7
29
40
29
6
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
*Rank indicates relative exposure to risk, with 1 being the most exposed.
12
Table 4: Units of measurement of LRHs

Hypothesis
Unit
LRH-1
LRH-2
LRH-3
LRH-4
LRH-5
Carbon intensity of generated electricity

Plant age, year constructed
Local air pollution exposure with PM2.5 as a proxy
Fraction of extracted renewable water resources
CCS Retrofitability described by criteria in Section 2.2.1
LRH-6
LRH-7
Average temperature change in 2035 above preindustrial levels

Regional restartable nuclear generation capacity
[kg.CO2/MWh]
[year]
[gPM2.5/m3]
[Percentage]
[1 = Retrofitable;
0 = Not retrofitable]
[oC]
[MW]
There is little variation in average coal generation CO2 intensity across the 11 major Japanese utilities, all of
which average close to the threshold for supercritical efficiency (880 kg CO2/MWh); but industrial users
have consistently higher CO2 intensity.
There is also little variation among the top 11 utilities with respect to average coal plant age - which were
built on average in the 1990s - with the exception of Kansai EPC which has a single plant built in 2007. Air
pollution, measured as atmospheric particulate matter of less than 2.5 m (PM 2.5), is also low especially
when compared with some of Japans neighbouring countries, although 16 companies have power stations
located where local air pollution is in excess of the WHO annual limit of 10 g/m3.
Average Water Stress (i.e. the percentage of annual recovered renewable water resources) is substantially
less than 100% for most Japanese utilities, with the exception of Show Denko (89%) and Tokuyama Corp
(100%).
As can been from Figure 20, with regard to the potential for CCS suitability Japan is split around the
Shizuoka area, with coastal areas south of this location generally possessing the potential to be suitable for
CCS, and locations north of this generally unsuitable. Furthermore, inland locations do not have the
potential for CCS. The potential CCS suitability of Japanese utilities reflects this combined north-south and
coastal-inland division.
Heat stress also shows a geographic divide, with utilities operating in northern areas such as Hokkaido
EPC taking on the largest 2035 temperature increases. However, within Japan this variation is small, with
the biggest difference between utilities at less than half a degree C (0.45).
Utilities with major operations in the Tohoku and Hokuriku regions bearing the most nuclear restart risk,
and more moderate risks for utilities on the island of Kyushu and Chubu on the south coast of Honshu.
In sum, a distinct north-south divide seems to be at work in Japan with respect to LRHs, with utilities
focused in northern regions fairing worse than utilities in central and to a lesser extent southern Honshu
Island.
Utility exposure to NRHs

The hypotheses below affect all coal-fired generating assets in Japan. A simple traffic-light method has been
used to conduct analysis for these risk hypotheses. Criteria are developed below for each hypothesis, with
conclusions as to whether coal-fired utilities are at high risk (red), medium risk (yellow) or low risk (green).
Based on each of these criteria, an aggregate risk outlook is given after scoring each (+2 for high risk
criteria, +1 for medium risk criteria). Comparator countries are also given based on the analysis conducted
in Stranded Assets and Thermal Coal: An analysis of environment-related risks. These comparisons are important
for contextualising risk exposure in Japan. For investors who have a global universe of investment
opportunities understanding how Japans utilities compare to utilities in other countries with regards to
13
environment-related risk exposure is eminently relevant. Table 5 provides a summary of all NRHs for
Japans coal-fired power utilities and those in comparator countries, where directly comparable.
Table 5: Summary of National Risk Hypotheses

United States
United Kingdom
South Africa
Poland
India
Indonesia
Germany
China
Australia
Japan
NRH-1: Future Electricity Demand

NRH-2: Renewables Resource
NRH-3: Renewables Policy Support
NRH-4: Growth of Decentralised Renewables
NRH-5: Growth of Utility-Scale Renewables
N/A
N/A
NRH-6: Growth of Gas-Fired Power

NRH-7: Falling Utilisation Rates
NRH-8: Regulatory Water Stress
NRH-9: CCS Regulatory Env.
NRH-10: Nuclear Restarts
N/A
TOTAL* 50% 60% 60% 50% 40% 45% 40% 55% 45% 60%
*Higher percentage equates to a worse risk outlook. Total for Japan based on this publication. Total for comparator countries based on
Stranded Assets and Thermal Coal.
The National Risk Hypotheses we apply and measure Japans coal-fired power stations against are outlined
here:
NRH-1: Future Electricity Demand Outlook
The hypothesis is that the greater the growth in demand for electricity, the less likely other forms for
generation (e.g. solar, wind, gas, and nuclear) are to displace coal-fired power. Growth in overall electricity
demand might allow coal-fired generators to maintain or increase their current share of power generation.
The hypothesis is that the availability of strong renewable resources is a key determinant of the
competiveness of renewables relative to conventional generation. Countries with larger renewables
resources could see larger and faster rates of deployment. This would result in coal-fired power stations
being more likely to face lower wholesale electricity prices and other forms of power sector disruption.
This hypothesis examines the Japanese governments policy support for renewable power generation. The
hypothesis is that countries with robust regimes for supporting renewables will see greater renewables
deployment. This would result in coal-fired power stations being more likely to face lower wholesale
electricity prices and other forms of power sector disruption.
14
NRH-4: Growth of Decentralised Renewables and the Utility Death Spiral

The hypotheses are that the growth of decentralised renewables might affect coal-fired power differently
than centralised renewables by leading to a utility death spiral and the rapid, unforeseen erosion of a coalfired utilitys business model. In Japan, decentralised renewables are almost exclusively small-scale solar
PV installations. The utility death spiral is the disruption to conventional power utility companies as a
result of a virtuous cycle where distributed energy resources (e.g. rooftop solar PV) are eroding the
distribution network business model of the central utility, which in turn raises retail electricity prices
making distributed energy resources even more competitive.8
The hypothesis is that rapid renewables deployment would result in coal-fired power stations being more
likely to face lower wholesale electricity prices and other forms of power sector disruption. Since 2008, half
the worlds added electric generating capacity has been renewable.9 The Japanese Government wants to
increase renewables from 10% of its energy mix to 24% by 2030, reducing its reliance on gas, coal and
nuclear.
NRH-6: Growth of Gas-Fired Generation
The hypothesis is that the growth of gas-fired generation, particularly in markets where electricity demand
growth is lower or negative, could harm the economics of coal-fired generation and result in coal-to-gas
switching.
The hypothesis is that under-utilised coal-fired power stations will be financially vulnerable and more
prone to stranding. The entrance of new generating options may reduce the utilisation rates of coal-fired
generating assets. Competition on marginal costs, or must-run regulation for renewables, can displace coalfired generation, reducing utilisation rates. Generating stations with falling utilisation rates are less able to
cover fixed costs with operating profit.
The hypothesis is that coal-fired power stations in countries that have strict water use requirements and an
awareness of water issues are more likely to be affected by water scarcity through direct or indirect water
pricing.
NRH-9: CCS Regulatory Environment
The hypothesis is that CCS could be a way for coal-fired power stations to keep running under stricter
carbon constraints, but CCS will not happen without a supportive legal framework. Such uncertainties can
present barriers to the development of CCS projects, which in turn present a risk to coal-fired utilities
which may not have CCS as an option for future GHG mitigation.
The hypothesis is that nuclear restarts in Japan would disrupt the economics of coal-fired power stations.
CTI (2015). Coal: Caught in the EU Utility Death Spiral. London, UK.; Graffy, E. and Kihm, S. (2014) Does disruptive competition mean
a death spiral for electric utilities, Energy LJ, HeinOnline, 35, p. 1.; Costello, K. W. and Hemphill, R. C. (2014) Electric Utilities
Death Spiral: Hyperbole or Reality?, The Electricity Journal, 27(10), pp. 726
9 Lovins, A. How Opposite Energy Policies Turned the Fukushima Disaster into a Loss for Japan and a win for Germany, Forbes,
2014.
8
15
Scale of potential asset stranding

To examine the scale of potential stranded coal assets in Japan, we used three illustrative scenarios where
existing and planned coal-fired power stations are stranded over five-year, ten-year, and 15-year periods.
We selected these three periods to reflect the different speeds and scales at which the environment-related
risks identified in this report could realistically materialise. The five-year scenario represents the very rapid
emergence of factors such as falling electricity demand (NRH-1), rapid growth in renewables (NRH-4 and
NRH-5), and nuclear restarts (LRH-10). The ten-year and 15-year scenarios represent the emergence of
these factors more slowly or less forcefully.
In all three scenarios the start date is 2016 and the known installed capacity of coal-fired generation is
48.3GW (including capacity planned for 2016). We extract capacity data from the Platts World Electric
Power Plants (WEPP) Database for Q1 2016. For our sample of 55 Japanese companies, we extract all the
capacities of all coal-fired generation assets in MW. To avoid double-counting jointly-owned capacity, we
separate capacity among joint-owners. We delineate the capacities into existing and planned (or currently
under construction). We assume a total installation cost of 250,000,000/MW (US$2.25m/MW10), which is
generous given that there are higher cost estimates for new build and the costs of new coal-fired power
stations have been increasing globally. 11 We include all sunk costs such as fees and contingency,
engineering, procurement and construction services, and any additional owner costs12 - as these represent
losses in the case of asset stranding. For each asset, we depreciate the asset over an assumed useful life of
40 years since the date (or planned date) of build, congruent with Pfeiffer et al. (2015).13 We assume a
salvage value of zero. As the last planned generating plant is scheduled for 2035, our total time series
covers 2016 to 2076 including 40 years depreciation.
In the five-year scenario, where coal-fired power stations become stranded assets by 2021, the total value of
stranded coal assets are estimated to be 8,453 billion ($75bn). In the 10-year scenario, where coal-fired
power stations become stranded assets by 2026, the total value of stranded coal assets are estimated to be
8,924 billion ($80.2bn), of which 6,223 billion ($56bn) are plants built after 2016. Finally, in the 15-year
scenario where coal-fired power stations become stranded assets by 2031, the total value of stranded coal
assets are estimated to be 6,857 billion ($61.6bn), of which 5,307 billion ($47.7bn) are plants built after
2016.
While highly illustrative, these scenarios highlight the potential impact of stranded coal assets on the utility
sector in Japan, particularly from coal-fired power plants that are planned, but not currently under
construction. Stranded coal assets would represent 22.6%-29.4% of the current market capitalization, and
4.5%-5.9% of total assets, of Japans power utilities. This highlights the risks of continuing to proceed with
the planning and development of new coal-fired power plants in Japan.
We judge that the five-year, ten-year, and 15-year scenarios are a suitable time horizon to consider given
the pace of change in the global energy system. Renewables deployment has increased from 10% of global
capacity to 15%in the last five years,14 the cost of onshore wind and solar PV has fallen by 39% and 41%
respectively over the same period, and sales of electric vehicles have grown by 1,031%. 15 Disruption
Assuming 111.28/$1, April 27th 2016 exchange rate. This exchange rate is used in all currency conversions below.
METI (26th May 2015) .
12 Rong and Victor
13 Pfeiffer, A., Millar, R., Hepburn, C. and Beinhocker, E. (2015) The 2oC capital stock for electricity generation: Cumulative
committed carbon emissions and climate change.
14 BNEF, global trends in renewable energy investment 2015, 2015.
15 Office of Energy Efficiency & Renewable Energy (2016) Fact #918: march 28, 2016 global plug-in light vehicle sales increased by
10
11
16
appears to be accelerating as tipping points are reached and the idea that the power sector will remain
relatively static and safe for new thermal coal assets is counter to the evidence we see internationally
across the G20.
Figure 1: Estimated scale of asset stranding for existing and new build coal generators
Estimated Unrecoverable Cost (bn)
12,000
10,000
8,000
6,000
D
F
4,000
2,000
2016 2021 2026 2031 2036 2041 2046 2051 2056 2061 2066 2071 2076
Existing Coal
Planned and Under Construction
NB: The difference between the value on the y-axis and zero represents estimated stranded assets charge.
Letters in the chart correspond to the labels in Table 6.
Table 6: Estimates of total stranded assets ( billion/US$)

Coal Offline in:
2021 (5 years)
2026 (10 years)
2031 (15 years)
Existing Assets
[A] 4,005 ($35.99)
[C] 2,700 ($24.26)
[E] 1,550 ($13.93)
Planned and
Under Construction
[B] 4,447 ($39.96)
[D] 6,223 ($55.92)
[F] 5,307 ($47.69)
Total
[A + B] 8,453 ($75.96)
[C+ D] 8,924 ($80.19)
[E + F] 6,857 ($61.62)
Utility case studies

At the company-level, we prepared five case studies of selected utilities. These were for: 1) J-Power; 2)
Tokyo Electric Power Co; 3) Chubu Electric Power Co Inc; 4) Kyushu Electric Power Co; and 5) Kansai
Electric Power Co. In these case studies we examine the sensitivity of these companies to the risks outlined
in this report, and estimate potential scale of asset stranding specifically attributable to them.
17
Table 7: Breakdown of the five utilities operating, under construction, and planned coal capacity
Coal Generating Capacity* [MW]
Rank
1
2
5
6
7
Company
OPR
CON
PLN
Total
J-POWER
CHUBU ELECTRIC POWER CO
8,414
5,900
4,100
3,646
1,800
84
540
NA
1,000
NA
4,020
5,357
2,030
667
3,462
12,518
11,797
6,130
5,313
5,262
Table 8: Selected utility estimates of total stranded assets(billion)

Ratio Analysisi
Env.-Related Risksi
LRH-7
LRH-6
LRH-5
LRH-4
LRH-3
LRH-2
LRH-1
(EBITDA
CAPEX) /
INTEREST
CURRENT
RATIO
DEBT /
EQUITY
OPR /
PLNiii
Stranded Assetsii
OPR 40% 58% 88% 55% 32% 53% 53%

J-POWER
84%
56%
94%
PLN 44% 44% 68% 88% 41% 56% 6%
OPR 32% 22% 22% 20% 100% 12% 95%
TEPCO
91%
47%
66%
PLN 47% 44% 68% 79% 53% 65% 76%
OPR 42% 35% 60% 80% 15% 30% 65%
CHUBU
EPCO
78%
KYUSHU
EPCO
100%
KANSAI
EPCO
96%
87%
86%
PLN 26% 6% 76% 91% 38% 68% 74%
OPR 35% 58% 88% 15% 30% 17% 85%
62%
ND
PLN 94% 62% 35% 50% 29% 15% 44%
OPR 20% 5% 30% 95% 15% 88% 12%
98%
ND
PLN 53% 18% 68% 74% 44% 59% 65%
2021
(5 year)
586.2
(23%)
608.2
(24%)
730.1
(5%)
1,309.3
(9%)
384.6
(7%)
114.1
(2%)
248.2
(5%)
406.0
(9%)
288.5
(4%)
439.2
(6%)
20 26
(10 year)
406.3
(16%)
904.9
(35%)
541.0
(4%)
1,136.3
(8%)
253.2
(5%)
339.5
(6%)
145.7
(3%)
353.0
(8%)
230.8
(3%)
661.3
(9%)
2031
(15 year)
237.5
(9%)
773.3
(30%)
351.9
(3%)
963.3
(7%)
121.7
(2%)
290.4
(5%)
83.6
(2%)
299.2
(6%)
173.1
(2%)
566.4
(8%)
i) Ratio and environment-related risk presented as a percentile relative to Japan utility peer group, with a higher percentage indicating
higher risk:
ND/E, NCurrent Ratio = 45; N(EBITDA-CAPEX)/INT = 35; NOPR = 40; NPLN = 34;
ii) Stranded Assets expressed in bn and as a fraction of total utility assets
iii) OPR: Operating plants; PLN: Planned and under construction plants;
Table 9 describes the units which are used to evaluate exposure to environment-related risks at the asset
level. Examples of these calculations are shown in the five case studies. In most cases, aggregate company
exposure is evaluated on a MW-weighted basis of the units of measurement in Table 9.
18
Table 9: Units of measurement of LRHs

Hypothesis
Unit
LRH-1
LRH-2
LRH-3
LRH-4
LRH-5
Carbon intensity of generated electricity

Plant age, year constructed
Local air pollution exposure with PM2.5 as a proxy
Fraction of extracted renewable water resources
CCS Retrofitability described by criteria in Section 2.2.1
LRH-6
LRH-7
Average temperature change in 2035 above preindustrial levels

Regional restartable nuclear generation capacity
[kg.CO2/MWh]
[year]
[gPM2.5/m3]
[Percentage]
[1 = Retrofitable;
0 = not retrofitable]
[oC]
[MW]
Each of the five companies will be subject to stranded assets if we assume coal must be removed from the
system in line with our five-year, ten-year and 15-year scenarios. Table 8 shows that both existing and
planned capacities are at risk of stranded assets in each of three scenarios. We briefly evaluate each
company below on the basis of i) their existing coal-fired power station portfolio, ii) the coal-fired
generation capacity they are constructing or planning to construct and iii) the extent their existing and
planned portfolios are exposed to environment-related risks. Table 9 provides guidance on the
interpretation of LRH exposure.
Table 8 shows selected indicators of risk for the five case study utilities. For the ratio analyses and
environment-related risk exposures, the performance of the utilities is shown by their percentile relative to
the entire peer population of Japans utility companies, where a higher percentage indicates a higher risk.
Potential stranded assets under the five, ten, and 15-year scenarios are shown both in their absolute value
and as a portion of total company assets. In the Appendix tables, the MW-weighted average risk exposure
is given in the units in Table 9, but in the summary tables in this report, the companies are compared to
each other either with by percentile or ranking.
J-Power
J-Power has the most coal generation (8.4GW) of all utilities in Japan, and coal comprises almost half of JPowers total generation (17.5GW). In addition, over 90% of planned generation capacity is coal (4GW out
of 4.3GW), and only TEPCO has more planned coal generation (5.9GW). J-Power has the largest combined
existing and planned coal plant capacity of all Japanese utilities (12.5GW), with two-thirds of this (8.2 GW)
is already operating.
Notably it has the lowest planned coal plant exposure to nuclear restarts of any of the major Japanese
utilities at only 704MW on average (2,465MW existing). According to our analyses we classify J-Power as
having a high exposure to asset stranding for existing coal capacity but less exposure for its planned coalcapacity. Across the existing and planned capacities, it is estimated stranded assets in the five-year, tenyear, and 15-year scenarios are second only to TEPCO. This is because most of J-Powers existing capacity
was built between 1980 and 2000 and thus has already depreciated significantly.
19
Table 10: Environment-related risk exposure of J-Power operating plants

LRH-5: CCS RETROFITABILITY
[1=RETROFITABLE]
LRH-6: FUTRE HEAT STRESS

[oC]
LRH-7: REGIONAL NUC.

RESTARTS [MW]
LRH-4: WATER STRESS

[% RENEWABLE RESOURCE]
URiii
LRH-3: LOCAL AIR POLLN

[gPM2.5/m3]
GENERATIONii
[GWH]
LRH-2: PLANT AGE
CAPACITYii
[MW]
LRH-1: CARBON INTENSITY

[kg.CO2/MWh]
PLANT
1,002
6,730
77%
922
1980
11.8
0%
0
2,000
15,633
89%
887
1993
11.9
19%
0
312
2,134
78%
880
1986
4.2
100%
0
1,300
8,136
71%
913
1978
8.6
05%
0
500
3,761
86%
928
1969
8.3
35%
0
2,100
16,182
88%
823
2001
8.5
10%
1
1,200
7,367
70%
786
2006
10.4
89%
1
TOTALi
8,414
59,943
81%
867
1991
9.8
26%
39%
i. MW-weighted for LRHs and UR; ii. Capacity and generation only for owned portion; iii. UR: Utilisation Rate
0.90
0.90
0.68
0.88
0.88
0.88
0.92
0.89
4,699
4,699
0
820
0
2,022
1,100
2,465
MATSUSHIMA
MATSUURA
ISHIKAWA
TAKEHARA
TAKASAGO
TACHIBANAWAN
SHIN ISOGO
Table 11: Environment-related risk exposure of J-Power planned plants

LRH-3
LRH-4
LRH-5
LRH-6
LRH-7
CAPACITYii
[MW]
LRH-2
CON/
PLN
LRH-1
PLANT
TAKEHARA
PLN
600
766
2020
TAKASAGO
PLN
1,200
759
2024
NISHIOKINOYAMA
PLN
400
872
2023
OSAKI COOLGEN
CON
84
692
2017
KASHIMA POWER
PLN
320
767
2020
YOKOHAMA
PLN
500
900
2020
SHIN YOKOSUKA
PLN
500
767
2020
YOKOSUKA
PLN
500
807
2020
TOTALi
4,104
794
2021
i. MW-weighted for LRHs; ii. Capacity only for owned portion;
8.6
8.3
10.8
8.9
10.1
10.4
10.2
10.2
9.5
05%
35%
15%
04%
30%
89%
89%
89%
47%
0
1
0
0
0
1
1
1
66%
0.88
0.88
0.90
0.88
0.88
0.92
0.92
0.92
0.90
820
0
820
820
1,100
1,100
1,100
1,100
704
20
Tokyo Electric Power Company

Like Kansai EPC, Tokyo Electric Power Company (TEPCO) is notable in that its planned coal generation
capacity (5.4GW) is high relative to its current operating capacity (5.9GW). This planned coal capacity
(5.4GW) represents 36% of TEPCOs total planned generation (14.7GW). TEPCO has 54GW of existing
generation in total, of which currently only 11% (5.9GW) is coal.
On a MW-weighted basis, TEPCOs existing coal-plants in Tokyo and Tohuku regions may need to
compete with 11,784MW of shutdown nuclear power. TEPCO also has planned or under construction coalfired power in regions which may nuclear power be restored to generating a MW-weighted average of
10,130MW. The potential for CCS retrofitability is also poor for TEPCOs existing coal fleet at 0%, and only
26% for planned plants.
TEPCOs existing and planned coal capacity is highly exposed to asset stranding. Of TEPCOs 5.9GW of
existing coal capacity, 3.2GW was recently built in 2008-09 and therefore has incurred little depreciation.
Further, Tokyo Electric has 5.4GW of planned capacity between 2017 and 2035, where most is planned for
pre-2020. We find that TEPCO has the highest exposure to asset stranding of all five companies analysed in
each of the three scenarios.
Table 12: Environment-related risk exposure of TEPCO operating plants
SHINCHI
1,000
7,104
81%
857
1995
7.7
15%
0
HIRONO
1,200
3,352
32%
773
2009
7.4
15%
0
NAKOSO
1,700
8,802
59%
926
1992
7.6
15%
0
HITACHINAKA
2,000
6,103
35%
846
2008
8.8
16%
0
TOTALi
5,900
25,361
49%
856
2001
8.0
15%
0%
0.95
0.88
0.88
0.88
0.89

RESTARTS [MW]

[oC]

[1=RETROFITABLE]
LRH-4: WATER STRESS

URiii

[gPM2.5/m3]
GENERATIONii
[GWH]
LRH-2: PLANT AGE
CAPACITYii
[MW]

[kg.CO2/MWh]
PLANT
17,263
17,263
17,263
1,100
11,784
Table 13: Environment-related risk exposure of TEPCO planned plants

LRH-3
LRH-4
LRH-5
LRH-6
LRH-7
CAPACITYii
[MW]
LRH-2
CON/
PLN
LRH-1
PLANT
HIRONO 'CGAS'
CON
540
652
2020
SHINCHI
PLN
500
835
2035
SOMA CORE
PLN
112
849
2017
HIRONO
PLN
540
652
2020
HIRONO
PLN
1,200
765
2020
NAKOSO
PLN
180
652
2021
HITACHINAKA
PLN
325
768
2021
KITAKYUSHU
PLN
1,000
900
2019
YOKOHAMA
PLN
500
900
2020
SHIN YOKOSUKA
PLN
500
767
2020
YOKOSUKA
PLN
500
807
2020
TOTALi
5,897
787
2021
7.3
7.7
7.7
7.4
7.4
7.6
8.8
11.4
10.4
10.2
10.2
8.9
00%
15%
15%
15%
15%
15%
16%
18%
89%
89%
89%
33%
0
0
0
0
0
0
0
0
1
1
1
25%
0.88
0.95
0.95
0.88
0.88
0.88
0.88
0.90
0.92
0.92
0.92
0.90
17,263
17,263
17,263
17,263
17,263
17,263
1,100
4,699
1,100
1,100
1,100
10,130
21
Chubu Electric Power Company

Although Chubu Electric Power Co has 30.3GW of operating capacity, only 4.1GW (or 14%) is coal-fired.
Yet of its 2.33 GW of total planned generation, 2GW or 88% is coal. With regard to the risk of nuclear
restart, Chubu EPCs planned coal plants can be considered to have medium exposure with an average of
7,619MW of potential nuclear capacity located in the same region as its planned coal plants, whereas its
existing coal plants are only exposed on average to 3,617MW.
Table 14: Environment-related risk exposure of Chubu EPCO operating plants

[1=RETROFITABLE]

[oC]

RESTARTS [MW]
LRH-4: WATER STRESS

URiii

[gPM2.5/m3]
GENERATIONii
[GWH]
LRH-2: PLANT AGE
CAPACITYii
[MW]

[kg.CO2/MWh]
PLANT
HEKINAN
4,100
30,610
85%
869
1997
9.0
53%
1
TOTALi
4,100
30,610
85%
869
1997
9.0
53%
1
0.84
0.84
3,617
3,617
Table 15: Environment-related risk exposure of Chubu EPCO planned plants

LRH-7
LRH-6
LRH-5
LRH-4
LRH-3
CAPACITYii
[MW]
LRH-2
CON/
PLN
LRH-1
PLANT
SHINCHI
PLN
500
835
2035
7.7
15%
0
0.95
17,263
HITACHINAKA
PLN
325 NAiii
2021
NA
NA
0
NA
NA
TAKETOYO
PLN
1,070
763
2022
9.0
53%
1
0.84
3,617
TOYOHASHI AKEMI
PLN
135
780
2020
8.6
23%
1
0.84
3,617
TOTALi
2,030
785
2025
8.6
39%
59%
0.87
7,619
i. MW-weighted for LRHs; ii. Capacity only for owned portion; iii: ND: No Data, omitted in MW weighting
Kyushu Electric Power Company

Kyushu EPC is the sole regional utility based on the island of Kyushu. Although Kyushu EPC has 3.6GW of
existing coal capacity (23% of total existing capacity: 15.5GW), it only has plans for another 0.7GW of coal
generation. However, almost 100% of total planned generation (0.7GW) is expected to be derived from coal.
Kyushu EPC is sole owner of the Matsuura coal plant, which is the largest coal plant (1.0GW) currently
under construction in Japan, and joint owner of the planned 2.0GW Sodegaura power plant.
Kyushu EPCs existing coal plants are all in the Kyushu region, where there are 4,699MW of restartable
nuclear power capacity, a medium risk level relative to the other utilities. Its planned coal plant
(Sodegaura) is in the Tokyo region where there is less restartable nuclear capacity, 1,100MW. Its existing
power plants also have relatively low potential CCS retrofitability at only 46%.
Our analysis shows that Kyushu Electric Power Co has low exposure to asset stranding. Kyushu has
3.64GW of existing capacity which was built between 1964 and 2001. Most of the capacity has already
significantly depreciated. Only 0.67GW of new capacity is planned for 2020. This low amount of planned
capacity reduces the level of asset stranding in later years.
22
Table 16: Environment-related risk exposure of Kyushu EPCO operating plants

[oC]

RESTARTS [MW]
REIHOKU
1,400
7,369
60%
874
1999
11.8
0%
MATSUURA
700
4,982
81%
861
1989
11.9
19%
KYUDEN
KANDA
740
2,132
33%
896
1986
11.4
18%
KARITA PBFC
360
850
27%
911
2001
11.4
18%
TOBATA
446
1,198
31%
744
1979
11.5
18%
TOTALi
3,646
16,531
52%
864
1992
11.7
11%

[1=RETROFITABLE]
LRH-4: WATER STRESS

URiii

[gPM2.5/m3]
GENERATIONii
[GWH]
LRH-2: PLANT AGE
CAPACITYii
[MW]

[kg.CO2/MWh]
PLANT
1
0
0.90
0.90
4,699
4,699
0
1
0
48%
0.90
0.90
0.90
0.90
4,699
4,699
4,699
4,699
Table 17: Environment-related risk exposure of Kyushu EPCO planned plants

LRH-3
LRH-4
LRH-5
LRH-6
LRH-7
CAPACITYii
[MW]
LRH-2
CON/
PLN
LRH-1
PLANT
MATSUURA KYUDEN
CON
1,000
767
SODEGAURA
PLN
667
900
TOTALi
1,667
820
2020
2020
2020
11.9
11.0
11.5
19%
35%
25%
1
1
100%
0.90
0.88
0.89
4,699
1,100
3,259
Kansai Electric Power Company

Kansai EPC is notable in that, should all its planned plants be built, the total coal capacity of Kansai will
almost triple from 1.8GW to 5.3 GW. This planned increase of 3.5 GW in coal generation represents 82% of
Kansai EPCs total planned capacity (4.2GW). Kansai EPCs coal fleet also has the youngest average age of
all major Japanese utilities at just nine years (2007 average).
Although Kansai EPCs single existing coal plant (Maizuru, 1.8GW) has no exposure to nuclear restart, we
classify its planned coal plants as having a medium risk of nuclear restart with 4,276 MW on average in the
same region. Japan generally has ample access to water resources, but certain areas (particularly cities)
have high water stress. Kansai EPCs Maizuru coal plant is noteworthy in that it has a relatively high level
of water stress, at 77% of renewable water resources recovered and used. Many Japanese power plants
utilise seawater for cooling and Maizuru is no exception. At the same time, while Maizuru power is
potentially CCS retrofitable, only 53% of Kansai EPCs planned coal plants have that possibility as well.
Kansai Electric Power Co has low exposure to asset stranding for existing capacity, but a medium risk for
planned capacity. Kansai plans to build an additional 3.5GW of capacity between 2017 and 2035. The large
additional capacity expected to come online in the 2020s increases Kansais risk of asset stranding over
time.
23
Table 18: Environment-related risk exposure of Kansai EPCO operating plants

RESTARTS [MW]
1,800
5,507
35%
806
2007
8.1
77%
TOTALi
1,800
5,507
35%
806
2007
8.1
77%

[oC]
MAIZURU

[1=RETROFITABLE]
LRH-4: WATER STRESS

URiii

[gPM2.5/m3]
GENERATIONii
[GWH]
LRH-2: PLANT AGE
CAPACITYii
[MW]

[kg.CO2/MWh]
PLANT
1
1
0.93
0.93
0
0
Table 19: Environment-related risk exposure of Kansai EPCO planned plants

LRH-5
LRH-6
LRH-7
112
650
1,200
500
500
500
3,462
LRH-4
SENDAI PORT
PLN
AKITA
PLN
AKO
PLN
ICHIHARA
PLN
KANSAI ELECTRIC POWER CHIBA PREF. PLN
KEPCO CHIBA
PLN
TOTALi
LRH-3
CAPACITYii [MW]
LRH-2
CON/
PLN
LRH-1
PLANT
900
807
800
807
743
839
803
2017
2025
2020
2025
2035
2020
2024
7.3
8.6
8.5
11.0
11.0
10.9
9.5
37%
13%
40%
35%
35%
35%
33%
0
1
1
0
0
0
53%
0.95
0.92
0.88
0.88
0.88
0.88
0.89
17,263
17,263
0
1,100
1,100
1,100
4,276
24
1 Introduction
The principal aim of this report is to conduct a comprehensive analysis of the exposure of coal-fired power
stations in Japan to environment-related risks that can create stranded assets. Stranded assets are assets
that have suffered from unanticipated or premature write-downs, devaluations, or conversion to
liabilities. 16 By examining the environment-related risks facing coal-fired power stations, creating
appropriate measures to differentiate the exposure of different assets to these risks, and linking this
analysis to company ownership, debt issuance, and capital expenditure plans, our research can help inform
decision-making in relation to Japans power sector by investors, policymakers, and civil society. The
datasets that underpin our analysis, as well as the analysis itself, also enables new lines of academic
research and inquiry. The typology of environment-related risks is described in Table 20.
Table 20: Typology of environment-related risks

Set
Subset
Environmental Change
Climate change; natural capital depletion and degradation; biodiversity loss

and decreasing species richness; air, land, and water contamination; habitat
loss; and freshwater availability.
Resource Landscapes
Price and availability of different resources such as oil, gas, coal and other
minerals and metals (e.g. shale gas revolution, phosphate availability, and
rare earth metals).
Government Regulations
Carbon pricing (via taxes and trading schemes); subsidy regimes (e.g. for
fossil fuels and renewables); air pollution regulation; voluntary and
compulsory disclosure requirements; changing liability regimes and stricter
licence conditions for operation; the carbon bubble and international climate
policy.
Technology Change
Falling clean technology costs (e.g. solar PV, onshore wind); disruptive
technologies; GMO; and electric vehicles.
Social Norms and

Consumer Behaviour
Fossil fuel divestment campaign; product labelling and certification schemes;

and changing consumer preferences.
Litigation and Statutory

Interpretations
Carbon liability; litigation; damages; and changes in the way existing laws are
applied or interpreted.
The approach used in this report is based on the methods pioneered in a previous report of the Sustainable
Finance Programme of the University of Oxfords Smith School of Enterprise and the Environment (the
Oxford Smith School) from March 2015, entitled Stranded Assets and Subcritical Coal: the risk to companies
and investors.17 This methodology was significantly expanded in the landmark publication Stranded Assets
and Thermal Coal: An analysis of environment-related risk exposure, 18 also published by the Oxford Smith
School in February 2016. This report uses similar data and methods to provide a high-resolution
examination of environment-related risk to Japanese thermal coal assets.
See Ben Caldecott, Nicholas Howarth, and Patrick McSharry, Stranded Assets in Agriculture: Protecting Value from EnvironmentRelated Risks, Stranded Assets Programme, SSEE, University of Oxford, 2013, http://www.smithschool.ox.ac.uk/researchprogrammes/stranded-assets/Stranded Assets Agriculture Report Final.pdf.
17 Ben Caldecott, Gerard Dericks, and James Mitchell, Stranded Assets and Subcritical Coal: The Risk to Companies and Investors,
Stranded Assets Programme, SSEE, University of Oxford, 2015, 178.
18 Ben Caldecott et al., Stranded Assets and Thermal Coal: An Analysis of Environment-Related Risk Exposure, Stranded Assets
Programme, SSEE, University of Oxford, 2016, 1188.
16
25
The Tohoku Earthquake and associated Fukushima Daiichi disaster caused a dramatic shift in Japanese
energy policy. As a result of the nuclear meltdowns at Fukushima, public confidence in nuclear power
dissolved rapidly, causing the government to shut down all of Japans nuclear reactors pending significant
safety reviews. Gas, oil, and coal-fired power stations compensated for the drop in supply, however an
explosion of renewables, particularly solar photovoltaic (PV), has been ongoing since the disaster. The
future of Japanese electricity supply is now substantially uncertain, with fundamental drivers like climate
change policies and renewables subsidies, commodity prices, the prospect of nuclear restarts, and
macroeconomic factors like population and GDP growth all likely to affect demand for power and its
supply.
Understanding how these and other environment-related factors interact and affect companies requires a
detailed examination of the companys specific asset base. For Japanese utilities, we analyse the attributes
of their coal-fired generating stations and integrate and cross-reference this data with indicators of
environment-related risk to develop asset-specific analyses of risk exposure. We then aggregate these
analyses to the company level to provide company-wide assessments of environment-related risk. We also
integrate capital expenditure pipeline and company debt issuance into these analyses to identify companies
with the most significant risk exposure.
This approach requires us to take a view on what the environment-related risks facing thermal coal assets
could be and how they could affect asset values. The environment-related risks facing the thermal coal
value chain are substantial and span physical environmental impacts, the transition risks of policy and
technology responding to environmental pressures, and new legal liabilities that may arise from either of
the former. From this horizon-scanning exercise we develop risk hypotheses. The hypotheses are
categorised into Local Risk Hypotheses (LRHs) and National Risk Hypotheses (NRHs) based on whether
the risk factor in question affects all assets in a particular country in a similar way or not. For example,
water stress has variable impacts within a country and so is an LRH, whereas a country-wide carbon price
is an NRH. In this report, we apply this bottom up, asset-specific approach to Japanese coal-fired power
stations.
The remainder of Section 1 introduces the Japanese power market and the use of coal-fired power in Japan.
Section 2 presents analysis of environment-related risk exposure of Japanese coal-fired power stations and
their utility owners. Section 3 examines stranding risks to Japanese coal-fired power plants across three
decommissioning scenarios and provides breakdowns of these risks for five major utilities. Section 4
concludes.
Japanese Electricity Market Structure

Japan has the second largest electricity market in the OECD.19 This market is dominated by ten vertically
integrated regional monopolies and the former national electricity development company (now called JPower) which owns plants in every region but is not involved in distribution. This framework was created
from the breakup of the former national electricity monopoly following WWII. These 11 companies control
the generation, transmission, and distribution of electricity across Japan. As a result, the utilities can decide
whom they will allow to compete against their own assets. In addition, the wholesale power market
comprises only 1.6% of total power, the remainder being locked up in long-term contracts. Today Japan has
255GW of generation capacity in total, of which these 11 companies control 76%.20
Louis du Plessis, Japans Biomass Market, JETRO, 2015,

https://www.jetro.go.jp/ext_images/_Events/ldn/Japan_biomass_market_overview.pdf.
20 According to WEPP, these 11 companies own 194 GW in Japanese generation capacity.
19
26
While the main island of Honshu is divided between six regional companies, the three other major islands
and Okinawa have sole providers. Notably, Japan is the only country in the world which uses two different
electricity frequencies to transmit power, with the eastern half of the country (including Tokyo) operating
at 50Hz and the western half at 60Hz. Expensive transformers are therefore required to exchange power
between Japans eastern and western grids, and at present only 1.2GW in total can be transferred at three
conversion locations. In practice this setup isolates the electrical grids of each half of the country.
Furthermore, within the eastern and western frequency zones connections between regions are also weak.21
This disjointed grid structure effectively blunts policy aimed at increasing market competition and
compromises national energy security.
Figure 2: Japanese regional monopolies and electricity grid22
James Topham, Japans Power Failure: Bid to Forge National Grid Stumbles, Reuters, 2014, http://www.reuters.com/article/usjapan-electricity-grid-idUSKCN0IA2JX20141021.
22 Source: Callum Aitchison, The Power Grid of Japan, 2012, https://commons.wikimedia.org/w/index.php?curid=19075661.
21
27
Market Reform
In spite of the dominance of the ten regional monopolists and J-Power, Japans electricity market has been
undergoing a process of gradual deregulation. Deregulation is of concern as empirical evidence from the
EU has shown that liberalization (deregulation) and environmental objectives have had a material impact
on the financial returns of European energy utilities.23 Beginning in December 1995 Japans independent
power producers (IPP) were allowed to provide wholesale electricity services, and in March 2000 electricity
retail supply for extra-high voltage users (demand exceeding 2MW) was liberalised. The scope of retail
liberalisation was then expanded in April 2004 to users of more than 500kW, to users of more than 50kW in
2005, and since April 2016 Japan has had full retail competition across all users. The Revised Electricity
Business Act 2015 will require legal separation of generation from transmission and distribution by April
2020. In order to effect these changes the Organisation for Cross-Regional Coordination of Transmission
Operators (OCCTO) was set up in 2015 to function as a national transmission system operator (TSO). Its
remit is to develop interconnections among present utility networks and increase the frequency converter
capacity across the 50-60 Hz east-west divide from 1.2 to 3GW by 2021. These changes are expected to
loosen the price control held by regional monopolies and open a 10tn ($82.8bn) market to competition.24 In
order to do so, OCCTO is expected to invest about 300bn (US $2.8 bn).25
Japans generating options and the Tohoku Earthquake

The 9.0 magnitude Tohoku earthquake of March 2011 was the largest earthquake ever recorded in Japan. It
triggered enormous tsunami waves which caused wholesale destruction along the Northeast coast of the
main island and the meltdown of three reactors at the Fukushima Daiichi nuclear plant: one of the worlds
worst-ever nuclear accidents. In the wake of this disaster public sentiment towards nuclear power soured
and the government ordered the shutdown of all 54 operating nuclear plants (comprising 49GW) until such
time as safety reviews could be carried out.26 Prior to the shutdown nuclear had generated 30 per cent of
Japans electricity and Japan had been the worlds third biggest generator behind the US and France.27
Daniel J Tulloch, Ivan Diaz-Rainey, and I.M. Premachandra, The Impact of Liberalization and Environmental Policy on the
Financial Returns of European Energy Utilities, The Energy Journal 38, no. 2 (2017): 77106,
doi:http://dx.doi.org/10.5547/01956574.38.2.dtul.
24 Hirofumi Matsuo, Energy Deregulation Threatens to Break up Japanese Monopolies, The Financial Times, 2015,
http://www.ft.com/cms/s/2/ac713e7a-cbd1-11e4-beca-00144feab7de.html#axzz45zVvNX8X.
25 Ibid.
26 World Nuclear Association, Nuclear Power in Japan, 2016, http://www.world-nuclear.org/information-library/countryprofiles/countries-g-n/japan-nuclear-power.aspx.
27 Ibid.
23
28
Figure 3: Electricity mix by generation 1952-2013
Derived from Energy Balance Sheet Ministry of Economy Trade and Industry
This shutdown crippled the grid in the eastern half of the country, and although western Japan had excess
generation capacity little could be transferred. In combination with the shutdowns the government
imposed a dramatic programme of energy conservation measures and called upon industry and citizens to
abstain from unnecessary power consumption. This policy caused total and peak electricity demand to fall
in 2011 by 12% and 18% respectively.28 After years of stagnation, in 2011 electricity prices rose 20 per cent
for households and 30 per cent for industry and are now the fourth highest among the IEAs 29
members.29,30
Nick Butler, Japan Returns to Nuclear Power, The Financial Times, 2015, http://blogs.ft.com/nick-butler/2015/06/22/japanreturns-to-nuclear-power/.
29 Matsuo, Energy Deregulation Threatens to Break up Japanese Monopolies.
30 Italy, Ireland, and Slovakia have higher electricity prices.
28
29
Figure 4: IEA member country industrial electricity prices

30
Italy
25
Japan
JPY/KWh
20
United Kingdom
France
15
Germany
10
Poland
USA
IEA median
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Derived from the International Energy Agency publication, Energy Prices and
Taxes
In order to compensate for the electricity supply lost due to the nuclear shutdown, existing oil, gas, and
coal plants expanded output by increasing their utilisation rates. However, the primary substitution came
from gas, as gas-fired power plants have greater output flexibility than coal and are cheaper to run than oil.
By contrast between 2010 and 2012 coals share of the energy mix did not increase.31 Whereas demand for
gas increased by a third in Japan from 70 million tons to 90 million tons, which effectively doubled the
import price of gas and increased expenditure from 3.5tn per year to 6tn.32
Figure 5: 2010 to 2012 change in Japanese generation mix
Source: http://www.nbr.org/downloads/pdfs/eta/PES_2013_handout_kihara.pdf
Coal capacity is less flexible than gas.

The National Bureau of Asian Research, Energy Mix in Japan - Before and after Fukushima, 2013,
http://www.nbr.org/downloads/pdfs/eta/PES_2013_handout_kihara.pdf.
31
32
30
At present Japanese generation capacity consists primarily of gas (30%), followed by coal (19%) and oil
(17%). Although Japan has excellent access to various forms of renewable energy, these are comparatively
underdeveloped. However, since 2014 solar capacity, particularly small-scale solar, has tripled from 10 to
30GW, and now represents 13% of generation capacity. Whereas there are currently 43 serviceable nuclear
reactors comprising 42.5GW (eight from the Fukushima Daiichi plant are no longer usable and three others
have since been retired due to age), only one Japanese reactor is currently operating.
In the short term Japan will see an additional 5.3GW of gas-fired and 1.9GW of coal-fired capacity come
online (plants currently under construction), but coal now comprises more than half of total planned
generation capacity (plants at any stage of the planning process) at 28.0GW, and this is almost double the
planned new capacity of gas (14.9GW). In the coming years there is also expected to be large increases in
small-scale and residential solar. 33 And in spite of the current political difficulty in restarting nuclear
reactors, the construction of Ohma power plant is continuing (slated to open in 2021), and an additional
two reactors at Tsuruga power plant are in the planning stages. Other forms of generation in the pipeline
are negligible.
Table 21: Japanese generating capacity and pipeline as of Q1 2016

Operational
MW
Percent
of Total
Construction
Average age
(MW
weighted)
Planned
Percent
of Total
MW
MW
Shutdown
Percent
of Total
MW
Gas
78,111
31%
1989
5,345
49%
14,946
29%
83
Coal
47,803
19%
1994
1,917
18%
28,044
55%
462
Oil
43,016
17%
1981
0%
176
0%
5,988
2,360
1%
1992
1,383
13%
3,400
7%
40,114
Solar
32,700
13%
2014
764
7%
1,493
3%
Water
27,953
11%
1974
571
5%
183
0%
Wind
3,038
1%
2009
43
0%
1,174
2%
539
0%
1988
0%
350
1%
Other
19,525
8%
1986
811
7%
1,265
2%
477
Total
255,035
100%
1995
10,834
100%
51,031
100%
47,124
Nuclear
Geothermal
a WEPP coverage of small scale wind and solar PV plants is not comprehensive. Therefore wind and solar PV is replaced by 2015
data from the Renewable Energy Institute.
b - http://www.enecho.meti.go.jp/category/electricity_and_gas/electric/hydroelectric/database/energy_japan002/
One observation: Ohi power plant reactors 3&4.
Coal-Fired Power in Japan

As recently as 2013, Japan had only 3.2GW of new coal capacity planned from four plants, and half of this
was not expected to be brought online until the next decade.34 However a new Basic Energy Plan was
decided by the Cabinet Council in April 2014, and it re-evaluated coal as an important fuel for baseload
power. Although coal-based power generation emits highly toxic air pollutants, is at least twice as CO2
intensive as other fuels, and can less easily adjust output to match demand, coal was viewed to possess
certain advantages. Among major fuels, coal has the most stable supplies (lowest geopolitical risk), and the
33
The data in
Table 21 does not include under construction and planned small scale solar, but does include operational small scale solar.
Justin Guay, Fukushima and the Japanese Coal Myth, Huffington Post, 2013, http://www.huffingtonpost.com/justinguay/fukushima-and-the-japanes_b_3062522.html.
34
31
greatest economic efficiency (the lowest price per unit of heat energy).35 With the governments approval36,
coal prices in secular decline, and deregulation threatening their business, power suppliers have been
rushing to develop new coal power plants.
Figure 6: Japanese fuel costs (/KWh)
Source: Argus Media (2015) Coal serves as long-term replacement for nuclear?
As a result, the number of coal development plans has increased rapidly in the past few years. Although
there are now only four coal plants under construction with a combined capacity of 1.9GW, there are also
49 planned plants comprising a significant 28GW at various planning stages. By contrast gas-fired plants
have 16GW under construction and 21GW planned. Since Japans coal fleet is the youngest of all types of
thermal generation and is on average five years younger than gas, this represents a very significant push to
increase coals share in Japans generation mix.
To better understand how significant this extra coal capacity is, we compare the amount of coal and gas
generating capacity currently under construction or in planning with the amount of capacity required to
maintain total capacity at current levels. By assuming a plant operating life of 40 years, the amount of
capacity retiring in the next ten years can be estimated (i.e. the sum of capacity constructed before 1986).
Assuming the under construction or in planning plants capture a ten-year development horizon, the
amount of new capacity can be directly compared to the amount of capacity estimated to be retiring, see
Figure 7.
Figure 7: Replacement of retiring capacity by fuel type

[GW]
Coal
Gas
Retiring Capacity
through 2026, estimate
10.3
37.1
Under Construction and

Planned Capacity, actual
30.0
37.1
Replacement
Ratio
291%
100%
The amount of planned and under construction coal-fired generating capacity greatly exceeds the capacity
required to replace the retiring fleet, by 191%. This may lead to conditions of oversupply exacerbated by
environment-related risks, leading to significant asset stranding. Strikingly, the amount of planned and
under construction gas capacity is precisely equal to the amount of capacity estimated to be retiring in the
next ten years.
Anthony Fensom, Japan: An Industry Saviour?, World Coal, 2015, http://www.worldcoal.com/special-reports/13052015/Japancoal-demand-what-does-the-future-hold-coal2265/.

36 Certain elements within the government do strongly oppose additional coal capacity such as the Ministry of the Environment
(MOEJ).
35
32
2 Investment Risk Hypotheses

In this section, a comprehensive analysis of the environment-related risk exposure facing Japans coal-fired
utilities is completed. This analysis is divided between two sub-sections: the first sub-section is a financial
analysis that considers Japans utilities in aggregate to explore the sectors financial health, and provides
insight into its potential vulnerability (or resilience) to environment-related risks; the second is our
assessment of the potential environment-related risks facing coal-fired power stations in Japan and how
they could affect asset values.
Table 22 shows there are 55 companies which own coal plants that are either operating, under construction,
or planned. These companies own 51GW of generating capacity, generating 289TWh of electricity per year.
Five new coal-fired power stations are under construction for an additional 1.9GW generating capacity,
and 49 plants with a total of 28GW capacity are in the planning phase.
Financial Analysis
This section provides an in-depth look at the financial structure and market value of Japanese utilities over
time. A thorough examination of the financial structure helps determine the performance, stability and
health of the utility companies. In this section, we examine the market capitalisation of the sample to
examine how market values of these firms have evolved over time. Second, we examine common financial
ratios, including: debt, leverage, profitability, coverage, liquidity and capital expenditure. These latter
ratios help identify investors exposure to financial risk in the sector. Understanding the financial structure
provides insight in Japans ability to finance both RES and thermal future generating capacity, as investors
also seek this information to determine their expected rates of return on utility investments. Utilities in
good financial health may be able to adapt to changes in operating environment, such as demand
destruction, population decline and adapting to a market with a large proportion of renewables. If the
sample is found to be under considerable financial stress, investors may consider the sector non-investment
grade and be hesitant to commit capital or demand higher rates of return on their investment. Access to
this private capital is crucial to facilitate investment in Japans energy infrastructure and generating assets.
2.1.1
Market Capitalisation and Book Value of the Sector
The following section presents the evolution of the market and book values of the 55 companies in our
sample. Figure 8 shows a 13-fold increase in total market capitalisation of the sample between 1995 and
2007, from 4.53 trillion to a peak of 60.45 trillion. From July 2007 to April 2009, the height of the Global
Financial Crisis (GFC), the sample saw a -55% decrease in value. It is argued that Japan was not directly
affected by the GFC, but rather through negative terms of trade shocks and sharp increases in energy and
other commodity prices.37 The time period also experienced negative economic growth, compounding the
issue. Total market capitalisation of the sector also declined post-Fukushima, but it had already been on a
downwards trajectory post-GFC. The sector experienced a recovery in market capitalisation from late 2012
onwards.
Masahiro Kawai and Shinji Takagi, Why Was Japan Hit so Hard by the Global Financial Crisis?, The Impact of the Economic Crisis on
East Asia: Policy Responses from Four Economies, 2011, 13148.
37
33
Table 22: The 55 Companies owning; operating, under construction, and planned coal plants
Rank
Company

OPR
CON
PLN
Total
1 J-POWER
8,414
2 TOKYO ELECTRIC POWER CO
5,900
3 CHUGOKU ELECTRIC POWER CO
5,164
4 TOHOKU ELECTRIC POWER CO
5,751
5 CHUBU ELECTRIC POWER CO
4,100
6 KYUSHU ELECTRIC POWER CO
3,646
7 KANSAI ELECTRIC POWER CO
1,800
8 HOKURIKU ELECTRIC POWER CO
2,903
9 KOBE STEEL
1,475
10 NIPPON STEEL & SUMITOMO METAL
1,950
11 HOKKAIDO ELECTRIC POWER CO
2,250
12 SHIKOKU ELECTRIC POWER CO
1,106
13 TOKYO GAS
0
14 NIPPON PAPER INDUSTRIES CO
680
15 Maeda Corporation
NA
16 SUMITOMO CORP
888
17 TOKUYAMA CORP
883
18 OSAKA GAS
149
19 OKINAWA ELECTRIC POWER CO
754
20 MARUBENI CORP
NA
21 IDEMITSU KOSAN CO
76
22 MITSUBISHI CORP
406
23 TOSOH CORP
667
24 KASHIMA-KITA ELEC POWER CORP
647
25 Tonen General Sekiyu
NA
26 Chiba Prefecture
NA
27 JFE STEEL CORP
124
28 Ube Industries
NA
29 ORIX CORP
NA
30 OJI PAPER CO
283
31 TAIHEIYO CEMENT CORP
281
32 SHOWA DENKO KK
78
33 Joban Joint Power Co
NA
34 MIIKE THERMAL POWER CO
175
35 ASAHI KASEI GROUP
50
36 MITSUI & CO
170
37 TOKAI KYODO ELEC POWER CO
149
38 ABL Co Ltd.
NA
39 TEIJIN LTD
32
40 IDI infrastructures F-Power
NA
41 ITOCHU ENEX CO
61
42 Air Water Inc.
NA
43 Hiroshima Gas
NA
44 Hokuzai Transport
NA
45 CHUETSU PULP INDUSTRY CO
50
46 TOSHIBA CORP
48
47 MAZDA
39
48 HOKUREN NOKYO RENGOKAI
26
49 NIPPON MINING HOLDINGS CO
24
50 KURARAY COMPANY
17
51 Meiko Trans
NA
52 Seika Corporation
NA
53 MATSUSHIMA COAL MINING CO
9
54 DAICEL CHEMICAL INDUSTRIES CO
9
55 Japan Energy Partners
NA
*OPR: Operating; CON: Under Construction; PLN: Planned
84
540
84
NA
NA
1,000
NA
NA
NA
NA
NA
NA
NA
100
NA
NA
NA
110
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
4,020
5,357
1,445
600
2,030
667
3,462
NA
1,300
320
NA
500
1,500
508
1,100
NA
NA
500
NA
750
667
292
NA
NA
500
500
333
400
390
NA
NA
124
180
NA
120
NA
NA
110
70
100
NA
56
56
56
NA
NA
NA
NA
NA
NA
15
15
NA
NA
0.16
12,518
10,947
6,693
6,351
5,878
5,313
5,262
2,903
2,775
2,270
2,250
1,606
1,500
1,288
1,100
888
883
759
754
750
743
698
667
647
500
500
457
400
390
283
281
202
180
175
170
170
149
110
102
100
61
56
56
56
50
48
39
26
24
17
15
15
9
9
0
34
Agg. Market Cap. (JPY Trillion)
Figure 8: Aggregate market capitalisation for the Japanese sample

70
60
50
40
30
20
10
0
This figure illustrates the monthly sum of market capitalisations across the 54 companies in the Japanese sample. Data between
January 1995 and March 2016. Source: Data from S&P Capital IQ.
Between 1995 and 2015, Figure 9 shows that our sample companies began to increase total equity in the
sector at a greater rate than increasing debt. The majority of growth came from retained earnings
reinvesting a larger proportion of net income into the company. Total retained earnings in the sector
increased by 261.69% between 1995 and 2015 from 6.17 trillion to 22.31 trillion. As shown Figure 9,
there was little change in retained earnings at the sector-level post-Fukushima; between 2011 and 2015
retained earnings totalled 21.83 trillion and 22.31 trillion, respectively. Simultaneously, total equity (less
retained earnings) also increased by 226.56% over the same period, from 6.98 trillion to 22.78 trillion. This
increase in equity can include book value of: preferred stock, paid-up capital, and common stock. PostFukushima, the book value of other equity more than doubled, from 11.92 trillion in 2011 to 22.78
trillion in 2015.
In absolute terms, the total value of debt is greater than equity. However, between 1995 and 2015, the total
liabilities of the companies grew at a slower rate than equity. Current liabilities grew by 53.20% between
1995 and 2015, from 26.49 trillion to 40.58 trillion. Of this value, 6.78 trillion was issued post-Fukushima.
Non-current liabilities also grew by 80.03% between 1995 and 2015, from 39.31 trillion in 1995 to 70.77
trillion in 2015; where 9.93 trillion was issued post-Fukushima. Overall, non-current liabilities represent
the largest entry on the balance sheets. The implications of the results above are that a large portion of the
companies total value was issued post-Fukushima; primarily from other equity and non-current liabilities.
35
200
150
100
50
Retained Earnings
Other Equity
Non-current Liabilities
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
0
1995
Total Assets (JPY Trillion)
Figure 9: Delineation of total assets for the sample
Current Liabilities
This figure presents the aggregate total assets for the sample. The data is delineated into: Retained Earnings, Other Equity (total equity
less retained earnings), Current Liabilities, and Non-current Liabilities (Total liabilities less current liabilities).
2.1.2
Bond Issuances
Exposure to high levels of debt increases risk for both debt and equity holders of companies as the priority
of either is further diluted in the event of the companys insolvency.
To build a general picture of the future direction for bond issuances, fixed-income securities are examined
through ratio analysis. A number of financial ratios are examined, including those related to profitability,
capital expenditure, liquidity, leverage, debt coverage, and the ability for utilities to service existing debt.
The analyses are conducted between 1995 and 2015 to represent the last 21 (inclusive) years of data.38 Of the
55 companies in the sample, fixed-income data was available for 41. Thus, the analysis only includes
securities which could be publicly traded. Figure 10 presents the median ratios, with 25th and 75th
percentiles to illustrate the distribution of observed ratios: 50% of companies will fall within the two
percentile bands.
The first two ratios examined report general profitability and capital expenditure in the thermal coal
mining industry, which are both relevant to the industrys ability to service its debt commitments. Profit
margins, shown in Figure 10 Chart (A), have been volatile since 2003. The most profitable years of
operations occurred in 2006-07, where the median profit margins were 4.03-4.24%. However, operations
were particularly difficult for many companies in 2009 and 2013, with negative profit margins.
Capital expenditure represents the funds required to acquire, maintain, or upgrade existing physical assets.
Capital expenditure is scaled by revenue to show how aggressively the company is re-investing its revenue
back into productive assets. A high ratio can be perceived either positively or negatively, depending on
how the capital is spent and how effectively it uses the assets to generate income. Chart (B) shows that a
large proportion of revenue was re-invested in companies between 1996 and 2003, with the median
reaching 11.42% at its peak (1999). Post-2003, the ratio remains relatively stable.
The current ratio and quick ratio are used as proxies for liquidity in the industry. The former measures the
ability to service current liabilities using current assets, the latter measures the ability to service current
liabilities using cash, near-cash equivalents, or short-term investments. Charts (C) and (D) show both
liquidity ratios have increased through time. Both ratios show increasing liquidity over the entire series.
38
Data were extracted from S&P Capital IQ (11 April 2016).
36
The current ratio increases from 0.84 in 1995 to 1.20 in 2015, whereas the quick ratio increases from 0.65 in
1995 to 0.77 in 2015. Chart (C) shows that firms holdings of current assets are currently in excess of their
current liabilities, being able to service their short-term liabilities. Chart (D) shows that the firms are
holding a greater proportion of cash, near-cash equivalents, or short-term investments to service current
liabilities. Overall, the samples liquidity has increased during the period.
Two financial leverage ratios are examined: the Debt/Equity ratio in Chart (I) and the Debt/Assets ratio in
Chart (J). Both ratios have decreased over time, suggesting the industry is financing its growth with debt
and/or may be retiring equity. Both ratios suggest leverage ratios are declining across time. The
Debt/Equity ratio decreases from 231% in 1995, with a wide range of observations, to 108% in 2015.
Similarly, the Debt/Capital ratio also declines over the same period. Combined with Figure 9, these
decreasing leverage ratios are primarily driven by a greater value of Total Equity on the balance sheet, as
opposed to decreasing total debt. The increase in total equity is a combination of greater retained earnings
and now issuances. Overall, the industry has made efforts to reduce its leverage, which can translate to
lower financial risk.
Coverage ratios measure the industrys ability to meet its financial obligations. Three ratios are considered:
1) EBIT/interest, 2) EBITDA/interest, and 3) (EBITDA-CAPEX)/interest. All three ratios are positive,
suggesting the sample is able to cover interest expenses and its ability to pay increases through time. The
EBIT/interest ratio in Chart (K) shows that the operating income of the industry is typically between 1.60
and 6.82 times. The increasing median ratio suggests that the average company can pay its interest
expenses many times over. Chart (L) considers EBITDA which accounts for large depreciation and
amortisation on assets. Consequently, the EBITDA/interest ratios ranging from 2.29 to 14.29 times interest
expense, suggest the costs of intangible and tangible assets are large. Chart (M) considers the impact of
capital expenditures on the industrys ability to cover interest expenses. The deduction of CAPEX allows
comparison across capital-intensive companies. When deducting annual CAPEX, the ratios range from 1.85
to 6.15 times interest cover. Across the three ratios, the range of observations widens through time,
suggesting a divergence of practices among companies.
The final four ratios represent the industrys ability to retire incurred debt. The ratios can be broadly
interpreted as the amount of time needed to pay off all debt, ignoring interest, tax, depreciation and
amortisation. The ratios are divided into two groups: group 1 considers the numerators: total debt and
net debt, where the latter subtracts cash and near-cash equivalents for total debt; group 2 considers the
denominators: EBITDA and (EBITDA-CAPEX), where the latter controls for capital expenditures.
37
Figure 10: Ratio analysis for all companies, with median, 25th, and 75th percentiles
38
All four ratios suggest the ability to retire debt has been relatively stable over the past 21 years,
typically fluctuating in the region of four to ten years using EBITDA, and six to 19 years after
subtracting CAPEX. The latter suggests that CAPEX is a major factor in the samples ability to retire
debt. Considering Charts (E) and (F), the number of years taken to retire debt, assuming constant
income, has been declining over time. In 1995, it took ten years to retire total debt and seven years to
retire net debt after utilising near-cash equivalents. By 2015, total debt could be retired in 5.6 years
while net debt could be retired in 4.4 years.39 When deducting CAPEX, these ratios increase. In 1995,
total debt took 11.8 years to retire while net debt took 9.5 years. 1997 to 2000 represent particularly
capital intensive years, where both debt ratios increase dramatically. This is consistent with the
CAPEX ratios in Chart (B), which showed high capital intensity over a similar period. In conclusion,
all four ratios indicate that the sample is making advances in its ability to retire debt.
Figure 11 illustrates the maturity schedule for the total debt outstanding for the sample. The fixedincome data was available for 41 of the 55 companies. The schedule is divided into total amount
outstanding ( Trillion) and the maturity dates of various contracts.
Plot A of Figure 11 shows that the majority (73.5%) of all outstanding debt obligation is due between
2016 and 2020, indicating the sample shows a preference for debt which matures within five years or
less. The most expensive years for retiring debt will be 2017 and 2018, with 4.09 trillion and 3.54
trillion due, respectively. There is some appetite for longer maturities; some contracts extend to 2035
and a few contracts extend to 2075. In the sample, only one company reported perpetual debt:
Nippon Steel & Sumitomo Metal Corporation issued perpetual debt worth 273.86bn.
39
Much of this decline has been due to the fall in Japanese interest rates since 1990.
39
Figure 11: Bond maturity schedule and number of contracts issued
40
Environment-Related Risk Hypotheses

In this section, we examine the environment-related risks facing coal-fired power stations and how they
could affect asset values. We call these Local Risk Hypotheses (LRHs) or National Risk Hypotheses
(NRHs) based on whether the risk factor in question affects all assets in Japan in a similar way, or if risk
exposure is specific to the local environment. Water stress, for example, varies across the country and so is
an LRH, whereas a country-wide utility death spiral is an NRH. The hypotheses are coded for easier
reference. For example, LRH-1 refers to carbon intensity of coal-fired power stations and NRH-1 refers to
the overall demand outlook for electricity.
Hypotheses for different environment-related risks have been developed through an informal process. We
produced an initial long list of possible LRHs and NRHs. This list was reduced to the more manageable
number of LRHs and NRHs contained in this report. We excluded potential LRHs and NRHs based on two
criteria. First, we received feedback from investors and other researchers in meetings, roundtables, and
through correspondence, on the soundness, relevance, and practicality of each hypothesis. Second, we
assessed the data needs and analytical effort required to link the hypotheses with relevant, up-to-date, and
where possible, non-proprietary, datasets.
The current list of hypotheses and the datasets used to measure asset exposure to them are in draft form.
Other datasets may have better correlations and serve as more accurate proxies for the issues we examine.
Important factors may not be represented in our current hypotheses. We are aware of these potential
shortcomings and in subsequent research intend to expand the number of hypotheses we have, as well as
improve the approaches we have used to analyse them.
2.2.1
Local Risk Hypotheses
LRH-1: Carbon Intensity

The hypothesis is that the more carbon intensive a coal-fired power station is, the more likely it is to be
negatively impacted by climate policy: whether carbon pricing, emissions performance standards, or other
similar measures. Carbon intensity is directly dependent on power station efficiency, see Figure 12.
41
Figure 12: Emissions intensity and efficiencies of coal-fired power stations40

Efficiency (LHV %)
1600
50
1400
45
g CO2/kWh
1200
40
35
1000
30
800
25
600
20
400
15
Lower Heating Value %
CO2 intensity factor (g CO2/kWh)
10
200
The carbon intensity of power stations can vary widely based on the efficiency of the boiler technology
used. Power stations with lower thermal efficiencies are more vulnerable to carbon policies because such
policies will more heavily impact inefficient power stations relative to other power stations.41 This is
highly relevant to coal-fired power generation because it is the most emissions-intensive form of
centralised generation.42 Inefficient coal-fired power stations, such as subcritical coal-fired power stations
(SCPSs), are the most vulnerable to such policies. Although Japan has one of the worlds least carbon
intensive coal fleets, there are plants within it that are relatively inefficient, particularly small plants built
for industrial use.
To identify carbon intensity risks, the emissions intensity of each power station globally is identified in
kg.CO2/MWh using data from CoalSwarms Global Coal Plant Tracker database, the Kiko Network, and
the Carbon Monitoring for Action (CARMA) database. Within our population of power utilities, CO2
intensities for 3% of all power plants and 10% of coal-fired power stations was not available. CO2 intensity
for these missing data points was estimated from coefficients derived from a log-log regression of matched
data, using fuel type, MW capacity, age, and a country or regional dummy43 as regressors. This functional
Taken from IEA, Energy Technology Perspectives 2013, (Paris, France, 2013).
Ben Caldecott and James Mitchell, Premature Retirement of Sub-Critical Coal Assets: The Potential Role of Compensation and the
Implications for International Climate Policy, Seton Hall Journal of Diplomacy and International Relations 16, no. 1 (2014): 5970.
42 W Moomaw et al., Annex II: Methodology, IPCC Special Report on Renewable Energy Sources and Climate Change Mitigation, 2011,
982.
43 Regional dummies are employed where there are fewer than 30 observations of plants in a given country.
40
41
42
form was chosen as it allows for proportional rather than absolute coefficient values, thereby
corresponding more closely with the way in which our regressors should affect CO2 intensity in practice.
Annual generation data (in MWh) was unavailable for 48% of all power stations owned by our 55
companies (all fuel sources) and 32% of coal-fired power stations. This data and plant utilisation rates (in
MWh/MW) for missing data points were similarly estimated from coefficients derived from a log-log
regression. The regressors employed were fuel type, plant age, and country or region.44 Similar to CO2
intensity, this functional form was chosen as it should correspond more closely with the way in which our
regressors are likely to affect MWh of generation in practice.
Power stations were then aggregated by utility and weighted by MW to determine the average carbon
intensity of both all the power stations and only the coal-fired power stations of the 55 companies in our
sample.
Figure 13: Operational coal-fired power station CO2 emissions intensities
LRH-2: Plant Age

The hypothesis is that older power stations creates risks for owners in two ways. First, ageing power
stations are more vulnerable to regulations that might force their closure, since it is financially and
politically simpler to regulate the closure of ageing power stations. Power stations typically have a
technical life of 40 years and recover their capital costs after 35 years 45 . Once power stations have
recovered capital costs and have exceeded their technical lives, the financial need to compensate is greatly
reduced or eliminated46. Second, utilities with significant ageing generation portfolios have a higher risk
Regional dummies are employed where there are fewer than 30 observations of plants in a given country.
IEA, Energy, Climate Change and Environment (Paris, France, 2014).
46 Caldecott and Mitchell, Premature Retirement of Sub-Critical Coal Assets: The Potential Role of Compensation and the
Implications for International Climate Policy.
44
45
43
of being required to cover site remediation costs after power station closures and outstanding worker
liabilities (i.e. pension costs). Finally, older power stations are more susceptible to unplanned shutdowns
and maintenance needs, resulting in the costs of repairs and secondary losses or opportunity costs of
underperformance on contracted power delivery.
The age of each generating unit within each power station is identified using CoalSwarm, the World
Electric Power Plant (WEPP) database, Kiko Network coal plant data, and CARMA. These are then
aggregated to the plant level by weighting the MW capacity of each generating unit. For power stations
that lack age data (4% in total, 7% for coal), the average age of stations with the same fuel type across the
complete dataset is used. Power stations are then further aggregated by utility company to determine the
average age of their complete and coal-fired only power generation portfolios.
Figure 14: Operational coal-fired power station ages
LRH-3: Local Air Pollution

The hypothesis is that coal-fired power stations in locations with serious local air pollution are at greater
risk of being regulated and required to either install emission abatement technologies or cease operation.
Thus, owners of assets in areas of high local pollution will have a greater risk of bearing the financial
impacts of such possibilities.
There is strong evidence to support this hypothesis from China, the EU, and the US. In China, a number of
non-GHG emission policies are forcing the closure of coal-fired power generation in the heavily polluted
eastern provinces.47
Power stations without abatement technologies (e.g. flue gas desulphurisation units and electrostatic
precipitators) installed are more at risk of being stranded by having to make large capital expenditures to
47
Caldecott, Dericks, and Mitchell, Stranded Assets and Subcritical Coal: The Risk to Companies and Investors.
44
fit emission abatement technologies. This risk is exacerbated by power station age because investments are
harder to justify closer to the end of a power stations technical life.
This is illustrated by the effects of the Mercury and Air Toxics Standards in the United States.
Implemented under the 1990 Clean Air Act amendments, MATS limit emissions of mercury, toxic metals,
and acidic gases. 70% of coal-fired power stations are compliant with the regulations. While 6% have plans
to comply with the regulation, 16% plan to cease operation instead of comply and another 8% are
undecided. The EIA attributes this to the capital expenditure necessary to comply as well as competition
from renewables and gas.48
The following approach is taken to identify risks to utilities that may be created by the co-location of coalfired power stations with serious local air pollution.
All coal-fired power stations are mapped against a geospatial dataset of global PM2.5 pollution.
PM2.5 data is taken from the analysis of Boys, Martin et al. (2014), and consists of annual groundlevel PM2.5 averages between 2012 and 2014 derived from satellite observation.
Average PM2.5 pollution within a radius of 100km of each power station is identified.
In this hypothesis, PM2.5 is used as a proxy for the other conventional air pollutants. Mercury has toxic
neurological impacts on humans and ecosystems, but PM2.5 is responsible for a more significant range of
respiratory and cardiac health impacts associated with coal-fired power.49 NOx and SOx form additional
PM pollution once suspended in the atmosphere, and so are included in an evaluation of exposure to PM2.5
alone. Figure 15, Figure 16, Figure 17, and Figure 18 show conventional air pollutant concentrations in
Japan.
Elias Johnson, Planned Coal-Fired Power Plant Retirements Continue to Increase, EIA, 2014,
https://www.eia.gov/todayinenergy/detail.cfm?id=15491.
49 Alan H Lockwood et al., Coals Assault on Human Health, Physicians for Social Responsibility Report, 2009.
48
45
Figure 15: Average PM2.5 concentrations, 2012-201450
Figure 16: Average NO2 concentrations, 201551
50 B L Boys et al., Fifteen-Year Global Time Series of Satellite-Derived Fine Particulate Matter, Environmental Science & Technology 48,
no. 19 (2014): 1110918.
51 K F Boersma et al., An Improved Tropospheric NO2 Column Retrieval Algorithm for the Ozone Monitoring Instrument, Atmos.
Meas. Tech. 4, no. 9 (September 16, 2011): 190528, doi:10.5194/amt-4-1905-2011.
46
Figure 17: Average SO2 concentrations, 2011-1452
Figure 18: Average mercury emissions, 201053
LRH-4: Water Stress

The hypothesis is that power stations located in areas with higher physical baseline water stress or in areas
with water conflict or regulatory uncertainty are at higher risk of being forced to reduce or cease
N A Krotkov et al., Aura OMI Observations of Regional SO2 and NO2 Pollution Changes from 2005 to 2015, Atmos. Chem. Phys.
16, no. 7 (April 13, 2016): 460529, doi:10.5194/acp-16-4605-2016.
53 AMAP/UNEP, AMAP/UNEP Geospatially Distributed Mercury Emissions Dataset 2010v1, 2013,
http://www.amap.no/mercury-emissions/datasets.
52
47
operation, of losing licence to operate, or of having profits impaired by water pricing. These risks can be
mitigated to an extent by the use of closed-cycle, hybrid, or dry cooling technology.
These risks can be exacerbated by policy in two ways. First, water-use hierarchies that give residential or
agricultural water use precedence over industrial use might worsen impacts of physical scarcity on power
generation. Second, areas with high water stress and low industrial water pricing are more vulnerable to
policy change.
Coal-fired Rankine-cycle (steam) power stations are second only to nuclear power stations in water use.
Cooling is by far the largest use of water in these power stations. The largest factor in determining the
water-efficiency of stations is the type of cooling system installed. Secondary factors are the ambient
temperature and station efficiency.54
Table 23: Water use in electric power generation55

Fuel-Type
Coal
Gas
Oil
Nuclear
Once-Through
95,000-171,000
76,000-133,000
76,000-133,000
133,000-190,000
Cooling Technology
Closed-Cycle
Hybrid (Wet/Dry)
(Wet)
2,090-3,040
1,045-2,755
1,900-2,660
950-2,470
1,900-2,660
950-2,470
2,850-3,420
Applicability
Dry Cooling
~0
~0
~0
Applicability
Use of hybrid and dry cooling only recently considered for nuclear plants.

Previous research shows that there is strong evidence to suggest that unavailability of water resources is a
legitimate concern to the profitability of power stations. 56 In India, coal-water risks have forced
nationwide blackouts and water shortages that restrict plants from operating at full capacity and have
been shown to quickly erode the profitability of Indian power stations.57 In China, attempts to abate local
air pollution in eastern provinces have pushed coal-fired power generation into western provinces, where
there is extreme water scarcity and shortages are expected.58
The following approach is taken to identify risks to utilities that may be created by physical water stress as
well as social or regulatory water risks. The Baseline Water Stress geospatial dataset from WRIs Aqueduct
is used to assess physical water stress-related risks. Social and regulatory risks are assessed at the national
level in NRH-8. Power station cooling technology is taken from the WEPP database and visual inspection.
It was not possible to identify the cooling technology of 29% of coal plants.
The measure for water stress used in this report is Baseline Water Stress (BWS) from Aqueduct created by
the World Resources Institute (WRI). BWS is defined as total annual water withdrawals (municipal,
industrial, and agricultural) expressed as a percentage of the total annual available flow within a given
watershed. Higher values indicate greater competition for water among users. Extremely high water stress
areas are determined by WRI as watersheds with >80% withdrawal to available flow ratios, 80-40% as high
water stress, 40-20% as high to medium, 20-10% as medium to low, and <10% as low.59
Caldecott, Dericks, and Mitchell, Stranded Assets and Subcritical Coal: The Risk to Companies and Investors.
EPRI, Water Use for Electric Power Generation (Palo Alto, CA, 2008).
56 Ibid.
57 IEA, World Energy Outlook 2012, 2012.
58 CTI, Coal Financial Trends, 2014.
59 Francis Gassert et al., Aqueduct Global Maps 2.1: Constructing Decision-Relevant Global Water Risk Indicators (Working Paper.
Washington, DC: World Resources Institute. Available online at: http://www. wri. org/publication/aqueductglobalmaps-21indicators, 2014).
54
55
48
All coal-fired power stations are mapped against the Aqueduct Baseline Water Stress geospatial dataset.
Those power stations that are in watersheds that have extremely high water risk60 for baseline water
stress are identified as at risk. If a power station uses dry cooling technology, it is reclassified as not at
risk.
Power stations are then aggregated by utility to identify the percentage of capacity that is at risk. Figure
19 shows global baseline water stress.
Figure 19: Baseline water stress, Data from WRI Aqueduct 2015
LRH-5: CCS Retrofitability

Coal-fired power stations not suitable for the retrofit of carbon capture and storage (CCS) technology may
be at more risk of premature closure. These power stations do not have the option of CCS retrofit in the
case of strong GHG mitigation requirements on coal-fired power utilities, enforced either by targeted
policy or carbon pricing. Because CCS plays a large part in in the IPCC and IEAs 2C scenarios61 (IPCC
AR5 2DS) as well as the IEAs 2C scenarios (IEA ETP, IEA WEO 450S), it is necessary to evaluate the
retrofitability of power stations to assess the resilience of utilities generation portfolio to policies aiming to
align power generation emissions with a 2DS.
In post-Fukushima Japan, thermal power became key energy policy in tandem with government plans to
increase efficiency in new coal power stations and reduce the cost of CCS projects to curb its CO2
emissions by 2030 (See following sections). Although there are few demonstration CCS projects in Japan,
the government supports cutting down the carbon capture cost from US$40/t in 2015 to US$10/t in 2025 in
Baseline water stress measures the ratio of total annual water withdrawals to total available annual renewable supply, accounting
for upstream consumptive use. Extremely high water risk signifies that >80% of renewable supply is withdrawn.
61 Refers specifically to the IPCC AR5 430-480PPM, IEA ETP 2DS, and IEA WEO 450S.
60
49
order to accelerate its commercialization.62 A geological CO2 storage in Japan can be achieved in deep
saline aquifers, which makes offshore seabed suitable for CCS projects. A 2012 survey by Research
Institute of Innovation Technology for the Earth suggests that the potential geological storage capacity on
Japans offshore areas shallower than 200 meters is 146.1 billion ton, and a further survey is being
conducted for areas deeper than 200 meters.63
No dataset exists for CCS retrofitability.64 Instead, this is defined as a function of power station size, where
only boilers larger than 100MW are economic to retrofit;6566 age, where only power stations <20 years old
are worth making significant investments in67,68, and location, where power stations that are within 40km
of geologically suitable areas are economically suitable.69
The following approach is taken to identify the percentage of utilities coal-fired power generation
portfolios that may be suitable for CCS retrofits. CCS policy support is considered separately as a nationallevel risk indicator.
Power stations with generators larger than 100MW, that are younger than 20 years, are deemed technically
suitable for CCS retrofit, and are then mapped against the Global CCS Suitability geospatial dataset to
determine whether they are within 40km of areas suitable for CCS, and therefore geographically suitable.
Power stations that are both technically and geographically suitable are aggregated by utility to identify
the percentage of utilities generation portfolio that is suitable for CCS retrofit.
Figure 20 depicts global CCS geological suitability and is taken from Geogreen. As we can see from this
figure, with the exception of western coasts of Aomori, Akita, and Yamagata prefectures and the outer
elbow of the Noto peninsula, there are few suitable CCS locations that are known in Japan. Whereas CCS
may be viable in many coastal regions south of Shizuoka, the areas around northern Honshu and
Hokkaido are less certain.
Kawasaki, T., Harada, M. (2015). Current Situation of Japans Post-Combustion Capture and CCS. Japan Coal Energy Centre,
September 8-9.
63 Kawasaki, T. (2015). Op. Cit.
64 IEA, CCS Retrofit, 2012.
65 National Energy Technology Laboratory, Coal-Fired Power Plants in the United States: Examination of the Costs of Retrofitting
with CO2 Capture Technology (Washington, US, 2011), http://www.netl.doe.gov/energy-analyses/pubs/GIS_CCS_retrofit.pdf.
66 Although MITei suggests that 300MW is the threshold for power stations generally, 100MW is taken as a conservative case. See
MITei, Retrofitting of Coal-fired Power Plants for CO2 Emission Reductions, 2009.
67 Ibid.
68 This is the central scenario of the OECD CCS retrofit study.
69 40km has been suggested as the distance to assess proximity to geological reservoirs, see NETL (2011).
62
50
Figure 20: CCS geological suitability70
CCS map data provided by Geogreen
LRH-6: Future Heat Stress

The hypothesis is that physical climate change will exacerbate heat stress on power stations. Higher
ambient local temperatures decrease power station efficiency and exacerbate water stress, which causes
physical risks, such as forced closure or reduced operation, and social risks, such as unrest and increased
potential for regulation.
There is strong evidence that warming risks should be taken into account. In Australia, there is evidence
that climate change poses direct water-related risks to Australian coal-fired power generation. During a
heat wave in the 2014 Australian summer, electricity demand increased in tandem with water
temperatures. Loy Yang power stations generating ability was greatly reduced because it could not cool
itself effectively.71 This caused the spot price to surge to near the market cap price.72 Inability to produce
power at peak demand times has the capacity to significantly impact power stations profits in competitive
energy markets.
To assess vulnerability of power stations to climate change-related temperature increases, the
Intergovernmental Panel on Climate Changes AR5 2035 geospatial dataset is used. This dataset gives a
spatial representation of expected temperature change by 2035.
Reproduced with permission of IEA GHG and Geogreen

AEMO, Heatwave 13 to 17 January 2014, American Energy Market Operator, 2014, http://www.aemo.com.au/News-andEvents/News/2014-Media-Releases/Heatwave-13-to-17-January-2014.
72 Brian Robins, Electricity Market: Heatwave Generates Interest in Power, The Sydney Morning Herald, 2014,
http://www.smh.com.au/business/electricity-market-heatwave-generates-interest-in-power-20140117-310d2.html.
70
71
51
Average temperature change within a 50km radius is calculated for each power station globally. Power
stations are then ranked globally. Those power stations in the top quintile of temperature change are
identified as at risk. Power stations are then aggregated by utility to identify the percentage of capacity at
risk from heat stress induced by climate change. Figure 21 shows global near-term future temperature
changes.
Figure 21: Projected 2016-35 temperature change73
LRH-7: Regional Nuclear Restart Capacity

With almost all nuclear plants in Japan now shutdown, nuclear restarts and new nuclear construction pose
a significant risk for power plants in Japans development pipeline. This risk is especially concerning for
coal plants built primarily to replace lost nuclear capacity. Existing and planned coal plants are evaluated
with regard to the nuclear capacity which exists in their regions that could be restarted; or nuclear capacity
which if now planned, could be developed. This is done because inter-regional electric connections in
Japan are weak, and therefore electrical grids are relatively compartmentalised by region. 74 New coal
plants in regions that have the greatest potential nuclear capacity are more likely to suffer lower demand
by an expansion of nuclear restarts.
Nuclear restarts and new builds pose a significant risk for Japans utility companies. This risk is especially
concerning for coal plants built primarily to replace lost nuclear capacity. Indeed, Figure 22 shows that
both the location and size of shutdown and new build nuclear plants are highly correlated with the
location and size choices of the coal plants now in the development pipeline. It is clear from this figure that
a number of planned coal plants are being strategically positioned to replace lost nuclear capacity.
Data from RCP8.5, P50 of IPCC, Climate Change 2014: Mitigation of Climate Change, 2014.
Note that coal capacity owned by one company is still threatened by nuclear from the same company. This is because, if restarted,
the nuclear plant will still cannibalise demand from that coal plant.
73
74
52
Figure 22: Planned and under construction coal plants; and shutdown, planned and under
construction nuclear plants
Note
that all shutdown nuclear capacity has new coal plants of a similar size being built within the same city, and therefore each nuclear
plant is underlaid by a size-equivalent coal plant marker.
The magnitude of nuclear restart risk to new coal plants will depend upon both the probability that a
nuclear plant restarts and the grid proximity of that nuclear plant to new coal. We do not explicitly
address the probability of individual nuclear restarts here as this is a political question with great
uncertainty(all operable plants are treated identically), but instead focus on the problem of grid proximity.
The ability of a power plant to compete with another is dependent on the grid network and complex
interlinkages that are difficult to model even with ideal data. With an adequate distribution network, it is
possible for power plants that are many hundreds of kilometres distant to compete with one another.
Rather than attempt to model the electrical network explicitly, we instead draw upon the fact that interregional linkages in Japan are known to be weak.75 We have therefore chosen to assume that each nuclear
plant and new coal plant can effectively provide power (and therefore compete) throughout the same
region76, but that these plants are effectively isolated from capacity in other regions. As such, we take the
amount of shutdown (but operable), planned, and under construction nuclear capacity within each region
as an approximation for the risk of nuclear restart to new coal power plants within that region.
When aggregating this risk up to the level of the utility, we take an average of the restartable nuclear
capacity in each region, weighted by the generating capacity of the utilitys coal-fired power stations in
each region. We can see from Table 24 that the regions of Tohoku, Hokuriku and the island of Kyushu
75
76
Topham, Japans Power Failure: Bid to Forge National Grid Stumbles.

We define these regions by geographical divisions of the 10 regional monopolists. There are therefore 10 such regions.
53
have the greatest potential nuclear capacity, and therefore new coal plants in these regions are likely to be
among the most affected by an expansion of nuclear restarts.
Table 24: Potential regional nuclear capacity (shutdown, under construction and planned)
Region
Tohoku
Hokuriku
Kyushu
Chubu
Hokkaido
Shikoku
Tokyo
Chugoku
Kansai
Okinawa
2.2.2
MW
17,263
13,306
4,699
3,617
2,070
2,022
1,100
820
0
0
National Risk Hypotheses
The hypotheses below affect all generating assets in Japan. A simple traffic light method has been used to
conduct analysis for these risk hypotheses. Traffic-light methods are well suited to complex situations
where more formal analysis is unavailable or unnecessary, and are particular prevalent in environmental
and sustainability analysis, e.g. DEFRA77, the World Bank78. The hypotheses developed below draw on the
IEA NPS as a conservative scenario and add extra evidence to give a more complete policy outlook for
coal-fired utilities. The time horizon for these risk indicators is near to mid-term, using the IEAs 2020
projections where appropriate.
An effective traffic-light method clearly describes threshold values or criteria for each colour that are
testable by analysis or experiment.79 Criteria are developed below for each hypothesis, with conclusions as
to whether coal-fired utilities are at high risk (red), medium risk (yellow) or low risk (green). Based on
each of these criteria, an aggregate risk outlook is given after scoring each (+2 for high risk criteria, +1 for
medium risk criteria). These scores can be used for an aggregate risk outlook for coal-fired power
generation in Japan. Comparator countries are also given based on the analysis conducted in Stranded
Assets and Thermal Coal: An analysis of environment-related risks. Particularly with the traffic-light
methodology, these comparisons are important for contextualising risk exposure in Japan. For investors
who have a global universe of investment opportunities understanding how Japans utilities compare to
utilities in other countries with regards to environment-related risk exposure is eminently relevant.
The analysis of NRHs below has been expanded and updated since Stranded Assets and Thermal Coal.
Changes in opinion of risk exposure are noted where appropriate. Table 25 provides a summary of all
NRHs for Japans coal-fired power utilities and their peers in comparator countries, where directly
comparable. Since Stranded Assets and Thermal Coal our opinion of risk exposure for Japan has worsened
with the additional of NRH-10: Nuclear Restarts.
Department for Food, Environment & Rural Affairs, Sustainable Development Indicators, 2013.
The World Bank, RISE Scoring Methodology, 2016, http://rise.worldbank.org/Methodology/Scoring-methodology.
79 R G Halliday, L P Fanning, and R K Mohn, Use of the Traffic Light Method in Fisheries Management Planning, Marine Fish
Division, Scotia-Fundy Region, Department of Fisheries and Oceans, Bedford Institute of Oceanography, Dartmount, NS, Canada, 2001.
77
78
54
Table 25: Summary of National Risk Hypotheses

United States
United Kingdom
South Africa
Poland
India
Indonesia
Germany
China
Australia
Japan
NRH-1: Future Electricity Demand

NRH-4: Growth of Decentralised Renewables
N/A
N/A
NRH-6: Growth of Gas-Fired Power

NRH-9: CCS Regulatory Env.
N/A
TOTAL* 50% 60% 60% 50% 40% 45% 40% 55% 45% 60%
*Higher percentage equates to a worse risk outlook. Total for Japan based on this publication. Total for comparator countries based
on Stranded Assets and Thermal Coal.
NRH-1: Future Electricity Demand Outlook

The hypothesis is that the greater the growth in demand for electricity, the less likely other forms for
generation (e.g. solar, wind, gas, and nuclear) are to displace coal-fired power. Growth in overall electricity
demand might allow coal-fired generators to maintain or increase their current share of power generation.
Change in electricity demand is driven by macroeconomic conditions and technology deployment. Japan
faces severe economic challenges as a result of its crushing debt load and now falling population. The
economic problems began in 1990 when Japan experienced the collapse of one of the largest financial
bubbles the world had ever seen. During the ensuing 25 years Japan experienced practically no economic
growth combined with no inflation and massive government spending. This had the predictable effect of
ballooning government debt from 67 per cent of GDP in 1990 to 229 per cent in 2015. Over the past decade
this debt has continued to grow at an average of rate of about 7 per cent per year.80 These unsustainable
liabilities have forced Japans hand to pursue an extremely risky policy of monetising this debt and other
forms of money printing such as Quantitative Easing which create economic distortions and have the
potential to cause hyperinflation. However, the Japanese economy is now dependent upon this financial
manipulation, and any attempts to remove it would prove equally disastrous. As a result, the Japanese
economy is locked in a fragile state. Since fluctuations in economic output are a key determinant of
electricity demand, Japanese energy producers have reason to be cautious about the future.
80
By comparison much in the news Greece has a lower debt to GDP ratio of 179% which has been stable over the last three years.
55
Figure 23: Japanese government debt to GDP ratio 1980-2015
Source: www.tradingeconomics.com, Ministry of Finance Japan
Against this already threatening economic backdrop, projections by the Japanese government indicate that
the population will also decline by 8 per cent from its current 127 million to 117 million by 2030, or 0.5%
per year; and then accelerate to 0.85% per cent per year until 2050 to 97 million.81 Meanwhile the working
age population is expected to fall even faster at 0.9 per cent per year to 2030. This decline is significant
given the long time-scale over which power plants operate (typically 40 years).82 Absent radical increases
in workforce participation rates or productivity, this smaller population will slash economic output and
further undermine the solvency of Japans financial system.
Energy producers must also dodge a third bullet in the form of increasing energy efficiency. Although
most of the increase in Japanese energy efficiency took place prior to 1990, in the last four years increased
energy efficiency has caused electricity demand to fall by 10%.83
Figure 24: Japanese energy efficiency per unit of real GDP (Mtoe/100 bn)
Source: METI
A struggling economy, declining population, and increasing energy efficiency should lead to falling
electricity demand. Curiously this is not what the Japanese government is forecasting. According to METI
the government expects electricity demand to increase from 967 TWh in 2013 to 981 TWh in 2030. By
contrast, using more realistic assumptions BNEF estimates 2030 demand to fall 3.5% to 946 TWh. Figure 25
shows projections of Japans electricity generating mix in 2030. BNEF takes a much more pessimistic view
of nuclear restarts than the Japanese Government. BNEF and both the IEAs NPS and 450S project larger
BNEF, Japans Likely 2030 Energy Mix: More Gas and Solar, Bloomberg New Energy Finance, 2015,
http://about.bnef.com/content/uploads/sites/4/2015/06/BNEF_White_Paper_Japan_Outlook_EN_FINAL.pdf.
82 John Mauldin and Jonathan Tepper, Code Red: How to Protect Your Savings from the Coming Crisis (John Wiley & Sons, 2013).
83 Christine Sheerer et al., Boom and Bust 2016: Tracking the Global Coal Plant Pipeline, 2016,
http://sierraclub.org/sites/www.sierraclub.org/files/uploads-wysiwig/final boom and bust 2017 %283-27-16%29.pdf.
81
56
penetration of renewables than the Japanese Government. In all scenarios, the IEA projects a strong return
of nuclear power to the Japanese generating mix.
Generated Electricity [TWh]
Figure 25: 2030 projections of Japans electricity mix84,85,86,87

1200
1000
12%
800
26%
600
27%
12%
0%
43%
400
200
25%
23%
26%
21%
9%
27%
42%
27%
23%
27%
27%
30%
26%
2010
2015
2030: Gov't
0
Coal
20%
Oil
Gas
22%
16%
33%
30%
27%
25%
31%
13%
2030: BNEF 2030: IEA NPS 2030: IEA CPS 2030: IEA 450S
Nuclear
Renewables
Table 26 shows the compound annual growth rates in GDP, population, and electricity and final energy
demand, and ratios thereof for several published projections. The government of Japan projects substantial
GDP growth simultaneous with large gains in efficiency, demonstrated by rapidly diminishing final
energy demand and power generation relative to GDP. The IEA also expects electricity as a portion of total
final energy demand to grow quicker than the government projects, indicating the electrification of final
energy uses like transport and heat.
Table 26: Japan future energy demand assumptions and indicators

2013-2030 CAGR
Government of
Japan88
BNEF89
IEA:
NPS90
GDP POP ELEC TFED ELEC/GDP ELEC/POP TFED/GDP TFED/POP ELEC/TFED

1.7% -0.7% 0.1% -0.6%
-1.6%
0.8%
-2.3%
0.1%
0.7%
1.0% -0.5% -0.1% N/A
-1.1%
0.4%
NA
NA
NA
0.8% -0.4% 0.3% -0.7%
-0.5%
0.6%
-1.7%
-0.2%
1.0%
IEA: CPS
0.8% -0.4% 0.5% -0.6%
-0.3%
0.8%
-1.6%
-0.1%
1.0%
IEA: 450S
0.8% -0.4% -0.5% -1.4%
-1.3%
-0.2%
-2.3%
-0.9%
0.9%
ELEC: Total electricity generation (i.e. in TWh)

POP: Population
TFED: Total Final Energy Demand (i.e. in EJ of electricity, heat, light, mobility, etc.)
For the purposes of evaluating risk exposure in this hypothesis, future electricity demand is considered in
the medium term. Medium-term electricity demand outlook is obtained from IEA WEO 2015. The WEOs
NPS scenario is chosen as a conservative outlook. Japans outlook is compared in Table 26 with the other
scope countries from Stranded Assets and Thermal Coal: An analysis of environment-related risk exposure.
BNEF, Japans Likely 2030 Energy Mix: More Gas and Solar., 2015.
IEA, World Energy Outlook, 2015.
86 Mari Iwata and Henry Hoenig, Japan Struggles to Find Balanced Energy Strategy, The Wall Street Journal, 2015,
http://www.wsj.com/articles/japan-struggles-to-find-balanced-energy-strategy-1431545581.
87 Reuters, CORRECTED-UPDATE 2-As Japans Oil, Gas, Power Use Stalls, Coal Imports Hit New Record, Reuters, 2016,
http://www.reuters.com/article/japan-energy-demand-idUSL3N15900U.
88 METI, Long-Term Energy Supply and Demand Outlook (Provisional Translation), Ministry of Economy, Trade and Industry, 2015,
http://www.meti.go.jp/english/press/2015/pdf/0716_01a.pdf.
89 BNEF, Japans Likely 2030 Energy Mix: More Gas and Solar., 2015.
90 IEA, World Energy Outlook.
84
85
57
Countries which have 0% projected electricity demand growth between 2013 and 2020 are considered
high risk. Countries with 1% or 2% growth are considered medium risk. Countries with >2% growth are
considered low risk. Japan is considered high risk.
Table 27: 2013-20 electricity demand outlook from IEA WEO 2015 NPS91
Other OECD
Pacific
China
India
Other SE
Asia
South Africa
EU
US
CAGR
Risk
Japan
2013
2020
0%
2%
4%
6%
4%
1%
0%
1%

The hypothesis is that the availability of strong renewable resources is a key determinant of the
competiveness of renewables relative to conventional generation. Countries with larger renewable
resources could see larger and faster rates of deployment. This would result in coal-fired power stations
being more likely to face lower wholesale electricity prices and other forms of power sector disruption.
Wind resource potential is drawn from Lu et al. (2009) and is normalised by 2014 total electricity
generation. Solar resource potential is drawn from McKinsey & Company and SolarGIS. Where either
solar resource exceeds 1400 kWh/kWP or wind resource exceeds ten times the annual electricity demand
of the country, coal-fired power generation in the country is considered at medium risk of displacement
by renewables. Where both exceed these thresholds, coal-fired power is considered at high risk.
Despite Japans abundance of wind resource, the available capacity normalised by Japans total power
consumption does not appear threatening to Japans conventional generators. Similarly, despite massive
build-outs of solar PV generation, Japans underlying solar resource is not naturally compelling.
Table 28: Renewables resources

South
Africa
United
Kingdom
United
States
3.3
22.0
31.7
29.8
20.5
1,175
1,425
1,300
950
1,400
1,450
~950
1,500
875
1,250
Poland
4.4
India
RISK
Indonesia
6.5
Germany
7.8
China
405.0
Australia
3.8
Japan
Wind resource
[TWh/TWh] 92,93
Solar resource
[kWh/kWP]94,95

This hypothesis examines the Japanese governments policy support for renewable power generation. The
hypothesis is that countries with robust regimes for supporting renewables will see greater renewables
deployment. This would result in coal-fired power stations being more likely to face lower wholesale
electricity prices and other forms of power sector disruption.
Ibid.
Xi Lu, Michael B McElroy, and Juha Kiviluoma, 'Global Potential for Wind-Generated Electricity', Proceedings of the National
Academy of Sciences 106, no. 27 (2009): 1093338.
93 BP, Statistical Review of World Energy 2015, 2015.
94 SolarGIS, SolarGIS: Free Solar Radiation Maps Download Page, 2016, http://solargis.info/doc/free-solar-radiation-maps-GHI.
95 David Frankel, Kenneth Ostrowski, and Dickon Pinner, The Disruptive Potential of Solar Power, McKinsey Quarterly 4 (2014).
91
92
58
Climate and Energy Policy in Japan

Prior to the Fukushima disaster, nuclear power was the Japanese governments preferred technology for
the provision of low-carbon energy. In the Ministry of Economy, Trade, and Industrys (METIs) 2008 Cool
Earth-Innovative Technology Plan, the Japan Atomic Energy Agency (JAEA) anticipated a 54% reduction
in CO2 emissions (from 2000 levels) by 2050, increasing to a 90% reduction by 2100. 60% of primary energy
needs would be supplied by nuclear energy in 2100 (compared with 10% in 2008), 10% from renewables
(from 5%) and 30% fossil fuels (from 85%). The adoption of nuclear power would contribute a 51%
reduction in emissions: 38% from power generation and 13% from hydrogen production and process heat.
In post-Fukushima Japan, coal-fired power has displaced shut-down nuclear plants at the expense of
carbon emissions. Japans CO2 emissions were about 1.31 billion tons in 2013, and about 270 million tons
were derived from coal-fired power generation.96 Although Japans coal-fired power generation has the
worlds highest level of efficiency, it still emits about twice the amount of CO2 as compared to gas-fired
power generation. During the UN climate talks in Warsaw in 2013, Japan faced international criticism for
abandoning its 2020 emission reduction target plans by slashing it from 25% to 3.8% on 1990 figures.97 In
2012, the Japanese government announced that its new energy policy, where nuclear made up 15% of
Japanese electricity generation and eventually planned to be phased out, would lead to 9% decrease in its
emissions.98 In fact, abandoning climate targets came at a time when the Japanese government did not
want any carbon constraint on its coal-driven economic recovery. .99
In the lead up to the Paris talks, Japan committed to reducing greenhouse gas emissions by 26% below
2013 figures by 2030 in its Intended National Determined Contributions (INDC).100 As put by Climate
Action Tracker, Japans INDC is inadequate for a low carbon transition given the potential of coal to grow
up by 2030.101 Despite a 2015 agreement between G7 members for decarbonisation of the global economy,
Japan is the only G7 member projecting to increase its coal generating capacity. Japans INDC includes the
addition of 54 coal-fired generating stations.102
The Japanese Government proposes to get accounting credits from land use, land use change and forestry
to reduce its target to 23.3% below 2030 levels of greenhouse gases from fossil fuel industry.103 Japan also
has two regional cap-and-trade systems in Tokyo and Saitama104 and a carbon tax on liquid fuels, LPG,
gas, and coal.105
Renewables Support Policy
The main renewables support scheme in Japan is the feed-in-tariff (FIT), first introduced in 2012. The FIT
scheme provided 42/kWh ($0.34/kWh) for 20 years when first introduced. Table 29 illustrates the range
of tariffs available for renewables. The government introduced the feed-in tariff system to promote
development of renewable energy power generation. Under the system, power utilities are required to
purchase electricity from renewable energy sources for a certain amount of time at a fixed price. The price
has been set high to encourage more businesses and households to install renewable energy power
Coaltrans Japan , Japans Coal Policy, 2015.

97 John Vidal and Terry Macalister, Japan under Fire for Scaling Back Plans to Cut Greenhouse Gases, The Guardian, 2013,
http://www.theguardian.com/global-development/2013/nov/15/japan-scaling-back-cut-greenhouse-gases.
98 Carbon Brief, Japans Nuclear Rollback Doesnt Fully Explain Why Its Relaxing Climate Targets, Carbon Brief, 2013,
http://www.carbonbrief.org/japans-nuclear-rollback-doesnt-fully-explain-why-its-relaxing-climate-targets.
99 Ibid.
100 Government of Japan, Submission of Japans Intended Nationally Determined Contribution, 2015.
101 Climate Action Tracker, Japan - Climate Action Tracker, Climate Action Tracker, 2015,
http://climateactiontracker.org/countries/japan.html.
102 Carbon Brief, Japans Nuclear Rollback Doesnt Fully Explain Why Its Relaxing Climate Targets.
103 Climate Action Tracker, Japan - Climate Action Tracker.
104 World bank Group, Tokyos Emissions Trading System, Directions in Urban Development, 2013.
105 IEA, World Energy Outlook 2015, 2015.
96
59
generation systems. For businesses, the tariff will remain in effect for 20 years. For households, the
duration is only ten years.106
Table 29: The range of Japans feed-in-tariffs107
In the past two-and-a-half years the FIT, combined with high retail prices, caused applications for
renewables to skyrocket and led to a rapid expansion of solar PV capacity. Installation applications have
exceeded 1.2 million, where solar has been the main beneficiary of the FIT reboot.
Overwhelmed by applications from solar power operators for grid connection and concerned about
integrating the pipeline of approved projects into the grid, five of the EPCOs stopped accepting
applications in 2014. Kyushu Electric Power, which supplies electricity to nine million households in
Japans sunny south, was the first to do so in September of 2014 after 72,000 solar-power producers rushed
to beat the deadline for a cut in the guaranteed tariff to 32 a kWh. It is accepting no new applications to
the grid until it has settled concerns about the reliability of supply from the new producers.108 Dubbed the
Kyushu electric shock, other power companies across Japan followed its lead.109 The process was only
restarted after METI agreed a rule change which allows EPCOs to curtail variable renewables at times of
peak supply or low demand.110
Nikkei, Japans Solar Power Feed-in Tariff to Fall 20% or More in 3 Years, Nikkei, 2016, http://asia.nikkei.com/PoliticsEconomy/Policy-Politics/Japan-s-solar-power-feed-in-tariff-to-fall-20-or-more-in-3-years.
107 IEA, Feed-in Tariff for Electricity Generated from Renewable Energy, International Energy Agency, 2016,
http://www.iea.org/policiesandmeasures/pams/japan/name-30660-en.php.
108 David McNeill, Japans Feed-in Tariff Program Becomes a Solar Shambles, Japan Today, 2015,
http://www.japantoday.com/category/opinions/view/japans-feed-in-tariff-program-becomes-a-solar-shambles.
109 James Simms, Outlook Cloudy for Japans Renewable Energy Drive, The Financial Times, 2015,
http://www.ft.com/cms/s/0/dae47c8c-d927-11e4-b907-00144feab7de.html#axzz459PztpkK.
110 Rachel Parkes, Japan: Land of the Rising Sun?, Renewable Energy Focus, 2015,
http://www.renewableenergyfocus.com/view/43409/japan-land-of-the-rising-sun/.
106
60
Japans utilities, backed by influential business and industry groups, have campaigned aggressively
against the use of renewables. Combined with public opposition to the recommissioning of nuclear plants,
the failure to deploy either nuclear or renewable power capacity could result in a large share of fossil fuel
power, more even than current government forecasts. Japans electricity companies have proposed
voluntary reductions in carbon intensity in the period to 2030, but these have been criticised as insufficient
by the Ministry of the Environment.111
The generous FITs which led to the solar boom are now under revision. The Ministry of Economy, Trade
and Industry aims to reduce the FITs for both systems by 2-3 per year until fiscal 2019. This will lower the
rate for the larger systems to around 17-18 per KWh by that year, bringing it in line with typical utility
rates for factories and other volume users. The rate for the smaller setups will fall to around 24 per KWh,
which is almost identical to the current power rate for the typical household. The ministry aims to keep the
rates at high levels for geothermal, biomass and small-scale hydroelectric power, since they are still poorly
utilised. But rates for wind power may also be lowered because the current rates are roughly double those
in Germany and France.112
In order for this hypothesis to produce comparable, testable results, a consistent measure must be used to
evaluate renewables policy support. EYs Renewable Energy Attractiveness Indicator (RECAI) provides a
country-specific measure of renewables support. This measure is also useful in that it allows peer
comparison of what constitutes strong policy support. Where EYs aggregate ranking is above 60, the
countries are considered high risk. Where over 50 they are considered medium risk. Despite the
decrease in FIT rates and the obstruction of the utility companies, the Japanese government remains a
strong supporter of renewables relative to peer countries and EYs recent RECAI update113 call Japan a
mature and steady market for renewables, the third-largest in the world.
Table 30: Renewables policy support114

China
Germany
Indonesia
India
Poland
South
Africa
United
Kingdom
United
States
64.5
Australia
Japan
EY: RECAI
RISK
56.0
75.6
66.3
41.8
62.2
45.8
53.2
58.5
73.3
NRH-4: Growth of Decentralised Renewables and the Utility Death Spiral

NRH-4 and NRH-5 examine the growth of renewables in Japans power supply. The hypotheses are that
the growth of decentralised renewables might affect coal-fired power differently from centralised
renewables by leading to a utility death spiral and the rapid, unforeseen erosion of a coal-fired utilitys
business model. In Japan, decentralised renewables are almost exclusively small-scale solar PV
installations. Until recently, grid-scale generation has not included solar PV installations. NRH-4 and
NRH-5 reflect this technological separation; however the growing role of solar PV is identified in NRH-5.
The utility death spiral is the disruption to conventional power utility companies as a result of a virtuous
cycle of distributed energy resources (e.g. rooftop solar PV) eroding the distribution network business
model of the central utility, which in turn raises retail electricity prices making distributed energy
EDF, The Worlds Carbon Markets: Japan, 2013.

Nikkei, Japans Solar Power Feed-in Tariff to Fall 20% or More in 3 Years.
113 EY, RECAI: Renewable Energy Country Attractiveness Index, 2016, http://www.ey.com/Publication/vwLUAssets/EY-RECAI46-Feb-2016/$FILE/EY-RECAI-46-Feb-2016.pdf.
114 EY, RECAI: Renewable Energy Country Attractiveness Index, 2015,
http://www.ey.com/Publication/vwLUAssets/Renewable_Energy_Country_Attractiveness_Index_43/$FILE/RECAI 43_March
2015.pdf.
111
112
61
resources even more competitive.115 Figure 26 shows the levelised cost of electricity (LCOE) for residential
PV and the average residential electricity tariff. The intersection of these two prices where self-generated
PV electricity becomes as cheap as grid power, i.e. grid parity is one of the tipping points of the utility
death spiral. Figure 26 suggests Japan reached this point in 2014.
Figure 26: The levelised cost of electricity for residential PV and retail electricity prices
Source: Renewable Energy Institute (Apr 2016) Recent renewable energy situation in Japan
Solar PV
Solar power has been one of Japans most successful renewables. There has been rapid growth in
cumulative and new installations of solar PV capacity in Japan (see
Figure 27). In 2002, solar installation totalled 19 MW, total installation passed 2GW by 2008, and had
grown to over 23.4GW in 2014. Provisional 2015 data116 suggests an additional 9.76 GW of solar capacity
has been installed, increasing cumulative capacity to 32.7 GW.117 96.6% of this capacity is distributed, see
Figure 27. Japans solar growth finally slowed in Q2 2015, however it will remain one of the largest PV
markets in the world118 and Japan still has more ambitious solar targets for the future. By 2030, the country
wants to more than double its solar capacity to 53.3 GW and generate 22% to 24% of its power from
renewable energy sources.119 Solar power is to contribute 7% under this goal.
Figure 27: Cumulative and new solar capacity (2002-14, provisional 2015)120
Matthew Gray, Coal: Caught in the EU Utility Death Spiral, Carbon Tracker. Http://www. Carbontracker. Org/wpcontent/uploads/2015/06/CTI-EU-Utilities-Report-v6-080615. Pdf, 2015; Elisabeth Graffy and Steven Kihm, Does Disruptive Competition
Mean a Death Spiral for Electric Utilities, Energy LJ 35 (2014): 1; Kenneth W Costello and Ross C Hemphill, Electric Utilities Death
Spiral: Hyperbole or Reality?, The Electricity Journal 27, no. 10 (December 2014): 726,
doi:http://dx.doi.org/10.1016/j.tej.2014.09.011.
116 Japan Renewable Energy Foundation Database derived from METI data.
117 Ibid.
118 Chisaki Watanabe, Solar Shipments in Japan Drop First Time Since 2012 Incentives, Bloomberg Technology, 2015,
http://www.bloomberg.com/news/articles/2015-08-31/solar-shipments-in-japan-drop-first-time-since-2012-incentives.
119 Parkes, Japan: Land of the Rising Sun?
120 IEA (2015). Survey report of selected IEA countries between 1992 and 2014: Photovoltaic power systems programme.
115
62
35,000
Capacity (MW)
30,000
25,000
20,000
15,000
10,000
5,000
0
Cumulative Capacity
New Capacity
The rapid expansion of solar PV capacity is due to the post-Fukushima feed-in tariffs and the rapidly
falling costs of PV panels. The combination of European demand and Chinese investment has slashed the
cost of solar panels by about two-thirds since 2006. Much of the price decline also occurred postFukushima, where the cost of solar PV modules has fallen by approximately 50% (see Figure 28).
Figure 28: The cost of solar PV

1.60
1.40
1.20
1.00
0.80
PV module cost
(USD/Watt)
0.60
0.40
0.20
0.00
2010
2011
2012
2013
2014
2015
Source: IRENA (2012) Renewable energy technologies: cost analysis series, vol 4/5.
Table 31: Breakdown of solar PV installation in Japan (MW)

2002
2003
2004
2005
Stand-alone
(Domestic)
0.96
(0.15%)
1.10
(0.13%)
1.14
(0.10%)
1.15
Stand-alone
(Non-domestic)
71.69
(11.26%)
77.79
(9.05%)
83.11
(7.34%)
85.91
Grid-connected
(distributed)
561.30
(88.14%)
777.83
(90.49%)
1,044.85
(92.30%)
1,331.95
Grid-connected
(centralized)
2.90
(0.46%)
2.90
(0.34%)
2.90
(0.26%)
2.90
Total
636.84
859.62
1,131.99
1,421.91
63
2006
2007
2008
2009
2010
2011
2012
2013
2014
(0.08%)
1.21
(0.07%)
1.88
(0.10%)
1.92
(0.09%)
2.64
(0.10%)
3.37
(0.09%)
5.55
(0.11%)
8.82
(0.13%)
8.82
(0.06%)
8.82
(0.04%)
(6.04%)
87.38
(5.04%)
88.27
(4.60%)
88.89
(4.15%)
92.00
(3.50%)
95.42
(2.64%)
97.73
(1.99%)
100.53
(1.52%)
114.62
(0.84%)
116.00
(0.50%)
(93.67%)
1,617.01
(93.22%)
1,823.24
(95.02%)
2,044.08
(95.33%)
2,521.79
(95.99%)
3,496.02
(96.62%)
4,741.46
(96.49%)
6,522.32*
(98.35%)
13,475.73*
(99.09%)
23,214.26*
(99.47%)
(0.20%)
29.00
(1.67%)
5.50
(0.29%)
9.30
(0.43%)
10.74
(0.41%)
23.33
(0.64%)
69.21
(1.41%)
1,734.60
1,918.89
2,144.19
2,627.17
3,618.14
4,913.95
6,631.67
13,599.17
23,339.08
Notes: * denotes that there is no longer a distinction between distributed and centralised generation.
Source: IEA PVPS (2014)
By 2020, renewable energy would account for 20% of Japans power mix, up from 10% in 2010, almost fully
accounting for the 27% contribution nuclear made pre-Fukushima. Moreover, the countrys feed-in tariff
regime, at that time limited to solar PV, would have to be overhauled, boosted and expanded to include all
technologies.
Hypothesis
This hypothesis assesses whether the growth of decentralised power exposes Japans utility companies to
conditions of the utility death spiral. The rapid penetration of small-scale solar PV into Japans electricity
market indicates that Japans utilities are significantly exposed to the growth of distributed renewables
and the utility death spiral. Japan is compared to the other countries in the comparison group from
Stranded Assets and Thermal Coal: An analysis of environment-related risks in Table 32.
64
Table 32: Countries showing evidence of the utility death spiral

Country
Japan
Australia
China
Germany
Indonesia
India
Poland
South Africa
United Kingdom
United States
Reference
Strong evidence of the utility death
spiral121
Strong evidence of the utility death spiral122
No evidence of the utility death spiral
Low evidence of the utility death spiral124
RISK

The hypothesis is that rapid renewables deployment would result in coal-fired power stations being more
likely to face lower wholesale electricity prices and other forms of power sector disruption. Since 2008, half
the worlds added electric generating capacity has been renewable.126 The Japanese Government wants to
increase renewables from 10 per cent of its energy mix to 24 per cent by 2030, reducing its reliance on gas,
coal and nuclear. The following sections outline the current and future state of grid-scale renewables in
Japan, separated by technology. Distributed renewables, exclusively small-scale solar PV, were considered
in NHR-4.
Solar PV
Recent years have seen the growth of utility-scale solar PV installations as well as the massive residential
and distributed installations discussed in NRH-4. Utility-scale solar generating capacity taken from the
dataset of the Oxford Smith School is shown in
Figure 29. METI will begin auctioning utility-scale solar PV contracts in 2017, which reflects a shift from
distributed solar PV systems to distributed PV-storage systems and centralised utility-scale solar PV
generation.127
[MW]
Figure 29 Utility-scale solar PV capacity

2000
0
128 36
164 51
215 285
500 587
1,087
714
2010
2011
2012
2013
2014
Total
1,801
2015
Additions
Rising rates and falling costs leading to grid parity for solar PV, see Keiji Kimura, Grid Parity Solar PV Has Caught Up with
Japans Grid Electricity, Renewable Energy Institute, 2015, http://www.renewable-ei.org/en/column/column_20150730_02.php.
122 AER, State of the Energy Market 2014, 2014.
123 Stephen Lacey, This Is What the Utility Death Spiral Looks Like, Greentech Media, March 4 (2014).
124 Costello, M. & Jamison, S. Is the utility death spiral inevitable for energy companies?, UtilityWeek, 2014.
125 Moodys Investors Service, Moodys: Warnings of a Utility Death Spiral from Distributed Generation Premature, Moodys, 2014,
https://www.moodys.com/research/Moodys-Warnings-of-a-utility-death-spiral-from-distributed-generation--PR_312101.
126 Amory B. Lovins, How Opposite Energy Policies Turned The Fukushima Disaster Into A Loss For Japan And A Win For
Germany, Forbes, 2014, http://www.forbes.com/sites/amorylovins/2014/06/28/how-opposite-energy-policies-turned-thefukushima-disaster-into-a-loss-for-japan-and-a-win-for-germany.
127 Jason Deign, Japan Market Shift Looks Good for Larger Projects, Solar Plaza, 2016,
http://www.solarplaza.com/channels/markets/11473/japan-market-shift-looks-good-larger-projects/.
121
65
Wind
There is increased interest in wind in the energy system. Since 2005, Japans wind capacity as tripled, from
1.05GW to 3.04GW (see Figure 30). The growth in new capacity was relatively stable until Fukushima,
where there was a decline in installed wind power between 2012 and 2014. The decline in wind installation
is likely due to the rapid uptake of solar installations instead.
Figure 30: Cumulative and Installed Capacity in Japan (2005-15)128
Wind power has considerable potential in Japan. Over a whole power system, wind speeds tend to
moderate fairly slowly; it takes hours, or in the very worst case many minutes, for wind power production
to drop from high to low levels. To a large extent, wind speeds are predictable by detailed weather
forecasts. This reduces the variability of electricity produced by wind farms and allows wind generators to
contribute to base-load capacity. Further, the predictable wind speeds allow standing reserve to be used to
cover production during periods of low wind generation, which contributes to Japans overall security of
energy supply. The standing generation fleet can be ranked by different response times to cover varying
shortfalls; from plants which can ramp-up in a few minutes, such as diesel generators, to longer periods of
scarcity, such as open-cycle and combined-cycle gas turbines.
Two major obstacles prevent the rapid uptake of wind energy. The first obstacle is regulatory, where
environmental rules and onerous approval processes slows progress. Offshore wind has emerged as a
potential avenue for wind generation in Japan. Onshore wind potential in Japan is estimated at 280GW,
whereas its offshore wind potential is 1,570GW.129 Japans Wind Power Association has set national targets
of 37GW of offshore wind by 2050.130 Near-shore turbines (within 10km) will represent the majority of
offshore wind, but Japan faces the physical challenge that its waters are relatively deep close to its shores.
In the long term, Japan will need to address how and where to install wind farms in deep-water at low
cost. Floating turbines have been suggested as a potential solution. However, floating turbines are very
much in their infancy; only 7MWs of turbines are complete, with another 10MW planned.131 Floating
turbines are also relatively expensive to install compared to other wind technology and induce many
technological challenges, such as ensuring enough cable flexibility for a mobile platform. Carbon Trust
estimates there is a reasonable chance that Japan can achieve its 2050 target of 37GW using 19GW of fixed
turbines and 18GW of floating turbines.132
128 Source: Japan Wind Power Association, Wind Power Installed Capacity (by Year), 2015,
http://jwpa.jp/pdf/JapanWindPowerInstallation2015.pdf.
129 Al-Karim Covindji, Rhodri James, and Adriana Cavallo, Appraisal of the Offshore Wind Industry in Japan (London, 2014),
https://www.carbontrust.com/media/566323/ctc834-detailed-appraisal-of-the-offshore-wind-industry-in-japan.pdf.
130 Ibid.
131 Robin Harding, Renewable Energy Poses Challenge for Tokyo, The Financial Times, 2015,
http://www.ft.com/cms/s/0/86bbc5a4-290c-11e5-8613-e7aedbb7bdb7.html?siteedition=uk#axzz47DpFjeKy.
132 Covindji, James, and Cavallo, Appraisal of the Offshore Wind Industry in Japan.
66
The second is outright rejection by utility monopolists. As stated, the Japanese energy system contains
regional monopolies, where vertically integrated utilities own both generating assets and transmission
lines. Typically only about 1% of electricity is traded, thus the system has little competition. These
vertically integrated utilities can bar competitors from their regional grids.
Given the historical installations, wind power is expected to remain relatively constant in the near future
and, at present, there are few indications that there will be changes in support to encourage more
installations, which will also depend on technological advances in deep-water wind generation.
Hydroelectric
Japan has an ample supply of water resources, but hydropower generation has remained between 1921GW since 1990. 133 The major obstacles to the increased use of hydropower are both physical and
regulatory. For the physical challenges, most of the countrys 2,700 irrigation and flood control dams lack
hydro-turbines and do not generate any electricity. Regulatory challenges for Japan include obtaining
rights to use water - for power, irrigation or flood control - are fixed and difficult to change.134
At present, about 9% of Japans generation is hydroelectric and there are no clear indications that capacity
or generation will change in the near future. Simply adding generators to the existing dams could cover an
additional 4% of Japans electricity needs with clean, reliable, low-cost power. However, new hydro
proposals always lead to disputes regarding who profits from the dam.
Geothermal
Geothermal power is a renewable, almost carbon-free, and sustainable source of energy. The volatile
tectonics of Japan mean geothermal power is a viable option, with geothermal potential estimated to be
20GW.135
Geothermal capacity in Japan stagnated almost unchanged in recent years. In 2000 and 2015, installed
capacities were respectively 546MW 136 to 519MW 137 . Overall, geothermal produces a tiny fraction of
Japans electricity and analysts are not optimistic that it will ever provide much more as much of the
potential geothermal power is located in national parks. What is more any hint of using them produces a
fierce backlash from hot spring resorts who think power stations will steal their hot water.
After a 20-year lull and in the wake of the Fukushima incident, government has restarted an incentive
scheme for development and mitigation of constraints in national parks.138 The purpose is to encourage
and incentivise geothermal resource exploration and to build small binary systems. Approximately 40 new
geothermal plants are under construction. Idemitsu Kosan is adding 5MW of geothermal capacity at an
existing plant in Kyushu, while a consortium headed by J-Power is building a new 42MW geothermal
facility in the northern province of Akita. 139 The success of the resource exploration and realised
geothermal capacity will determine the extent to which geothermal can outbid conventional generators.
Risk Hypothesis
We use the growth in installed renewables capacity (GW) and the growth in the proportion of renewable
power generation to estimate risk exposure to year-on-year renewables growth. Where the CAGR in
renewable power generation as a portion of total generation exceeds 10%, and where CAGR in renewable
power capacity exceeds 10%, the country is considered high risk. Where only one exceeds 10%, the
country is medium risk. Table 33 and Table 34 shows the risk assessment for Japans utilities and the risk
J-Power, Hydro and Geothermal Development in Japan, IEA, 2013,
https://www.iea.org/media/workshops/2013/scalingupfinancingtoexpandrenewables/7JPOWER.pdf.
134 Harding, Renewable Energy Poses Challenge for Tokyo.
135 Ruggero Bertani, Geothermal Power Generation in the World 20102014 Update Report, Geothermics 60 (2016): 3143.
136 Ruggero Bertani, World Geothermal Generation in 2007, GHC Bulletin 7 (2007): 19.
137 Bertani, Geothermal Power Generation in the World 20102014 Update Report.
138 Ibid.
139 Harding, Renewable Energy Poses Challenge for Tokyo.
133
67
assessments of comparator countries from Stranded Assets and Thermal Coal: An analysis of environmentrelated risks.
This hypothesis does not include the growth in distributed renewables, and Japan has long had substantial
hydropower capacity, so Japan shows little growth in renewables capacity in this hypothesis. Because this
methodology is different from Stranded Assets and Thermal Coal, the comparator countries are shown
separately.
Table 33: Year-on-Year growth of utility-scale renewables capacity and generation

Japan
2%
1.3%

2010 - 2015 CAGR

Utility-Scale Renewables Capacity
Utility-Scale Renewables Generation
RISK
Table 34: Year-on-Year growth of all renewables capacity and generation

Indonesia
India
Poland
14%
12%

2%
-8%

7%
1%

15%
16%

United
States
Germany
13%
6%

United
Kingdom
China
11%
8%

South
Africa
Australia
2010 - 2014 CAGR

All Renewables Capacity
All Renewables Generation
RISK
14%
25%

23%
30%

8%
7%

NRH-6: Growth of Gas-Fired Generation

The hypothesis is that the growth of gas-fired generation, particularly in markets where electricity demand
growth is lower or negative, could harm the economics of coal-fired generation and result in coal-to-gas
switching.
While the growth of renewables and the restart of nuclear power stations are expected to displace fossil
fuel-fired power, gas-fired generating stations are unlikely to be the first affected. Oil-fired and coal-fired
power will be the first to be displaced by renewables and gas, see NRH-1. The IEA WEO is chosen as a
central, conservative, and comparable scenario for use in this hypothesis. If either historic or projected
CAGR of gas-fired power generation is positive, then the outlook for coal-fired power in that country is
considered medium risk. If both are positive, then the outlook is considered high risk Table 35 shows
the outlook for Japan and comparator countries.
Table 35: Natural gas-fired power generation outlook140

Germany
Indonesia
India
Poland
10%
17%

-13%
0%

2%
2%

-18%
6%

-13%
0%

N/A

United
States
China
11%
0%

United
Kingdom
Australia
10%
-4%

South
Africa
Japan
CAGR
2010-13 Historic
2013-20 NPS
RISK
-13%
0%

4%
2%


The hypothesis is that under-utilised coal-fired power stations will be financially vulnerable and more
prone to stranding. The entrance of new generating options may reduce the utilisation rates of coal-fired
generating assets. The utilisation rate of a power generating asset is the ratio of its actual annual output to
140
Harding, Renewable Energy Poses Challenge for Tokyo.
68
its maximum potential annual output according to its nameplate capacity. Competition on marginal costs,
or must-run regulation for renewables, can displace coal-fired generation, reducing utilisation rates.
Generating stations with falling utilisation rates are less able to cover fixed costs with operating profit.
Utilisation rates for thermal power have been identified for Japan in Figure 31. Post-Fukushima, a power
supply crisis caused utilisation rates to jump above 60%. However the Institute for Energy Economics and
Financial Analysis (IEEFA) finds141 that although historic utilisation rates have been high since the crisis,
falling electricity demand and a rapid build-out of coal-fired capacity will soon lead to an oversupply of
coal-fired power.
Figure 31: Japan thermal power utilisation

rates
Utilisation Rate
70%
65%
60%
55%
50%
45%
40%
2010
2012
2014
Following the methodology of Stranded Assets and Thermal Coal: An analysis of environment-related risks,
where historic utilisation rates have been decreasing, we find this to be at risk. We combine this with
research on future utilisation rates. If they are expected to decrease, this is also at risk. If both are at risk
then we assign a high risk opinion. If only one is, then we assign a medium risk opinion.
Japans historic utilisation rate has been increasing, indicating low risk exposure. Based on the analysis by
the IEEFA however, we find the future utilisation rate of Japans coal-fired power stations to be at risk
that is, that utilisation rates are likely to fall in the future. Combined, these two perspectives give a
medium risk evaluation. Table 36 shows the risk hypotheses of Japan and the comparator countries from
Stranded Assets and Thermal Coal.
Table 36: Utilisation rate risk hypothesis

United
States
United
Kingdom
South
Africa
Poland
India
Indonesia
Germany
China
Australia
Japan
Utilisation rate - Historic
Utilisation rate - Outlook
RISK

The hypothesis is that coal-fired power stations in countries that have strict water use requirements and an
awareness of water issues are more likely to be affected by water scarcity through direct or indirect water
pricing. Coal-fired power generation has a substantial water footprint, described in hypothesis LRH-4:
Water Stress. This water footprint exposes coal-fired power utilities to regulatory risks, as policymakers
IEEFA, IEEFA: Japan Briefing: Japans Energy Transformation, 2016, http://ieefa.org/wp-content/uploads/2016/03/JapanEnergy-Brief.pdf.
141
69
may take action to restrict or price a utilitys access to water. Public opinion on the water footprint of
power generation may also put pressure on policymakers to restrict water use, exposing utilities to a
reputational risk as well.
The World Resources Institute (WRI) maintains the Aqueduct Water Risk Indicator maps. The WRIs
Regulatory & Reputational Risk indicator aggregates indicators from the World Health Organization
(WHO) concerning water access, the International Union for Conservation of Nature (IUCN) for
threatened amphibians, and Google keyword searches for water supply media coverage. 142 With few
exceptions, this indicator is provided at the national level. WRI provides an indicator in five groupings,
with low risk in group 1 and very high risk in group 5. In this report, WRI groups 1 and 2 will be
considered low risk, group 3 will be considered medium risk and groups 4 and 5 high risk.
Japan has very low exposure to regulatory water stress despite moderate levels of actual underlying water
stress (see LRH-4). The Water Pollution Control Law protects all of Japans freshwater resources,
regulating industrial effluents either by concentration or volume. Japans well-managed water system
keeps water out of the news and thus unforeseen regulation of water is not a major cause for concern for
Japans utilities. Table 37 shows regulatory water stress exposure of Japan and its comparator countries.
Table 37: Regulatory water stress143
Japan
Australia
China
Germany
Indonesia
India
Poland
South Africa
United Kingdom
United States
Risk grouping
RISK
NRH-9: CCS Regulatory Environment

The hypothesis is that CCS could be a way for coal-fired power stations to keep running under stricter
carbon constraints, but CCS will not happen without a supportive legal framework.
CCS in Japan faces substantial uncertainty with regards to current and future liabilities for the unique
aspects of a CCS project. These uncertainties can present barriers to the development of CCS projects,
which in turn present a risk to coal-fired utilities which may not have CCS as an option for future GHG
mitigation. Box 1 reproduces our opinion on CCS from Stranded Assets and Thermal Coal: an analysis of
environment-related risks. See Stranded Assets and Thermal Coal for more details and references.
In 2012, METI commissioned a large-scale CCS demonstration project in Tomakomai (south-west
Hakkaido) with the aim of verifying the total CCS system and storage capacity. Japan CCS Co., Ltd (JCSS),
established by 35 Japanese companies promoting CCS, is responsible for implementation and
demonstration of viability of the Tomakomai CCS Project that is expected store 100,000 tonnes of CO2 per
year in saline aquifers under offshore seabed.144 On March 18, 2016, the Tomakomai CCS Project, being the
first integrated CCS project in Japan, began operating and expected to be operational until 2020.145 The
planned CO2 injection will take place for the period between 2016-2018, and there will be two more years
of environmental monitoring after the injection is completed.146
Gassert et al., Aqueduct Global Maps 2.1: Constructing Decision-Relevant Global Water Risk Indicators.
IEA, World Energy Outlook.
144 Tanaka, Y., Abe, M., Sawada, U., Tanase, D., Ito, T., Kasukawa, T. (2014). Tomakomai CCS Demonstration Project in Japan, 2014
Update. Energy Procedia 63: 61116119.
145 Global CCS Institute (2016). Tomakomai CCS Project showcases Japanese technology leadership. March 18, Melbourne, Australia.
146 Global CCS Institute (2016). Tomakomai CCS Demonstration Project. March 17.
142
143
70
Box 1: Opinion on CCS from Stranded Assets and Thermal Coal

Several additional factors may prevent the scale adoption of CCS as a mitigation technology. First,
CCS is not currently developing at the pace necessary to meet the 2oC scenarios of the IEA and the
IPCC. Second, other mitigation substitutes are becoming cost-competitive much more quickly than
CCS. Third, a technology pathway which necessarily includes enhanced oil recovery is subject to
additional economic and reputational risks.
By 2040, in the IEAs 450S, CCS is deployed to store 4000 MtCO2 per year (Mtpa). The 15 currently
operating projects are anticipated to store 28.4 Mtpa. The 30 additional projects planned to operate
before 2025 will bring the total storage to 80 Mtpa, an annual growth rate of 11%. To reach 4000
Mtpa by 2040 will require a 48% growth rate from the 2025 planned fleet, or 22% growth from the
operating fleet this year. This growth rate is unrealistic given the current state of deployment and
technical progress.
The IEA foresees substantial deployment of CCS under the 450S only if policy supports CCS to
become more affordable. As a mitigation technology for power generation, CCS will need to
compete with falling prices of wind and solar power, and widespread efforts to improve grid
flexibility. McKinsey estimates that by 2030, the abatement cost of solar and high-penetration wind
power will be 18.0 and 21.0 per tCO2 respectively, while CCS coal retrofits, new builds, and gas
new builds will be 41.3, 42.9, and 66.6 per tCO2 respectively. Bloomberg New Energy Finance
(BNEF) estimates that the global average LCOE for onshore wind power is US$83/MWh, $122 for
crystalline solar PV, and $174 for offshore wind , while the Global CCS Institute estimates the US
levelised cost of electricity (LCOE) for coal with CCS is US$115/MWh to $160, and $82 to $93 for
CCS-equipped gas-fired power . For markets and policymakers seeking abatement options in the
context of finite public funds, CCS may remain a low priority for support.
The IEA suggests that the technology development pathway for power generation with CCS begins
with collocating the power station with EOR projects to enable commercial viability. The IEA
admits that the public are already sceptical of end-of-pipe solutions apparently promoted by the
same industries they hold responsible for the problem . When co-located with EOR the stored
carbon is used to extract additional hydrocarbons. Critics would argue any purported climate
change merit of these projects is greenwashing a reputational risk for the companies involved.
Moreover, dependence on EOR also exposes power stations with CCS to oil price commodity risks.
If the price of oil falls, then the profitability of EOR falls, and the profitability of the power station
is reduced.
In conclusion, CCS is unlikely to be significant in mitigating power sector emissions. Deployment
of CCS has already been too slow to match IEA and IPCC scenarios. CCS compares unfavourably
with other power sector mitigation options, especially considering that CCS also reduces plant
efficiency, exacerbating existing merit-order challenges for conventional generators. CCS should
remain an attractive option for industrial and process emitters that have few other mitigation
options, and may be significant as a long-term option for delivering negative emissions with
BECCS.
In 2014, Japanese Ministry of Environment (MOE) called for an additional Yen 1.25 billion plan to
accelerate the CCS implementation in Japan with the aim of reducing GHG emissions by 80% by 2050.147
The Ministry of Economy, Trade and Industry (METI) started considering new CCS projects by doing
geological surveys for large-scale implementation, including storage in seabed in offshore areas.148 Since
147
148
Global CCS Institute (2014). Japans FY2014 draft budget and CCS-related actions explained. February 26, Chiyoda.
Global CCS Institute (2014). Op. Cit. February 26.
71
FY2014, Japanese government has been supporting new initiatives for transportation of CO2 from power
stations to storage sites, which could accelerate the CCS implementation at low cost in Japan. 149 The
Shuttle Ship Initiative, a concept developed by the Global CCS Institute in 2011 and now engaged by
Chiyoda Corporation, aims to transport CO2 by shuttle ship for storage in seabed offshore.150 Overall,
prominent Japanese companies supported by the government, have been active participants in these
demonstration projects which could help commercialization of CCS technologies in Japan.
The development of a robust hypothesis of risk exposure requires a repeatable, testable measure. Certain
countries have been proactive in developing policy and law specifically for CCS. The Global CCS Institute
periodically evaluates their progress and publishes an indexed indicator. The institute groups countries
into three performance bands, which are used here as an indicator for CCS liability risk. Band A, the most
CCS-ready, is considered low risk, Band B medium risk, and Band C high risk. Japan, in Band B, is
acknowledged for its progress in preliminary development of marine permitting models.
Table 38: CCS legal environment indicator151
China
Germany
Indonesia
India
Poland
South Africa
United
Kingdom
United States
Australia
Japan
Band
RISK

The hypothesis is that nuclear restarts in Japan would disrupt the economics of new coal-fired power
stations: many of which are ostensibly being built to replace lost nuclear capacity, and hurt existing coal
plants now accustomed to higher levels of demand. This section examines the possibility of nuclear
restarts from a political, social and technical standpoint.
The development of nuclear technology has been a strategic national priority in Japan since WWII, and its
first commercial nuclear power reactor began operating in 1966. Nuclear power came under intense
scrutiny following the Fukushima disaster, and in consequence all of Japans nuclear plants were shut
down by May 2012.152 Prior to the accident, the country's 54 then existing reactors provided some 30% of
its electricity and this share was expected to increase to at least 40% by 2017, and 50% by 2030.
Figure 32 shows the share of nuclear in both power capacity and generation by utility company prior to
the earthquake.
Figure 32: Share of nuclear power plant capacity and its generation by region in 2010 [%]153
Kawasaki, T., Harada, M. (2015). Op. Cit.

Global CCS Institute (2014). Japans Energy Market Post Fukushima and its Companies Involved in CCS. July 04.
151 Global CCS Institute CCS Legal and Regulatory Indicator, 2015.
152 David Batty, Japan Shuts down Last Working Nuclear Reactor, The Guardian, 2012,
http://www.theguardian.com/world/2012/may/05/japan-shuts-down-last-nuclear-reactor.
153 Reproduced from Nobuhiro Hosoe, Nuclear Power Plant Shutdown and Alternative Power Plant Installation scenariosA NineRegion Spatial Equilibrium Analysis of the Electric Power Market in Japan, Energy Policy 86 (2015): 41632.
149
150
72
Share in Total Power Generation
Share in Total Generation Capacity
60%
50%
40%
30%
20%
10%
0%
Japan now has 42 operable nuclear reactors. Of these, 40 reactors across 17 plant sites with a total
generation capacity of 40GW are currently shut down.154 The Sendai nuclear power plant was restarted in
August 2015.155 Oi nuclear power plant had been initially restarted in July 2012 but was then taken offline
for a second time in September 2013 due to political opposition. No power plant has been retired as a
result of the Fukushima meltdown 156 however the six reactors at Fukushima Daiichi are being
decommissioned and several plants have since been retired due to their age.
Political position
From a national security point of view, it is likely that Japan will restart more of its reactors. Enrichment
capacity provides cover against any weakening of the US security umbrella, and supports a stronger
negotiating position within it.
Japans dependence on imported energy has been a drag on the Abenomics growth-boosting programme
(named after Japans Prime Minister Shinz Abe), and higher electricity prices have dented the business
confidence of thousands of smaller manufacturers. He has promised restarts after regulators approve their
safety and called nuclear power an important source of baseload electricity. His Liberal Democratic party
(LDP), which has ruled Japan for most of the postwar period, has heavily pushed nuclear power to
promote energy security and, more recently, to curtail greenhouse gas emissions.157
Accordingly, the power mix targets in the Fourth Basic Energy Plan, unveiled by the government in April
2015, included a target for nuclear power to produce 20-22% of Japans electricity by 2020. The renewables
target remains at 20% (with hydro producing 10%, and solar producing 5%), despite the Ministry of
Environments assertion that Japan could achieve as much as 35% renewables penetration in the power
mix.158 The replacement of all nuclear plants with gas turbines would raise the price of power by 0.5-1.5
per kWh159. Table 39 shows the levelised costs of electricity (LCOE) of Japans generating options.
World Nuclear Association, Nuclear Power in Japan.

Simms, Outlook Cloudy for Japans Renewable Energy Drive.
156 Five reactors have since been retired however as a result of reaching the end of their normal operating lives (Genkai Unit 1,
Mihama Units 1 and 2, Shimane Unit 1, and Tsuruga Unit 1)
157 Ibid.
158 Parkes, Japan: Land of the Rising Sun?
159 Hosoe, Nuclear Power Plant Shutdown and Alternative Power Plant Installation scenariosA Nine-Region Spatial Equilibrium
Analysis of the Electric Power Market in Japan.
154
155
73
Table 39: LCOE of Japans generating options160

[Yen/KWh]
Nuclear
10.1
Coal
12.3
Gas
13.7
Wind
21.6
Geo
16.9
Water
11.0
Biomass
29.7
Oil
30.6
Solar
24.2
CCGT
13.8
Public Sentiment
Even before the meltdowns at Fukushima, public acceptance of nuclear power was fragile due to
numerous previous accidents and blatant cover-ups by utilities and authorities.161 However the Fukushima
meltdowns caused a public confidence crisis in nuclear technology and triggered a supply crisis as all of
Japans nuclear reactors were shut down.
Surveys from Japans media outlets (e.g. NHK and Mainichi) continue to show that more people are
against nuclear restarts than for them. Attitudes have been shifting over time. They are affected by a range
of factors, one of which is that electricity bills are significantly higher than they were and not just because
of the nuclear shut-downs. Also significant are the perceived prospects for alternatives to nuclear power.
162 Due to a series of accidents between 1997 and 2007, public resistance has meant only five reactors have
been built since 2000. Figure 33 shows public opposition to nuclear restarts since 2013.
Figure 33: Opposition to nuclear restarts in Japan,163,164

100%
80%
60%
40%
20%
55%
56%
55%
52%
58%
57%
53%
Jul 2013
Aug 2014
Dec 2014
Feb 2015
Apr 2015
Nov 2015
Mar 2016
Against
For or No Opinion
0%
Local opposition to nuclear power can have a substantial impact on the operations of utility companies. In
March 2016, Kansai Electric was forced to shut down two of its nuclear reactors at Takahama over fears of
insufficient earthquake protection. The court injunction caused Kansai shares to drop 15% the following
day.165 Nomura, an investment broker, has also dropped its buy recommendation. The injunction followed
a previous injunction in April 2015 which delayed the restart of two other reactors in the Fukui
prefecture.166 The plaintiffs in both cases were groups of concerned local residents.
Restart Feasibility
Of the 43 operable reactors, 24 are currently in the process of restart approvals. They are supported by
powerful industrial lobbies such as the Kaidanren and the Keizai Doyukai and have the cooperation of the
Japanese government.167 The first two restarted in August and October 2015.168 Fewer than a third, and at
METI, Cost Working Group. Available at
http://www.enecho.meti.go.jp/committee/council/basic_policy_subcommittee/mitoshi/cost_wg/pdf/cost_wg_01.pdf.
161 For instance, in 2007 a magnitude 6.8 earthquake caused the Kashiwaszaki-Kariwa plant in Niigata to leak radioactive cooling
water into the sea.
162 Alex Forbes, Back to a Nuclear Future: The Abe Government Restarts Japans Energy Policy, Energy Post, 2015,
http://www.energypost.eu/back-nuclear-future-abe-government-restarts-japans-energy-policy/.
163 The Mainichi, Many Feel Less Interest in 2011 Quake Disaster Hit Areas: Survey, The Mainichi, 2016,
http://mainichi.jp/english/articles/20160308/p2a/00m/0na/006000c.
164 Forbes, Back to a Nuclear Future: The Abe Government Restarts Japans Energy Policy.
165 The Financial Times, Kansai Electric Plunges after Reactor Halt, The Financial Times, 2016,
http://www.ft.com/fastft/2016/03/10/kansai-electric-plunges-after-reactor-halt/.
166 Kana Inagaki, Japan Court Blocks Restart of Two Nuclear Reactors, The Financial Times, 2015,
http://www.ft.com/cms/s/0/deaf7bde-e28a-11e4-ba33-00144feab7de.html#axzz42adPbRGg.
167 Butler, Japan Returns to Nuclear Power.
168 World Nuclear Association, Nuclear Power in Japan.
160
74
most about two-thirds, of the reactors will pass todays more stringent safety checks and clear the other
seismological, economic, logistical and political hurdles needed to restart, a Reuters analysis shows.169
The reactor restarts are facing significant implementation costs ranging from US$700 million to US$1
billion per unit, regardless of reactor size or age. In March 2014 the cost was put at $12.3 billion so far. A
key bottleneck is the level of expertise and the number of staff that the NRA is able to deploy to conduct
the complex and time-consuming engineering studies required for safety reviews and approvals. 170 The
Nuclear Regulation Authority (NRA) is working to increase its relicensing staff to about 100 people, which
could potentially shorten the currently envisaged six-month review timeline. Under a high case scenario
developed by Itochu, about ten reactors could be added every year and a total of up to 35 reactors back
online within five years.171
The restart of all the nuclear plants is marred by substantial uncertainty. The government has made it clear
that it will not force restarts, and has left it to the NRA to set safety rules and dictate the ability of utilities
to restart their nuclear fleets. Decision making has ultimately been delegated to the local communities and
local politicians may have the final say in whether a plant is restarted. Some of the front-runners have local
governments strongly behind nuclear power and the wealth it brings to communities through jobs and
government subsidies.
The NRA has fast-tracked two reactors at the Sendai plant in southern Japan after operator Kyushu
Electric Power Co broke ranks with its peers and said it would provision for far greater seismic shocks to
the plant. Three reactors in southern Japan are considered next in line, among 11 pressurised-water
reactors at five plants run by Shikoku Electric, Kansai Electric and Hokkaido Electric being actively vetted
by the regulator.
Hokkaido Electric Power Co, facing a third year of financial losses, is seeking a capital infusion from a
state-owned lender, which would make it the second utility, after Fukushima operator Tokyo Electric
Power Co, to get a government bailout since the March 2011 disaster.
Tepco's Kashiwazaki Kariwa plant on the Japan Sea coast north of Tokyo, the world's biggest nuclear
station by output capacity, faces a politically fraught process. Although two of the seven reactors look
likely to restart on technical grounds, the head of the local prefecture has accused the operator of
institutionalized lying and says Tepco cannot be trusted to operate another facility.
Chubu Electric Power Cos Hamaoka plant on the Pacific coast 190km southwest of Tokyo has been
branded by one Japanese seismologist as the country's most dangerous nuclear facility as it is located in an
area where four major tectonic plates meet. Any restart would face significant opposition from local
legislators even in Mr Abe's own party, and the prefectural governor supports a referendum on the issue.
Tepco's Fukushima Daini station is well within the Daiichi plant evacuation zone and faces near-universal
opposition from a traumatised local population. Also highly unlikely to switch back on is Japan Atomic
Power Cos Tsuruga plant west of Tokyo. It sits on an active fault, according to experts commissioned by
the NRA. Twelve reactors will reach or exceed the standard life expectancy of 40 years within the next five
years, probably sealing their fate in the new, harsher regulatory climate. These include reactor No. 1 at
Shikoku Electri's Ikata power station.
Mari Saito, Aaron Sheldrick, and Kentaro Hamada, Japan May Only Be Able to Restart One-Third of Its Nuclear Reactors,
Reuters, 2014, http://www.reuters.com/article/us-japan-nuclear-restarts-insight-idUSBREA3020020140401. The Reuters analysis is
based on questionnaires and interviews with more than a dozen experts and input from the 10 nuclear operators. It takes into account
such factors as the age of the plants, nearby seismic faults, additional work needed to address safety concerns, evacuation plans and
local political opposition.
170 Forbes, Back to a Nuclear Future: The Abe Government Restarts Japans Energy Policy.
171 Source: World Nuclear Association, Nuclear Power in Japan.
169
75
I think the government is incredibly clever by doing the restarts in the most modern, advanced places that
have the most local support and are yet far from centres of political activity, said Jeff Kingston, director of
Asian Studies at Temple University's Japan campus. Then you use that to create momentum for the
agenda of restarting as many reactors as possible.
Table 40 shows the status of reactor restarts in Japan.
Table 40: Status of restart applications and safety reviews172

Reactors
Sendai 1&2
Total
Capacity
[MW]
1,780
Age
Utility
Company
Applied
Status
1984
1985
1985
1985
Kyushu
Jul-13
Operational
Kansai
Oct-14
Shutdown
(court)
890
1995
Shikoku
Mar-16
Scheduled
restart
Ohi 3&4
2,360
1991
1993
Kansai
Jul-13
Shutdown
(court)
Genkai 3&4
2,360
Kyushu
Jul-13
Shutdown
Tomari 1-3
2,070
1994
1997
1989
1991
2009
1976
Hokkaido
Jul-13
Shutdown
Kansai
Mar-15
Shutdown
1974
1975
1987
Kansai
Mar-15
Shutdown
JAPC*
Nov-15
Shutdown
Tepco
Sep-13
Shutdown
1,383
1996
1997
2021
JAPC*
Dec-14
Shimane 2
Onagawa 2
820
825
1989
1995
Chugoku
Tohoku
Dec-13
Dec-13
Under
construction
Shutdown
Shutdown
Hamaoka 4
1,137
1993
Chubu
Feb-14
Shutdown
Tokai 2
Higashidori
1
Shika 2
1,100
1,100
1978
2005
JAPC
Tohoku
May-14
Jun-14
Shutdown
Shutdown
1,358
2006
Hokuriku
Aug-14
Shutdown
Hamaoka 3
1,100
1987
Chubu
Jun-15
Shutdown
Takahama
3&4
Ikata 3
1,652
Mihama 3
826
Takahama
1&2
Tsuruga 2
1,652
Kashiwazaki
Kariwa 6&7
Ohma 1
2,706
1,160
Notes
Unit 1 connected to grid August
2015, unit 2 October 2015
After NRA final approval and
local gov approval, unit 3 grid
connection 1/2/16. Unit 4
restarted end Feb. Both then shut
down due to court injunction.
Upgrade plan approved by
NRA, unanimous local gov
approval, expect operation in
August
Restarted July 2012 and
shutdown Sept 2013. Quake &
tsunami scenarios complete, but
court injunction issued
Quake & tsunami scenarios
complete
Quake scenarios pending
NRA reviewing (requires licence

extension)
NRA doing inspection
NRA has identified seismic
problem
NRA doing inspection
NRA reviewing
NRA reviewing
NRA reviewing, start possible
after April 2017
NRA reviewing, start possible
after Sept 2016
NRA reviewing
Question re faults nearby, start
possible after April 2017
Safety engineering work to
March 2017, NRA review under
way but concern re seismic fault
Start possible after Sept 2017
*JAPC is jointly owned by TEPCO (28.23%), Kansai (18.54%), Chubu (15.12%), Hokuriku (13.05%), Tohoku (6.12%), and J-Power (5.37%)
172
Ibid.
76
The six reactors at Fukushima Daiichi have been slated for permanent decommissioning, the first four in
the immediate aftermath of the Tohoku earthquake and the last two in 2014. Decommisioning is expected
to take at least 40 years173 and will remove 2719MW from Tepcos generation capacity. Figure 34 shows the
status of all Japans nuclear reactors.
Figure 34: Nuclear units shut for new safety standards174
There are nuclear plants still under construction Oma nuclear power plant in Aomori Prefecture
(northernmost prefecture on Honshu) is scheduled to startup in 2021. Whats more, this plant will use a
plutonium-uranium mixture (MOX) as fuel, which is only available from reprocessed spent uranium fuel.
In effect it is designed to recycle spent uranium fuel. This plant relies therefore, not only on the ability to
start in this region, but also on the fact that nuclear plants will be restarted around Japan as a whole. Work
on the facility began in 2008, was halted following the Tohoku earthquake, and resumed in October 2012.
Although they do not take a definitive view, energy consultant Wood Mackenzies base case future energy
scenario for Japan has its nuclear power plants gradually returning to operation over the next several
years.175 New nuclear power stations, most of which have local political support, are expected to continue
with construction and commissioning without challenge. In some cases there is local opposition but it is
likely that up to ten nuclear plants will be operational again within 18 months.
Assessment of risk exposure
Due to Japans unique circumstance post-Fukushima, an assessment with comparator countries is
impossible. It is almost certain that Japans nuclear fleet will continue to be returned to service. It is
uncertain as to whether those restarts will fall short, meet, or exceed the governments targets, although
given the challenges articulated above and analysis by BNEF,176 a shortfall seems more likely. The impact
on coal-fired generating stations, however, depends also on the future of gas-fired generation and
Robin Harding, Chief Optimistic Tepco Earnings Can Cover Fukushima Plant Clean-Up, The Financial Times, 2016,
http://www.ft.com/cms/s/0/af09b686-cd7d-11e5-92a1-c5e23ef99c77.html#axzz42adPbRGg.
174 Source: Argus Media Coal serves as long-term replacement for nuclear?, 2015.
175 Wood Mackenzie Global thermal coal price forecast: How far will coal prices rise in 2015-2016? 2015.
176 BNEF, Japans Likely 2030 Energy Mix: More Gas and Solar., 2015.
173
77
renewables. Taking all other things to be equal, we find it medium risk that nuclear restarts will disrupt
coal-fired generating stations.
Table 41: Risk exposure from nuclear restarts
Japan
Justification
Short to medium-term horizon limits the amount of nuclear able to be
restarted
Nuclear restarts put pressure on total share of coal-fired power, although not
as much as government projections
Nuclear power has lower marginal cost of electricity, depressing market
prices
An overbuild of coal-fired power post-Fukushima will cause further supply
competition
RISK
Summary of Companies Owning Operating, Under Construction,

and Planned Coal Plants
Table 42 aggregates data on the operating capacity of all generation and coal generation only across each of
our 55 companies. This table is ordered according to total coal generation capacity.
It is interesting to note that even though Tohoku EPC has less coal capacity than TEPCO, it has greater
MWh of generation; perhaps replacing greater lost nuclear capacity. Another point that stands out from
the data is that a number of steelmakers and conglomerates have coal generation capacity in excess of
some regional monopolies.
78
Table 42: Summary of financial and environment-related risk exposure
[GWH]
8,414
5,900
4,901
4,208
4,100
3,646
2,903
2,500
1,800
1,475
1,443
1,395
1,106
883
754
680
667
647
406
283
281
175
170
149
149
124
78
76
61
50
50
48
39
32
26
24
17
9
9
0
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
[MW]
OPR
84
540
NA
84
NA
1,000
NA
NA
NA
NA
NA
NA
NA
NA
NA
100
NA
NA
NA
NA
NA
NA
NA
110
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
[MW]
CON
4,020
5,357
600
1,445
2,030
667
NA
NA
3,462
1,300
320
NA
500
NA
NA
508
NA
NA
292
NA
NA
NA
NA
500
NA
333
124
667
NA
120
NA
NA
NA
70
NA
NA
NA
NA
NA
1,500
400
750
390
110
56
500
56
56
100
0
180
1,100
15
15
500
[MW]
COAL-FIRED CAPACITY
60,352
25,360
36,273
23,106
30,610
17,231
18,492
15,868
5,507
8,753
6,739
7,994
7,040
1,730
4,912
2,473
3,474
789
1,700
1,415
1,689
1,659
721
870
822
652
438
416
344
364
267
279
206
25
8
143
74
33
33
1
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
DEBT/EQUITY
1.17
1.21
0.73
0.86
0.83
1.03
1.23
0.70
0.63
1.22
1.38
1.59
0.91
2.08
0.72
1.02
1.35
NA
1.53
0.89
0.87
NA
1.67
1.89
NA
1.54
1.01
0.96
1.06
1.76
0.85
1.15
1.45
1.68
NA
0.98
3.11
2.51
2.49
1.51
1.18
1.19
2.59
NA
1.20
NA
0.95
NA
NA
NA
NA
1.34
3.92
1.39
0.83
CURRENT RATIO
34.4
2.8
(EBITDA-CAPEX)
/ INTEREST
92.7
3.5
34.4
10.2
6.1
NA
NA
NA
22.3
NA
9.0
NA
NA
NA
NA
6.7
13.0
55.7
6.1
5.0
10.8
18.1
NA
4.6
10.5
NA
2.5
9.8
NA
12.2
5.7
0.6
3.8
2.5
0.4
2.4
NA
NA
NA
NA
7.2
17.8
1.3
3.6
1.2
5.4
3.8
17.9
NA
2.48
3.34
3.97
3.14
1.95
7.41
2.54
6.89
4.07
0.83
0.56
1.73
2.37
1.67
1.56
1.49
0.85
NA
1.06
1.08
1.21
NA
1.09
0.69
NA
0.75
1.19
1.60
0.46
0.25
1.00
0.86
0.79
1.01
NA
1.09
0.12
0.37
0.24
0.67
0.83
2.03
1.85
NA
0.64
NA
1.00
NA
NA
NA
NA
0.51
0.00
0.30
1.43
LRH-1: CARBON
INTENSITY
6
24
37
38
1
31
1
22
39
23
17
15
21
9
1
20
14
13
16
19
33
1
39
11
27
8
32
34
35
30
18
1
6
25
28
12
29
26
36
10
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
LRH-2: PLANT AGE

24
27
6
6
2
15
12
18
29
9
15
21
21
38
15
13
24
1
29
32
39
9
40
6
18
9
34
13
35
23
5
3
37
18
32
3
26
29
28
35
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
LRH-3: LOCAL AIR

POLLUTION
7
22
11
8
37
28
10
27
39
38
12
9
23
14
25
13
33
1
19
21
34
30
18
36
5
2
16
24
29
35
17
31
3
15
26
4
6
40
32
20
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
RANK*
LRH-4: WATER
STRESS
3
9
16
15
33
9
23
31
37
18
29
29
13
38
26
26
25
40
19
9
4
5
17
13
35
24
2
39
8
26
1
5
22
19
33
21
32
12
5
36
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
1
40
1
1
1
1
1
31
40
1
33
26
34
40
1
27
1
1
25
40
40
1
1
1
29
1
1
1
40
1
1
1
1
28
1
1
1
30
1
32
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
LRH-5: CCS
RETROFITABILITY
13
36
34
13
2
9
7
28
1
2
15
16
9
17
9
24
8
26
33
36
9
28
28
4
23
17
17
36
36
6
35
28
17
27
5
17
17
40
28
25
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
LRH-6: FUTURE
HEAT STRESS
26
15
26
26
21
15
1
24
21
21
13
14
40
7
40
29
5
7
19
15
40
29
24
4
7
7
29
15
40
1
35
29
7
20
3
7
29
40
29
6
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
79
SUMMARY OF RISK EXPOSYRE
Electric Power Development Co., Ltd.

Holdings,
Incorporated
Tohoku Electric
Power Co. Inc.
Chugoku Electric Power Co.,Inc.
Chubu Electric Power Company,
Kyushu Electric Power Company,
Incorporated
Incorporated
Hokuriku
Electric Power Company
Hokkaido Electric Power Co. Inc.
Kansai Electric Power Company,
Incorporated
Kobe Steel Ltd.
NIPPON STEEL & SUMITOMO
METAL
CORPORATION
Sumitomo
Corporation
Shikoku Electric Power Co. Inc.
Tokuyama Corp.
The Okinawa Electric Power Company,
Incorporated
Nippon Paper Industries Co., Ltd.
Tosoh Corporation
Kashima-Kita Electric Power
CorporationCorporation
Mitsubishi
Oji Holdings Corporation
Taiheiyo Cement Corp.
NC Miike Co., Ltd
Mitsui & Co. Ltd.
Osaka Gas Co., Ltd.
Tokai Kyodo Hatsuden K.K.
JFE Holdings, Inc.
Showa Denko K.K.
Idemitsu Kosan Co. Ltd.
Itochu Enex Co. Ltd.
Asahi Kasei Corporation
Chuetsu Pulp & Paper Co., Ltd.
Toshiba Corporation
Mazda Motor Corporation
Teijin Ltd.
Hokuren Federation of Agricultural
Cooperatives
JX Holdings, Inc.
Kuraray Co. Ltd.
Mitsui Matsushima Co., Ltd.
Daicel Corporation
Tokyo Gas Co. Ltd.
Ube Industries, Ltd.
Marubeni Corporation
ORIX Corporation
Abl Co.,Ltd.
Air Water Inc.
Chiba Prefecture
HIROSHIMA GAS Co.,Ltd.
Hokuzai Transport Co.,Ltd.
New Frontier Capital Management
Co.,Ltd.
Seika Corporation
Joban Joint Power Co., Ltd.
Maeda Corp.
Meiko Trans Co., Ltd.
Japan Energy Partners*
TonenGeneral Sekiyu k.k.
COAL-FIRED
GENERATION
PLN
LRH-7: REGIONAL
NUCLEAR
RESTARTS
For LRHs, companies are ranked by exposure, with 1 being the most exposed
For more details, see tables in Appendix C.
3 Potential scale of stranded assets facing coal-fired

power stations in Japan

Stranded assets are assets that have suffered from unanticipated or premature write-downs, devaluations, or
conversion to liabilities and they can be caused by a variety of risks. Increasingly risk factors related to the
environment are stranding assets and this trend is accelerating, potentially representing a discontinuity able
to profoundly alter asset values across a wide range of sectors. 177 The following section examines the
potential scale of stranded assets facing Japanese coal-fired utilities.
To calculate potential asset stranding charges, we extract capacity data from the Platts World Electric Power
Plants (WEPP) Database for Q1 2016. For our sample of 55 Japanese companies, we extract the capacities of
all coal-fired generation assets in MW. To avoid double-counting jointly-owned capacity, we divide capacity
among joint-owners. We delineate the capacities into existing and planned (or currently under construction).
We assume a total installation cost of 250,000,000/MW (US$2.25m/MW178).179 We include all sunk costs
such as fees and contingency, engineering, procurement and construction services, and any additional
owner costs180 - as these represent losses in the case of asset stranding. For each asset, we depreciate the asset
using the straight-line method over an assumed useful life of 40 years since the date (or planned date) of
build, congruent with Pfeiffer et al. (2015). 181 We assume a salvage value of zero. As the last planned
generating plant is scheduled for 2035, our total time series covers 2016 to 2076 including 40 years
depreciation. The series plot, for each year, the total estimated asset stranding charge if the value of the
generating assets declines unexpectedly.
In addition to the estimated asset stranding charges, we overlay three pathways to remove coal-fired
generation from the energy system: five years, ten years, and 15 years. We select these three scenarios as they
are compatible with the impact of factors chosen previously, such as: population growth and forecast
electricity demand (NRH-1), targets for renewables policy support and generation outlook (NRH-4 and
NRH-5), and nuclear restarts (LRH-7). In all three scenarios the start date is 2016 and the known installed
capacity is 48.265 GW (including capacity planned for 2016). The three scenarios assume inaction in the early
years and accelerated action in later years. This is primarily due to poor disclosure of marginally profitable
assets by firms, regardless of technology, and the fact that many firms will forward-hedge future generation
to protect profits.182 Thus, the impact may not materialise for the first few years.
The results show that all generation assets, new and existing, will require some asset stranding regardless of
the three scenarios. In the baseline scenario - the most extreme case where coal is decommissioned now, the
total impairment charges would be 5,494 billion183 ($49.37bn), with the existing generation assets being the
most affected [5,416 billion ($48.67bn)]. Importantly, this baseline assumes that much of the planned assets
are not built especially the large amount of capacity planned in 2020. If the planned generation units are
built, the asset stranding charges will be considerably higher depending on the value of sunk-costs.
Atif Ansar, Ben Caldecott, and James Tibury, Stranded Assets and the Fossil Fuel Divestment Campaign: What Does Divestment
Mean for the Valuation of Fossil Fuel Assets?, Stranded Assets Programme, SSEE, University of Oxford, no. October (2013): 181,
doi:10.1177/0149206309337896.
178 Assuming 111.28/$1, April 27th 2016 exchange rate. This exchange rate is used in all currency conversions below.
179 METI, All Power Plant Specifications List (), 2016,
http://www.enecho.meti.go.jp/committee/council/basic_policy_subcommittee/mitoshi/cost_wg/001/pdf/001_11.pdf..
180 Fang Rong and David G. Victor, What Does It Cost to Build a Power Plant?, ILAR Working Paper, vol. 17, 2012.
181 Alexander Pfeiffer et al., The 2C Capital Stock for Electricity Generation: Committed Cumulative Carbon Emissions from the
Electricity Generation Sector and the Transition to a Green Economy, Applied Energy (In Press) (2016),
doi:http://dx.doi.org/10.1016/j.apenergy.2016.02.093.
182 Ben Caldecott and Jeremy McDaniels, Stranded Generation Assets: Implications for European Capacity Mechanisms , Energy
Markets and Climate Policy, Stranded Assets Programme, SSEE, University of Oxford, 2014, 162.
183 Note all asset stranding charges represent total and not annual charges.
177
80
For the five, ten, and 15-year scenarios, the total asset stranding new-capacity is estimated using known
planned capacity and capacity currently under construction. Therefore, the charge represents the lower
estimate bound, as any additional planned capacity over the upcoming years will also increase this estimate.
In the 5-year scenario, total asset stranding charges are 8,453 billion ($75.96bn). The asset stranding charges
are marginally weighted towards the planned capacity. The ten-year scenario is the most expensive overall,
with total asset stranding charges of 8,924 billion ($80.19bn), of which 6,223 billion ($55.92bn) falls on the
new-build capacity only. Finally, the 15-year scenario estimates total asset stranding charges to be 6,857
billion ($61.62bn), of which 5,307 billion ($47.69bn) falls on the new build.
Figure 35: Estimated scale of asset stranding for existing and new build coal generators
Estimated Unrecoverable Cost (bn)
12,000
10,000
8,000
6,000
D
F
4,000
2,000
2016 2021 2026 2031 2036 2041 2046 2051 2056 2061 2066 2071 2076
Existing Coal
Planned and Under Construction
NB: The difference between the value on the y-axis and zero represents estimated stranded assets charge.
Letters in the chart correspond to the labels in Table 43.
Table 43: Estimates of total asset stranding charges (bn/US$)

Coal Offline in:
2021 (5 years)
2026 (10 years)
2031 (15 years)
Existing Assets
[A] 4,005 ($35.99)
[C] 2,700 ($24.26)
[E] 1,550 ($13.93)
Planned and
Under Construction
[B] 4,447 ($39.96)
[D] 6,223 ($55.92)
[F] 5,307 ($47.69)
Total
[A + B] 8,453 ($75.96)
[C+ D] 8,924 ($80.19)
[E + F] 6,857 ($61.62)
Our conclusion from the preceding analysis is that asset stranding will impact both existing and planned
generating capacity. For existing capacity, the impact is highest in the short-term within five years. For
planned capacity, the impact is highest after five years. Further, the impact for planned capacity will increase
pending any additional capacity applications in the near future. Therefore, although total potential
impairment charges in our analysis decline beyond ten years, if additional planned capacity is constructed
within this time period then future stranded assets could continue to rise. It will be increasingly difficult to
convince investors to commit capital to these projects if there is a high likelihood that assets will become
stranded. Accordingly, planned capacity may be increasingly expensive to finance.
81
Utility Case Studies

At the company-level, we prepared five case studies of selected utilities. These were for: 1) J-Power; 2) Tokyo
Electric Power Co; 3) Chubu Electric Power Co Inc; 4) Kyushu Electric Power Co; and 5) Kansai Electric
Power Co. In these case studies we examine the sensitivity of these companies to the risks outlined in this
report, and estimate potential scale of asset stranding specifically attributable to them following the
methodology used earlier in this section.
Table 44: Breakdown of the five utilities operating, under construction, and planned coal capacity
Rank
1
2
5
6
7
Company
OPR
CON
PLN
Total
J-POWER
CHUBU ELECTRIC POWER CO
8,414
5,900
4,100
3,646
1,800
84
540
NA
1,000
NA
4,020
5,357
2,030
667
3,462
12,518
11,797
6,130
5,313
5,262
Table 45: Estimates of total asset stranding (bn)

Ratio Analysisi
98%
Stranded Assetsii
LRH-7
96%
LRH-6
KANSAI
EPCO
62%
LRH-5
100%
LRH-4
KYUSHU
EPCO
87%
LRH-3
78%
LRH-2
CHUBU
EPCO
47%
OPR /
PLNiii
LRH-1
91%
56%
(EBITDA
CAPEX) /
INTEREST
TEPCO
84%
CURRENT
RATIO
DEBT /
EQUITY
J-POWER
Env.-Related Risksi
OPR
40% 58% 88% 55% 32% 53% 53%
PLN
44% 44% 68% 88% 41% 56% 6%
OPR
32% 22% 22% 20% 100% 12% 95%
PLN
47% 44% 68% 79% 53% 65% 76%
OPR
42% 35% 60% 80% 15% 30% 65%
PLN
26% 6% 76% 91% 38% 68% 74%
OPR
35% 58% 88% 15% 30% 17% 85%
PLN
94% 62% 35% 50% 29% 15% 44%
OPR
20% 5% 30% 95% 15% 88% 12%
PLN
53% 18% 68% 74% 44% 59% 65%
94%
66%
86%
ND
ND
2021
(5 year)
586.2
(23%)
608.2
(24%)
730.1
(5%)
1,309.3
(9%)
384.6
(7%)
114.1
(2%)
248.2
(5%)
406.0
(9%)
288.5
(4%)
439.2
(6%)
20 26
(10 year)
406.3
(16%)
904.9
(35%)
541.0
(4%)
1,136.3
(8%)
253.2
(5%)
339.5
(6%)
145.7
(3%)
353.0
(8%)
230.8
(3%)
661.3
(9%)
2031
(15 year)
237.5
(9%)
773.3
(30%)
351.9
(3%)
963.3
(7%)
121.7
(2%)
290.4
(5%)
83.6
(2%)
299.2
(6%)
173.1
(2%)
566.4
(8%)
i) Ratio and Environment-related risk presented as a percentile relative to Japan utility peer group:
ND/E, NCurrent Ratio = 45; N(EBITDA-CAPEX)/INT = 35; NOPR = 40; NPLN = 34;
ii) Stranded Assets expressed in bn and as a fraction of total utility assets
iii) OPR: Operating plants; PLN: Planned and under construction plants;
Overall, the five companies will be subject to some asset stranding charges if we assume all coal must be
removed from the system in line with various transition scenarios. Table 45 shows that both existing and
planned capacities are at risk of stranded assets in the baseline (now), five, ten, and 15-year cases. We
evaluate each company below.
82
3.1.1
J-Power
J-Power has the most coal generation (8.41GW) of all utilities in Japan, and coal comprises almost half of JPowers total generation (17.47GW). In addition, over 90% of planned generation capacity is coal (4.02 of 4.34
of GW), and only TEPCO has more planned coal generation (5.90GW).
Notably 67% of its planned coal fleet is potentially CCS retrofitable (39% existing) and it has the lowest
planned coal plant exposure to nuclear restarts of any of the major Japanese utilities at only 702 MW on
average (2,483 MW existing).
J-Power has the largest combined existing and planned coal plant capacity of all Japanese utilities (12.52
GW), but two-thirds of this (8.18 GW) is already operating. According to our analyses we classify J-Power as
having a high exposure to asset stranding for both its existing coal capacity but only medium exposure to its
planned coal-capacity. Across the existing and planned capacities, its estimated asset stranding charges in
the 5, 10, and 15 year scenarios is second only to TEPCO. This is because although J-Power has 8.18 GW of
existing capacity, most was built between 1980 and 2000 and thus has already depreciated significantly.
Table 46: Environment-related risk exposure of J-Power operating plants

[1 = RETROFITABLE]

[oC]

RESTARTS [MW]
LRH-4: WATER STRESS

URiii

[gPM2.5/m3]
GENERATIONii
[GWH]
LRH-2: PLANT AGE
CAPACITYii
[MW]

[kg.CO2/MWh]
PLANT
1,002
6,730
77%
922
1980
11.8
0%
0
2,000
15,633
89%
887
1993
11.9
19%
0
312
2,134
78%
880
1986
4.2
100%
0
1,300
8,136
71%
913
1978
8.6
05%
0
500
3,761
86%
928
1969
8.3
35%
0
2,100
16,182
88%
823
2001
8.5
10%
1
1,200
7,367
70%
786
2006
10.4
89%
1
TOTALi
8,414
59,943
81%
867
1991
9.8
26% 39%
0.90
0.90
0.68
0.88
0.88
0.88
0.92
0.89
4,699
4,699
0
820
0
2,022
1,100
2,465
MATSUSHIMA
MATSUURA
ISHIKAWA
TAKEHARA
TAKASAGO
TACHIBANAWAN
SHIN ISOGO
Table 47: Environment-related risk exposure of J-Power planned plants

LRH-3
LRH-4
LRH-5
LRH-6
LRH-7
CAPACITYii
[MW]
LRH-2
CON/
PLN
LRH-1
PLANT
TAKEHARA
PLN
600
766
2020
TAKASAGO
PLN
1,200
759
2024
NISHIOKINOYAMA
PLN
400
872
2023
OSAKI COOLGEN
CON
84
692
2017
KASHIMA POWER
PLN
320
767
2020
YOKOHAMA
PLN
500
900
2020
SHIN YOKOSUKA
PLN
500
767
2020
YOKOSUKA
PLN
500
807
2020
TOTALi
4,104
794
2021
8.6
8.3
10.8
8.9
10.1
10.4
10.2
10.2
9.5
05%
35%
15%
04%
30%
89%
89%
89%
47%
0
1
0
0
0
1
1
1
66%
0.88
0.88
0.90
0.88
0.88
0.92
0.92
0.92
0.90
820
0
820
820
1,100
1,100
1,100
1,100
704
83
3.1.2
Like Kansai EPC, Tokyo Electric Power Company (TEPCO) is notable in that its planned coal generation
capacity (5.4GW) is high relative to its current operating capacity (5.90 GW). However this planned coal
capacity (5.4GW) only represents 36% of TEPCOs total planned generation (14.72 GW). Further, TEPCO has
54.0GW of existing generation in total, of which currently only 11% (5.90 GW) is coal.
On a MW-weighted basis, TEPCOs existing coal-plants in Tokyo and Tohuku regions may need to compete
with 11,784MW of shutdown nuclear power. TEPCO also has planned or under construction coal-fired
power in regions which may nuclear power be restored to generating a MW-weighted average of 10,130MW.
The potential for CCS retrofitability is also poor for TEPCOs existing coal fleet at 0%, and only 26% for
planned plants.
TEPCOs existing and planned coal capacity is highly exposed to asset stranding. Of TEPCOs 5.90 GW of
existing coal capacity, 3.20GW was recently built in 2008-09 and therefore has incurred little depreciation.
Further, Tokyo Electric has 5.36 GW of planned capacity between 2017 and 2035, where most is planned for
pre-2020. Accordingly, TEPCO has the highest exposure to asset stranding of all five companies analysed in
each of the three future scenarios.
Table 48: Environment-related risk exposure of TEPCO operating plants

RESTARTS [MW]
SHINCHI
1,000
7,104
81%
857
1995
7.7
15%
0
HIRONO
1,200
3,352
32%
773
2009
7.4
15%
0
NAKOSO
1,700
8,802
59%
926
1992
7.6
15%
0
HITACHINAKA
2,000
6,103
35%
846
2008
8.8
16%
0
TOTALi
5,900
25,361
49%
856
2001
8.0
15%
0%

[oC]

[1 = RETROFITABLE]
LRH-4: WATER STRESS

URiii

[gPM2.5/m3]
GENERATIONii
[GWH]
LRH-2: PLANT AGE
CAPACITYii
[MW]

[kg.CO2/MWh]
PLANT
0.95
0.88
0.88
0.88
0.89
17,263
17,263
17,263
1,100
11,784
Table 49: Environment-related risk exposure of TEPCO planned plants

LRH-3
LRH-4
LRH-5
LRH-6
LRH-7
CAPACITYii
[MW]
LRH-2
CON/
PLN
LRH-1
PLANT
HIRONO 'CGAS'
CON
540
652
2020
SHINCHI
PLN
500
835
2035
SOMA CORE
PLN
112
849
2017
HIRONO
PLN
540
652
2020
HIRONO
PLN
1,200
765
2020
NAKOSO
PLN
180
652
2021
HITACHINAKA
PLN
325
768
2021
KITAKYUSHU
PLN
1,000
900
2019
YOKOHAMA
PLN
500
900
2020
SHIN YOKOSUKA
PLN
500
767
2020
YOKOSUKA
PLN
500
807
2020
TOTALi
5,897
787
2021
7.3
7.7
7.7
7.4
7.4
7.6
8.8
11.4
10.4
10.2
10.2
8.9
00%
15%
15%
15%
15%
15%
16%
18%
89%
89%
89%
33%
0
0
0
0
0
0
0
0
1
1
1
25%
0.88
0.95
0.95
0.88
0.88
0.88
0.88
0.90
0.92
0.92
0.92
0.90
17,263
17,263
17,263
17,263
17,263
17,263
1,100
4,699
1,100
1,100
1,100
10,130
84
3.1.3
Chubu Electric Power Company
Although Chubu Electric Power Co (Chubu EPC) has 30.32GW of operating capacity and only 4.10GW (or
14%) is coal-fired, of its 2.33GW of total planned generation, 2.03GW or 88% is coal. Nevertheless the
absolute quantity of additional coal-fired power planned from Chubu is low relative to the other regional
utilities.
Although we are bearish on CCS generally, the generation units of Chubu EPC are favourably situated with
regard to CCS retrofitability. By our definition, 100% of Chubu EPCs existing and 71% of its planned coal
plants may have the potential to be CCS retrofitable.184
With regard to the risk of nuclear restart, Chubu EPCs planned coal plants can be considered to have
medium exposure with an average of 7,619MW of potential nuclear capacity located in the same region as its
planned coal plants, whereas its existing coal plants are only exposed on average to 3,617 MW.
Chubu Electric Power Co has relatively low exposure to coal asset overall stranding, with green lights in
Table45 for both existing and planned coal generation. Specifically, Chubu has 4.1GW of existing coal
capacity from a single plant which was built in 1996 but has since depreciated in value over time. Its planned
coal capacity is also among the lowest, with only 2.33GW of planned capacity expected to begin operating
between 2020 and 2035. This low capacity and long projected start times reduces the risk of coal asset
stranding in future years as it provides an opportunity to cancel these later projects.
Table 50: Environment-related risk exposure of Chubu EPCO operating plants
1
1

RESTARTS [MW]
HEKINAN
4,100
30,610
85%
869
1997
9.0
53%
TOTALi
4,100
30,610
85%
869
1997
9.0
53%

[oC]

[1 = RETROFITABLE]
LRH-4: WATER STRESS

URiii

[gPM2.5/m3]
GENERATIONii
[GWH]
LRH-2: PLANT AGE
CAPACITYii
[MW]

[kg.CO2/MWh]
PLANT
0.84
0.84
3,617
3,617
Table 51: Environment-related risk exposure of Chubu EPCO planned plants

LRH-7
LRH-6
LRH-5
LRH-4
LRH-3
CAPACITYii
[MW]
LRH-2
CON/
PLN
LRH-1
PLANT
SHINCHI
PLN
500
835
2035
7.7
15%
0
0.95
17,263
HITACHINAKA
PLN
325 NAiii
2021
NA
NA
0
NA
NA
TAKETOYO
PLN
1,070
763
2022
9.0
53%
1
0.84
3,617
TOYOHASHI AKEMI
PLN
135
780
2020
8.6
23%
1
0.84
3,617
TOTALi
2,030
785
2025
8.6
39%
59%
0.87
7,619
i. MW-weighted for LRHs; ii. Capacity only for owned portion; iii: ND: No Data, omitted in MW weighting
3.1.4
Kyushu Electric Power Company
Kyushu EPC is the sole regional utility based on the island of Kyushu. Although Kyushu EPC has 3.64GW of
existing coal capacity (23% of total existing capacity: 15.5GW), it only has plans for another 0.67GW of coal
184
According to Geogreens data, plant locations are within 40km of a possible CCS reservoir.
85
generation. However, almost 100% of total planned generation (0.70GW) is expected to be derived from coal.
Kyushu EPC is sole owner of the Matsuura coal plant, which is the largest coal plant (1.0GW) currently
under construction in Japan, and joint owner of the planned 2.0GW Sodegaura power plant.
Kyushu EPCs existing coal plants are all in the Kyushu region, where there are 4,699MW of restartable
nuclear power capacity, a medium risk level relative to the other utilities. Its planned coal plant (Sodegaura)
is in the Tokyo region where there is less restartable nuclear capacity, 1,100MW. Its existing power plants
also have relatively low potential CCS retrofitability at only 46%.
Our analysis shows that Kyushu Electric Power Co has low exposure to asset stranding. Kyushu has
3.64GW of existing capacity which was built between 1964 and 2001. Most of the capacity has already been
significantly depreciated. Only 0.67GW of new capacity is planned for 2020. This low amount of planned
capacity reduces the level of asset stranding in later years.
86
Table 52: Environment-related risk exposure of Kyushu EPCO operating plants

RESTARTS [MW]
60%
81%

[oC]
7,369
4,982

[1 = RETROFITABLE]
1,400
700
LRH-4: WATER STRESS

URiii

[gPM2.5/m3]
GENERATIONii
[GWH]
LRH-2: PLANT AGE
REIHOKU
MATSUURA
KYUDEN
KANDA
KARITA PBFC
TOBATA
CAPACITYii
[MW]

[kg.CO2/MWh]
PLANT
874
861
1999
1989
11.8
11.9
0%
19%
1
0
0.90
0.90
4,699
4,699
740
2,132
33%
896
1986
11.4
18%
0
360
850
27%
911
2001
11.4
18%
1
446
1,198
31%
744
1979
11.5
18%
0
TOTALi
3,646
16,531
52%
864
1992
11.7
11%
48%
0.90
0.90
0.90
0.90
4,699
4,699
4,699
4,699
Table 53: Environment-related risk exposure of Kyushu EPCO planned plants

LRH-5
LRH-6
LRH-7
3.1.5
LRH-4
MATSUURA KYUDEN
CON
1,000
767
SODEGAURA
PLN
667
900
TOTALi
1,667
820
LRH-3
CAPACITYii
[MW]
LRH-2
CON/
PLN
LRH-1
PLANT
2020
2020
2020
11.9
11.0
11.5
19%
35%
25%
1
1
100%
0.90
0.88
0.89
4,699
1,100
3,259
Kansai Electric Power Company
Kansai EPC is notable in that, should all its planned plants be built, the total coal capacity of Kansai will
almost triple from 1.80GW to 5.26GW. This planned increase of 3.46GW in coal generation represents 82% of
Kansai EPCs total planned capacity (4.22GW). Kansai EPCs coal fleet also has the youngest average age of
all major Japanese utilities at just 9 years (2007 average).
Although Kansai EPCs single existing coal plant (Maizuru, 1.8GW) has no exposure to nuclear restart, we
classify its planned coal plants as having a medium risk of nuclear restart with 4,276 MW on average in the
same region. Japan generally has ample access to water resources, but certain areas (particularly cities) have
high water stress. Kansai EPCs Maizuru coal plant is noteworthy in that it has a relatively high level of
water stress, at 77% of renewable water resources recovered and used. Many Japanese power plants utilise
seawater for cooling and Maizuru is no exception. At the same time, while Maizuru power is potentially
CCS retrofitable, only 53% of Kansai EPCs planned coal plants have that possibility as well.
Kansai Electric Power Co has low exposure to asset stranding for existing capacity, but a medium risk for
planned capacity. Kansai plans to build an additional 3.46GW of capacity between 2017 and 2035. The large
additional capacity expected to come online in the 2020s increases Kansais risk of asset stranding over time.
87
Table 54: Environment-related risk exposure of Kansai EPCO operating plants

RESTARTS [MW]
1,800
5,507
35%
806
2007
8.1
77%
TOTALi
1,800
5,507
35%
806
2007
8.1
77%

[oC]
MAIZURU

[1 = RETROFITABLE]
LRH-4: WATER STRESS

URiii

[gPM2.5/m3]
GENERATIONii
[GWH]
LRH-2: PLANT AGE
CAPACITYii
[MW]

[kg.CO2/MWh]
PLANT
1
1
0.93
0.93
0
0
Table 55: Environment-related risk exposure of Kansai EPCO planned plants

LRH-5
LRH-6
LRH-7
112
650
1,200
500
500
500
3,462
LRH-4
SENDAI PORT
PLN
AKITA
PLN
AKO
PLN
ICHIHARA
PLN
KANSAI ELECTRIC POWER CHIBA PREF.
PLN
KEPCO CHIBA
PLN
TOTALi
LRH-3
CAPACITYii
[MW]
LRH-2
CON/
PLN
LRH-1
PLANT
900
807
800
807
743
839
803
2017
2025
2020
2025
2035
2020
2024
7.3
8.6
8.5
11.0
11.0
10.9
9.5
37%
13%
40%
35%
35%
35%
33%
0
1
1
0
0
0
53%
0.95
0.92
0.88
0.88
0.88
0.88
0.89
17,263
17,263
0
1,100
1,100
1,100
4,276
88
4 Conclusion
The future for Japans power generators is highly uncertain, particularly for heavily polluting
thermal generators such as coal. Factors including climate change policy and renewables subsidies,
the prospect of nuclear restarts, energy efficiency, and macroeconomic factors like low levels of
population and GDP growth, will all affect power demand and supply in ways that would likely
harm the economics of coal-fired power stations in Japan.
Despite the highly uncertain context for coal-fired generation the government has encouraged a
major expansion of coal-fired generating capacity. As a result, the number of coal plants under
development has increased rapidly in the past few years. Although there are currently four coal
plants under construction with a combined capacity of 1.9 GW, there are now 49 planned plants
comprising a significant 28 GW at various stages of planning.
The amount of planned and under construction coal-fired generating capacity greatly exceeds the
capacity required to replace the retiring fleet - by 191%. This may result in overcapacity and
combined with competition from other forms of generation capacity with lower marginal costs (e.g.
nuclear and renewables), lead to significant asset stranding of coal generation assets.
To examine the scale of potential stranded coal assets in Japan, we used three illustrative scenarios
where existing and planned coal-fired power stations are stranded over 5-year, 10-year, and 15-year
periods. We selected these three periods to reflect the different speeds and scales at which the risk
factors identified in this report could realistically materialise. While highly illustrative, these
scenarios highlight the potential impact of stranded coal assets on the utility sector in Japan,
particularly from coal-fired power plants that are planned, but not currently under construction.
We found that stranded coal assets could be 6,857bn - 8,924bn ($61.6bn - $80.2bn), equivalent to
22.6% - 29.4% of the current market capitalization, and 4.5%-5.9% of total assets, of Japans power
utilities. This highlights the risks of continuing to proceed with the planning and development of
new coal-fired power plants in Japan.
In the 5-year scenario, where coal-fired power stations become stranded assets by 2021, the total
value of stranded coal assets are estimated to be 8,453 billion ($76bn). In the 10-year scenario,
where coal-fired power stations become stranded assets by 2026, the total value of stranded coal
assets are estimated to be 8,924 billion ($80.2bn), of which 6,223 billion ($55.9bn) are plants built
after 2016. Finally, in the 15-year scenario where coal-fired power stations become stranded assets by
2031, the total value of stranded coal assets are estimated to be 6,857 billion ($61.6bn), of which
5,307 billion ($47.69bn) are plants built after 2016.
We judge that the five-year, ten-year, and 15-year scenarios are a suitable time horizon to consider
given the pace of change in the global energy system. Renewables deployment has increased from
10% of global capacity to 15%in the last five years,185 the cost of onshore wind and solar PV has
fallen by 39% and 41% respectively over the same period, and sales of electric vehicles have grown
by 1,031%.186 Disruption appears to be accelerating as tipping points are reached and the idea that
the power sector will remain relatively static and safe for new thermal coal assets is counter to the
evidence we see internationally across the G20.
BNEF (2015) global trends in renewable energy investment 2015

Office of Energy Efficiency & Renewable Energy (2016) Fact #918: march 28, 2016 global plug-in light vehicle sales increased by
185
186
89
At the company-level, we prepared five case studies of selected utilities. These were for: 1) J-Power;
2) Tokyo Electric Power Co; 3) Chubu Electric Power Co Inc; 4) Kyushu Electric Power Co; and 5)
Kansai Electric Power Co. We find that Tokyo Electric Power Co has the highest exposure to asset
stranding in absolute value for the five-year, ten-year, and 15-year scenarios of the five comparator
companies. Tokyo Electric Power Co also has some of the highest exposure to environment-related
risk, especially for planned or under construction power stations. J-Power has the most exposure to
asset stranding relative to total assets (>20%).
Given significant proposed coal expansion on the one hand and growing environment-related risks
on the other, companies, investors, and policymakers should examine the exposure of Japans
existing and proposed coal-fired power plants to the risk of asset stranding. Stranded coal assets
would affect utility returns for investors; impair the ability of utilities to service outstanding debt
obligations; and create stranded assets that have to be absorbed by taxpayers and ratepayers.
Moreover, new coal-fired power stations will generate significant negative externalities for the
duration of their shorter than anticipated lives, particularly in terms of carbon emissions that cause
climate change, as well as air pollution that harms human health.
90
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Simms, James. Outlook Cloudy for Japans Renewable Energy Drive. The Financial Times, 2015.
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The Financial Times. Kansai Electric Plunges after Reactor Halt. The Financial Times, 2016.
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The National Bureau of Asian Research. Energy Mix in Japan - Before and after Fukushima, 2013.
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Topham, James. Japans Power Failure: Bid to Forge National Grid Stumbles. Reuters, 2014.
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95
Appendix A: Dataset Preparation

This report uses a number of data sources to provide analysis of coal-fired power utilities, thermal coal
mining companies, and coal processing technologies. Table 56summarises the main sources of data.
Where the data was not available for all plants and mines, the remainder was either estimated from
available data or completed by the Oxford Smith School as noted. For example, 74% of all coal-fired
generating assets had generation data (in MWh) from CARMA, and the remaining 26% was estimated
by the Oxford Smith School.
Table 56: Data sources and completeness

Data Source
(in order of seniority)
Number of Coal-Fired Generating Assets (N = 154 coal-fired power stations)
CoalSwarms Global Coal Plant Tracker (CoalSwarm, Q4
2015)
Enipedia
Location Carbon Monitoring for Action Database
(CARMA, v3.0 released Jul 2012)
Platts World Electric Power Plant Database
(WEPP, Q1 2016)
Capacity [MW] CoalSwarm, WEPP, Enipedia, CARMA
Generation [MWh] Enipedia, CARMA, Oxford Smith School
CoalSwarm, WEPP, Enipedia, CARMA, Oxford Smith
Plant Age
School
CO2 Intensity CoalSwarm, WEPP, CARMA, Oxford Smith School
Market Analysis
General Information S&P CapitalIQ, Trucost
Capital Spending Trends S&P CapitalIQ
Bond Issuances S&P CapitalIQ
Ownership Trends S&P CapitalIQ
Local Risk Hypotheses
Atmospheric Composition Analysis Group, Dalhousie
PM2.5 Emissions 2012-2014 Average
University
NO2 Emissions 2015 NASA GES DISC OMNO2
Data
Mercury Emissions 2010

Water Stress 2015
CCS Geologic Suitability
Heat Stress Change 2016-2035
Nuclear Restart Risk
National Risk Hypotheses
Renewables Outlook
Renewables Policy
Water Regulatory Risk 2015
CCS Legal Environment
AMAP/UNEP 2010
WRI Aqueduct
Geogreen
IPCC AR5 WGII
WEPP
EY Renewable Energy Country Attractiveness Index
REN21 Global Status Report
WRI Aqueduct
Global CCS Institute Legal and Regulatory Indicator
Completion
%
Notes
100%
100%
100%
100%
100%
48% estimated
4% estimated
3% estimated
Global
Global
Global
Global
Global
Global
Global
See NRHs for
details
See NRHs for
details
See NRHs for
details
See NRHs for
details
Individual power station information is taken from the most recent version (v3) of the Carbon Monitoring
for Action (CARMA) database, Enipedia, and CoalSwarms Global Coal Plant Tracker (CPT). These
databases are merged, and when power station matches occur, we preferentially use fields from CoalSwarm,
then Enipedia, and finally CARMA. The Platts World Electric Power Plants Database (WEPP) is used to
exclude power stations that have been closed, but not reported as such in CARMA, Enipedia, or CPT. We
also use WEPP to identify non-coal-fired power stations that are operational, but not included in CARMA.
CARMA contains data on existing and planned plants and was last systematically updated to the end of
2009, CPT has data on coal-fired power plants planned and added to the global stock since the start of 2010
96
onwards (we currently used the most recent December 2015 update), and Enipedia is continuously updated
on an individual power plant basis. WEPP is updated quarterly (we currently use data from the Q4 2015
release). The merger between these datasets has produced a database that effectively defines the locations of
all the worlds power plants, their ownership, the annual megawatt hours of electricity produced, plant age,
fuel type, capacity, and carbon intensity. It is particularly current and comprehensive for coal-fired power
stations.
Information on the accuracy of the CoalSwarm, Enipedia, and WEPP databases are not available, but the
CARMA data has a number of caveats that are thoroughly enumerated on its website (carma.org), two of
which are particularly relevant to this database. The first is that CARMA estimates electricity generation and
CO2 emissions using statistical models that have been fitted from detailed US plant data. CARMA reports
that fitted CO2 emissions values are within 20% of the true value 60% of the time, and that electricity
generation is within 20% of the true value 40% of the time. Second, CARMA geographical location data
varies in its degree of precision. For almost all power plants the state/province location is known, for 80% of
power plants at least the city location is known, for 40% county/district data is known, and for 16% of
power stations a unique postal code is assigned. Comparisons of approximate and precise coordinates
suggest that the average spatial error is about 7 km, which is well within the bounds of all our geographical
analyses (scales of 40km and 100km used).
International Securities Identification Numbers (ISINs) which uniquely identify securities have been
matched to the equities of top coal-fired utilities, thermal coal miners, and coal processing technology
companies where possible. Equity ISINs are not available for private companies. Multiple bond ISINs could
be matched to each company, however that has not been completed at this time. ISINs were acquired
directly from the public database187 and through internet research.
187
Accessible at http://www.isin.org.
97
Appendix B: Financial Data

Table 57: Ratio analysis for coal-fired power utilities
Year
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
(J)
(K)
(L)
(M)
Net
Debt to
EBITDA
Net Debt
to
(EBITDA
CAPEX)
EBIT to
interest
expense
EBITDA
to
interest
expense
(EBITDACAPEX)
to
interest
Total
Debt to
EBITDA
Total
Debt to
(EBITDA
CAPEX)
69.82%
1.60x
2.29x
1.85x
9.94x
11.80x
6.93x
9.51x
250.51%
71.47%
1.96x
3.86x
3.56x
6.97x
7.91x
5.67x
6.57x
0.62x
232.98%
69.97%
1.99x
4.32x
3.01x
7.99x
14.30x
5.74x
12.93x
0.86x
0.59x
303.01%
75.10%
1.71x
4.52x
1.86x
8.15x
18.36x
6.40x
15.88x
0.90x
0.63x
308.62%
75.43%
1.71x
4.40x
2.38x
8.01x
16.45x
6.76x
15.59x
10.36%
0.94x
0.63x
291.46%
74.44%
2.00x
5.19x
2.22x
5.93x
15.80x
5.57x
14.25x
2.09%
7.95%
0.85x
0.53x
249.76%
71.41%
2.38x
5.72x
3.22x
5.53x
10.85x
5.38x
9.28x
2002
1.39%
7.81%
0.81x
0.51x
282.78%
73.88%
2.39x
6.14x
2.74x
6.01x
13.37x
5.81x
13.15x
2003
1.35%
6.17%
0.83x
0.53x
254.31%
71.78%
3.05x
7.05x
3.54x
5.93x
11.12x
5.42x
10.28x
2004
2.54%
6.15%
0.87x
0.51x
235.46%
70.19%
3.90x
8.38x
5.07x
5.21x
9.02x
4.83x
8.04x
2005
3.60%
6.04%
0.93x
0.57x
184.26%
64.82%
5.29x
10.67x
6.52x
4.47x
7.95x
4.20x
6.88x
2006
4.24%
7.00%
0.93x
0.53x
158.34%
61.29%
6.05x
12.76x
6.78x
4.92x
8.14x
4.80x
7.86x
2007
4.03%
7.25%
0.99x
0.55x
132.47%
56.98%
5.94x
11.45x
5.63x
4.79x
8.91x
4.71x
7.75x
2008
3.09%
7.69%
1.00x
0.55x
148.01%
59.68%
4.10x
11.35x
5.07x
5.02x
10.10x
5.02x
9.62x
2009
0.47%
7.46%
1.07x
0.59x
181.65%
64.49%
4.40x
9.43x
4.93x
5.49x
11.42x
5.07x
10.10x
2010
2.70%
6.50%
1.12x
0.69x
141.65%
58.62%
3.35x
12.21x
5.13x
5.04x
11.65x
4.78x
13.11x
2011
3.08%
5.41%
1.17x
0.70x
122.98%
55.15%
6.28x
15.32x
8.60x
4.28x
6.49x
3.93x
6.80x
2012
1.40%
5.85%
1.13x
0.69x
128.41%
56.22%
6.50x
12.80x
8.76x
5.22x
8.91x
5.22x
9.25x
2013
1.28%
6.09%
1.12x
0.71x
120.54%
54.66%
5.23x
12.22x
7.08x
6.13x
10.15x
5.70x
9.60x
2014
2.54%
6.00%
1.20x
0.79x
112.08%
52.85%
6.83x
13.48x
6.77x
5.92x
8.56x
5.18x
8.98x
2015
2.60%
5.78%
1.20x
0.77x
107.64%
51.84%
6.82x
14.29x
6.15x
5.57x
10.71x
4.41x
9.22x
Net
Profit
Margin
CAPEX
to
Revenue
Quick
Ratio
Total
Debt to
Equity
Total
Debt to
Capital
Current
Ratio
1995
0.90%
6.49%
0.93x
0.65x
231.37%
1996
1.89%
5.84%
0.84x
0.61x
1997
1.62%
9.03%
0.90x
1998
1.64%
10.56%
1999
1.42%
11.42%
2000
1.63%
2001
98
Table 58: Debt issuance of Japan's utility companies

Air Water Inc.
Chubu Electric Power Company, Incorporated
The Chugoku Electric Power Co.,Inc.
Daicel Corporation
Hokuren Federation of Agricultural Cooperatives
Hokuriku Electric Power Company
JFE Holdings, Inc.
The Kansai Electric Power Company, Incorporated
Kashima-Kita Electric Power Corporation
Kobe Steel Ltd.
Kuraray Co. Ltd.
Kyushu Electric Power Company, Incorporated
NC Miike Co., Ltd
Mitsubishi Corporation
Mitsui & Co. Ltd.
JX Holdings, Inc.
NIPPON STEEL & SUMITOMO METAL CORPORATION
The Okinawa Electric Power Company, Incorporated
ORIX Corporation
Osaka Gas Co., Ltd.
Showa Denko K.K.
Sumitomo Corporation
Teijin Ltd.
Tohoku Electric Power Co. Inc.
Tokuyama Corp.
Tokyo Electric Power Company Holdings, Incorporated
Tokyo Gas Co. Ltd.
Toshiba Corporation
Tosoh Corporation
Abl Co.,Ltd.
New Frontier Capital Management Co.,Ltd.
Maeda Corp.
Seika Corporation
Japan Energy Partners
Chiba Prefecture
Total Debt
Outstanding
154,861.00
269,017.00
2,936,214.00
50,940.00
1,960,594.00
86,957.00
1,298,394.00
NA
874,285.00
1,006,180.00
52,103.00
1,501,760.00
1,723,656.00
4,315,724.00
NA
709,855.00
59,444.00
3,340,367.00
3,410,535.00
12,736.00
701,019.00
NA
6,402,754.00
4,793,957.00
2,660,282.00
729,697.00
1,975,159.00
862,579.00
231,204.00
4,419,626.00
632,980.00
713,328.00
368,835.00
4,520,047.00
421,754.00
306,761.00
2,583,923.00
NA
283,195.00
7,018,090.00
728,597.00
1,341,384.00
271,526.00
239,714.00
334,207.00
NA
39,170.00
NA
81,342.00
288.00
8,397.00
NA
NA
NA
NA
Peak Debt outstanding

2020
2019
2017
NA
2018
2018 / 2019 / 2023
2018
NA
2018
2018
2022
2017
2017
2017
NA
2017
2021
2017
2017
NA
2019
NA
2016
2016
2018
2017
2017
2017
2018
2017
2018
2017
2021
2022
2018
2018 / 2021
2017
NA
2020
2017
2018
2069
NA
2016
2019
NA
2018/ 2021 / 2023
NA
2018 / 2019
NA
NA
NA
NA
NA
2024 / 2025
Unsecured Debt
122,994
79.4%
266,280
99.0%
2,245,293
76.5%
46,636
91.6%
768,927
39.2%
86,957
100.0%
489,052
37.7%
NA
NA
360,708
41.3%
1,006,180
100.0%
40,954
78.6%
1,519,094
101.2%
1,380,342
80.1%
2,065,719
47.9%
NA
NA
661,713
93.2%
59,236
99.7%
1,763,100
52.8%
3,369,024
98.8%
8,003
62.8%
644,526
91.9%
NA
NA
6,092,106
95.1%
4,600,743
96.0%
2,393,257
90.0%
729,806
100.0%
2,244,968
113.7%
849,256
98.5%
120,468
52.1%
4,126,095
93.4%
588,659
93.0%
343,550
48.2%
368,831
100.0%
3,913,707
86.6%
364,888
86.5%
306,758
100.0%
1,327,745
51.4%
NA
NA
276,691
97.7%
2,348,553
33.5%
727,897
99.9%
1,309,876
97.7%
269,017
99.1%
238,399
99.5%
334,207
100.0%
NA
NA
39,157
100.0%
NA
NA
74,022
91.0%
NA
0.0%
6,502
77.4%
NA
NA
NA
NA
NA
NA
NA
NA
Total
DEBT/EBITDA
2.48
1.06
7.75
4.97
10.90
1.13
13.15
0.00
7.92
NM
2.05
3.77
10.37
14.07
0.00
3.39
0.54
22.17
12.39
5.35
2.58
0.00
22.82
9.55
6.87
8.35
2.91
7.16
6.26
7.13
3.19
7.52
5.78
15.40
3.81
3.74
6.61
0.00
7.38
7.46
2.35
3.72
3.12
4.21
7.64
0.00
3.55
0.00
5.25
0.05
2.22
NA
0
0
0
99
Table 59: Ownership of Japans utility companies

Air Water Inc.
Ticker
TSE:4088
TSE:3407
Ownership
Public Company
Public Company
Insiders
1,316.04
254.44
Institutions
115,701.64
538,458.40
Corporate
16,797.61
NA
ESOP
8,796.15
26,972.77
Public/Other
183,676.66
495,398.04
Chubu Electric Power Company, Incorporated

TSE:9502
TSE:3877
Public Company
Public Company
369.59
37.16
340,527.08
6,030.02
155.09
9,317.38
29,204.66
NA
721,294.65
11,722.38

Daicel Corporation
TSE:9504
TSE:4202
Public Company
Public Company
280.59
308.84
156,484.72
167,807.81
1,010.08
44,693.58
10,235.46
7,334.71
251,471.23
263,449.61

Hokuren Federation of Agricultural Cooperatives
TSE:9509
Public Company
Trade Association
118.93
NA
75,491.64
NA
NA
NA
4,233.25
NA
125,932.43
NA

TSE:9505
TSE:5019
Public Company
Public Company
352.01
326.87
69,575.98
96,384.88
26.26
82,739.45
10,358.84
15,041.56
183,987.40
182,341.72

JFE Holdings, Inc.
TSE:8133
TSE:5411
Public Company
Public Company
186.91
142.52
11,811.61
256,048.71
61,116.15
12,519.53
1,269.53
NA
26,203.56
642,175.21

The Kansai Electric Power Company, Incorporated
TSE:9513
TSE:9503
Public Company
Public Company
541.26
350.79
264,840.52
156,408.06
NA
21,158.03
12,145.71
NA
329,258.84
463,907.21
Kashima-Kita Electric Power Corporation

Kobe Steel Ltd.
TSE:5406
Private Company
Public Company
NA
178.34
NA
87,613.54
NA
17,428.32
NA
NA
NA
282,229.35
Kuraray Co. Ltd.

Kyushu Electric Power Company, Incorporated
TSE:3405
TSE:9508
Public Company
Public Company
372.59
309.62
227,511.25
145,570.94
NA
572.30
NA
11,248.55
265,897.00
364,326.75
TSE:8002
TSE:1518
Public Company
Public Company
658.74
1,019.10
387,616.09
2,570.44
103.58
NA
NA
NA
628,677.64
12,077.06

NC Miike Co., Ltd
TSE:7261
Public Company
Private Company
103.36
NA
350,240.09
NA
21,813.99
NA
NA
NA
670,702.88
NA
Mitsui & Co. Ltd.
TSE:8058
TSE:8031
Public Company
Public Company
1,468.01
516.22
1,098,466.23
585,931.02
182.35
NA
NA
NA
1,851,470.11
1,818,103.73
JX Holdings, Inc.
TSE:5020
TSE:3863
Public Company
Public Company
290.82
154.09
410,788.73
99,521.27
42,841.85
7,657.35
NA
6,988.59
716,015.04
129,396.80
NIPPON STEEL & SUMITOMO METAL CORPORATION

TSE:5401
TSE:3861
Public Company
Public Company
472.28
6,924.73
639,676.31
104,136.24
45,104.22
8,140.97
1,022.10
10,904.66
1,427,118.28
317,556.48
The Okinawa Electric Power Company, Incorporated

ORIX Corporation
TSE:9511
TSE:8591
Public Company
Public Company
206.04
772.11
24,309.22
1,140,408.92
NA
723.71
3,381.71
NA
36,308.07
935,158.24
Osaka Gas Co., Ltd.

TSE:9532
TSE:9507
Public Company
Public Company
469.94
204.93
259,165.63
63,557.76
158.76
13,444.83
10,792.51
6,028.24
554,810.88
188,100.94
Showa Denko K.K.

Sumitomo Corporation
TSE:4004
TSE:8053
Public Company
Public Company
248.88
608.34
68,348.29
360,785.39
2,557.53
53,475.05
2,830.22
NA
90,257.51
1,045,301.80

Teijin Ltd.
TSE:5233
TSE:3401
Public Company
Public Company
101.02
259.67
142,758.30
117,724.03
2,943.25
3,876.90
NA
9,980.57
212,920.38
258,352.80
Tohoku Electric Power Co. Inc.

TSE:9506
Public Company
Private Company
288.15
NA
162,961.54
NA
NA
NA
19,825.20
NA
483,753.87
NA
Tokuyama Corp.
Tokyo Electric Power Company Holdings, Incorporated
TSE:4043
TSE:9501
Public Company
Public Company
24.14
108.03
24,612.16
144,015.81
1,136.36
2,333.91
NA
28,150.19
35,097.95
745,128.03
Tokyo Gas Co. Ltd.

Toshiba Corporation
TSE:9531
TSE:6502
Public Company
Public Company
374.48
296.27
463,697.49
270,525.99
13,075.36
27,767.91
20,794.00
NA
661,387.72
696,370.74
Tosoh Corporation
TSE:4042
TSE:4208
Public Company
Public Company
330.43
144.08
130,158.56
83,832.98
5,027.84
572.18
NA
NA
195,398.94
137,632.11

Abl Co.,Ltd.
TSE:5012
Public Company
Private Company
7.34
NA
84,104.55
NA
43,969.09
NA
NA
NA
253,266.00
NA

New Frontier Capital Management Co.,Ltd.
TSE:9535
Public Company
Private Company
735.95
NA
4,256.95
NA
5,375.40
NA
NA
NA
13,336.47
NA
Maeda Corp.
TSE:1824
NSE:9357
Public Company
Public Company
169.55
670.31
41,566.43
6,881.68
30,147.32
4,118.55
3,854.99
NA
78,793.68
16,281.95
Seika Corporation
TSE:8061
Public Company
NA
324.98
NA
1,968.21
NA
2,198.18
NA
NA
NA
10,516.05
NA

Private Company
Private Company
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
Chiba Prefecture
Government Institution
NA
NA
NA
NA
NA
100
Appendix C: Summary of Coal Plant Data
Table 60: Operating, under construction, and planned generating capacity by fuel type
Holdings,
Incorporated
Tohoku Electric
Power Co. Inc.
Chubu Electric Power Company,
Incorporated
Kyushu Electric Power Company,
Incorporated
The Kansai Electric Power Company,
Incorporated
Kobe Steel Ltd.
NIPPON STEEL & SUMITOMO
METAL
CORPORATION
Sumitomo
Corporation
Tokuyama Corp.
The Okinawa Electric Power Company,
Incorporated
Tosoh Corporation
Kashima-Kita Electric Power
Corporation
NC Miike Co., Ltd
Mitsui & Co. Ltd.
Osaka Gas Co., Ltd.
JFE Holdings, Inc.
Showa Denko K.K.
Toshiba Corporation
Teijin Ltd.
Hokuren Federation of Agricultural
Cooperatives
JX Holdings, Inc.
Kuraray Co. Ltd.
Daicel Corporation
Tokyo Gas Co. Ltd.
ORIX Corporation
Abl Co.,Ltd.
Air Water Inc.
Chiba Prefecture
New Frontier Capital Management
Co.,Ltd.
Seika Corporation
Maeda Corp.
Japan Energy Partners*
60,352
25,360
36,273
23,106
30,610
17,231
18,492
15,868
5,507
8,753
6,739
7,994
7,040
1,730
4,912
2,473
3,474
789
1,700
1,415
1,689
1,659
721
870
822
652
438
416
344
364
267
279
206
25
8
143
74
33
33
1
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
OPR
1,483
1,960
1,344
84
2,599
1,480
8
400
NA
NA
NA
38
280
NA
35
100
NA
NA
NA
NA
NA
NA
NA
110
NA
NA
NA
NA
37
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
204
NA
28
153
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
CON
4,339
15,047
1,426
1,445
2,701
700
873
1,726
4,220
2,900
320
365
500
NA
634
513
NA
NA
377
NA
NA
NA
623
500
NA
943
124
667
NA
120
NA
101
NA
70
NA
NA
NA
NA
NA
2,648
400
838
519
110
56
500
56
56
100
NA
180
1,100
15
15
500
PLN
868
863
845
898
869
866
894
871
806
695
949
934
886
906
867
1,046
932
578
985
1,140
1,066
995
1,118
900
826
1,140
1,130
767
862
1,070
1,140
1,130
812
386
386
637
1,140
986
1,140
403
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
Fleet Emissions
[kg.CO2/MWh]
-148,404
-567,470
-257,649
-170,330
-260,347
-293,944
-117,322
-121,374
-415,859
-95,353
-324,074
-247,965
-59,120
-32,470
-23,023
-48,692
-34,133
NA
-307,539
-69,890
-38,402
NA
-378,374
-105,082
NA
-220,809
-40,645
-111,698
-14,054
-82,990
-8,177
-236,510
-123,370
-26,527
NA
-388,400
-43,099
-1,753
-29,629
-180,097
-41,961
-322,419
-716,755
NA
-30,055
NA
-7,339
NA
NA
-413
NA
-7,599
-2,533
NA
-37155
All Capacity [MW]
17,472
54,852
16,045
12,829
30,322
15,525
6,547
5,962
26,328
2,058
2,623
2,893
4,702
883
2,369
1,466
678
647
2,168
705
704
175
808
1,755
149
1,247
802
303
158
550
50
294
42
74
26
76
19
9
13
1,216
543
309
44
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
Coal
OPR
Oil
CON
Gas
Nuclear
PLN
62%
58%
33%
19%
Renewables
123%
284%
28%
63%
243%
220%
889%
101
Coal-Fired
Generation [GWh]
CAPEX
[mJPY, 2015]
Table 51 aggregates data on the operating capacity of all generation and coal generation only across each
of our 55 companies. This table is ordered according to total coal generation capacity.
It is interesting to note that even though Tohoku EPC has less coal capacity than TEPCO, it has greater
MWh of generation; perhaps replacing greater lost nuclear capacity. Another point that stands out from
the data is that a number of steelmakers and conglomerates have coal generation capacity in excess of
some regional monopolies.
102
Table 61: Detailed exposure of 55 companies with operating coal-fired power stations
KOBE STEEL LTD
J-POWER
2451
4702
2058
26328
3130
5712
6547
11873
15525
30070
54002
16895
17472
1750
8253
12770
9443
79345
13208
19890
25479
38402
56450
110216
152098
67733
72690
707
714
881
632
540
761
360
864
566
558
565
453
463
444
530
423
1989
1986
1993
1977
1990
1979
1999
1988
1991
1981
1980
1982
1987
1988
1987
1987
1983
Avg. Age
667
680
754
883
888
1106
1475
1800
1950
2250
2903
3252
3646
4100
5900
5751
8414
MW Coal
3474
2473
4912
1730
4874
7040
8753
5507
9859
14709
18492
19870
16532
29129
21993
38147
59943
GWh Coal
TOSOH CORP
OJI PAPER CO LTD
MITSUBISHI CORP
1755
878
175
704
1155
2251
647
9009
1844
1659
2130
2342
5553
789
446
493
995
758
444
528
578
2006
1987
1975
1987
1975
1990
1983
149
170
175
281
283
406
647
870
721
1659
1689
1415
1700
789
MITSUI & CO LTD

OSAKA GAS CO LTD
822
826
652
602
1970
149
822
1992
124
3475
1996
1990
149
652
1979
1247
415
1976
416
1990
JFE STEEL CORP

SHOWA DENKO KK
1449
603
1998
438
541
1484
450
2001
416
802
480
2000
MAZDA
TEIJIN LTD
143
89
24
33
33
74
17
26
344
303
801
1999
78
166
350
1395
386
1989
76

562
1399
386
1971
KURARAY COMPANY LTD
61
ITOCHU ENEX CO LTD
167
70
209
529
1969

364
303
278
1980
267
42
348
986
2011
50
ASAHI KASEI GROUP
115
166
246
50
77
33
409
279
147
134
48
TOSHIBA CORP
5900
1990
25
116
538
2006
206
1216
559
158
2011
39
TOKYO GAS
543
706
149
0
0
0
0
0
0
0
0
0
0
32
Ube Industries
309
120
ORIX CORP
26
MARUBENI CORP
44
0
0
0
0
0
0
0
0
0
0
ABL Co Ltd.
Air Water Inc.
Chiba Prefecture
Hiroshima Gas
Hokuzai Transport
IDI infrastructures F-Power
Joban Joint Power Co
Maeda Corporation
Meiko Trans
0
0
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
Seika Corporation
10
0.18
0.27
0.41
0.2
100%
100%
23%
0%
83%
24%
0.84
0.88
0.84
0.93
0.69
1.09
0.93
0.9
820
3617
1100
820
3617
3617
4699
4699
7462
2070
7627
1100
4536
9606
439
2898
2022
4491
2070
820
4699
2483
0.2
0.26
0.77
63%
0.87
17263
10
0.55
12%
0.68
0.8
1991
0.17
0%
0.89
1993
0.26
58%
0.91
0%
868
2000
1.7
0%
39%
845
1997
0.42
72%
3617
1991
10
0.41
12348
865
0.18
0.88
0.77
869
1989
0%
0.85
0.84
868
1992
10
0.3
0%
1.09
0.81
881
1984
10
0.21
0%
0.71
0%
894
1992
0.13
64%
46%
873
2007
0.05
100%
949
2003
0.9
0.93
0%
0.88
0.24
0%
0.92
12
0%
0.9
0.84
0.9
0%
0.84
0.53
0%
0%
0.68
0%
100%
9
0.89
0.22
0.15
0.53
0.9
11
0.45
4699
0%
0.88
0.9
0%
0.93
0.24
0%
1.13
0%
0.54
0.88
100%
12
0.28
0.88
1100
17263
0.2
5
100%
0.9
0.02
10
0.03
0%
0.95
0.68
0%
0.92
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
4699
820
820
2070
2022
820
0.68
0%
4699
0%
0.39
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
0%
10
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
0
10
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
0.23
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
12
10
10
Average Potential
Nuclear (MW)
12
0.1
806
1991
1995
0.13
695
1999
2006
0.53
886
1990
934
1977
862
2005
906
1999
1070
2002
10
867
1983
1983
578
1994
1990
985
1973
932
1140
2003
1046
1066
1975
1140
2020
1990
1130
1999
1984
812
1998
826
386
1975
1140
386
1969
1994
637
1986
1989
1140
1983
767
986
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
403
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
1140
1130
995
CCS Potential
1984
Baseline Water Stress
2000
PM 2.5
900
Average Age Coal
1118
Avg. Coal CO2

Intensity
Heat Stress
Values for Average CO2 Intensity, Average Age, PM 2.5, Baseline Water Stress, CCS Potential, Heat Stress, and Average
Potential Nuclear are weighted according to the MW capacity of each constituent plant.
Joint ownership of plants is taken into account by fractional attribution of MW capacity according to ownership percentages.
Coal Operating Capacity
SUMITOMO CORP
913
10424
923
Coal Operating Capacity
TOKUYAMA CORP
2369
3958
Avg. CO2 Intensity
Tonen General Sekiyu
103
All Operating Capacity

3486
GWh

681
1592
MW
Table 52 below examines the planned capacity of all generation and coal generation only across each of our 55
companies. This table is also ordered according to total coal generation capacity. As in the previous table
detailing operating plants, a number of industrial companies in Table also have greater planned coal-fired
capacity than some regional monopolies. Also of note is that fact that the utility with the second biggest
planned coal capacities (J-Power at 4,020 MW) also has the second smallest Average Potential Nuclear
capacity risks at only 702 MW. Perhaps unsurprisingly, the regional monopolists in the areas of Tokyo and
Kansai which are expecting to see some of the most robust electricity demand growth also have the highest
and third highest planned coal capacities (5,682 MW and 3,462 MW).
104
Table 62: Detailed exposure of 55 companies with planned coal-fired power generation
J-POWER
TOKYO GAS
KOBE STEEL LTD
Maeda Corporation
MARUBENI CORP
OSAKA GAS CO LTD
Tonen General Sekiyu
Chiba Prefecture
Ube Industries
ORIX CORP
JFE STEEL CORP
MITSUBISHI CORP
Joban Joint Power Co
SHOWA DENKO KK
ASAHI KASEI GROUP
ABL Co Ltd.
IDI infrastructures F-Power
TEIJIN LTD
Hokuzai Transport
Air Water Inc.
Hiroshima Gas
Meiko Trans
Seika Corporation
MITSUI & CO LTD
SUMITOMO CORP
TOSHIBA CORP
ITOCHU ENEX CO LTD
KURARAY COMPANY LTD
MAZDA
OJI PAPER CO LTD
TOKUYAMA CORP
TOSOH CORP
54169
12061
11757
7905
7241
3953
6639
3005
2209
1912
1829
3091
1409
2894
1366
1361
1339
1091
1384
2223
878
963
493
342
530
303
275
193
154
154
154
42
42
0
2,246
2,255
1,150
1,241
707
243
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
505
738
659
563
616
781
579
839
719
865
900
649
857
936
877
807
743
872
495
548
767
564
652
786
930
800
849
790
610
900
849
794
794
794
447
224
504
438
191
0
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
2015
2020
2019
2018
2019
2022
2020
2023
2024
2020
2020
2018
2017
2022
2023
2025
2035
2024
2017
2025
2020
2021
2021
2017
2018
2018
2019
2017
2017
2018
2019
2018
2018
2018
2023
2007
2018
2020
2019
2015
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
GWh
Average CO2
Intensity
MW Coal
25840
11004
9443
5959
4116
3953
3559
3005
2044
1829
1829
2395
1400
2894
1366
1361
1339
1091
1074
915
878
801
493
342
530
303
275
193
154
154
154
42
42
0
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
GWh Coal
798
796
803
785
859
781
872
839
804
900
900
781
865
936
877
807
743
872
659
807
767
727
652
786
930
800
849
790
610
900
849
794
794
794
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
Average Coal CO2

Intensity
2021 6
2021 6
2024 6
2026 7
2020 4
2022 6
2022 9
2023 8
2024 5
2020 4
2020 4
2022 9
2017 7
2022 9
2023 4
2025 6
2035 6
2024 4
2018 8
2020 4
2020 5
2020 4
2021 3
2017 10
2018 10
2018 7
2019 4
2017 10
2017 6
2018 5
2019 5
2018 4
2018 4
2018 0
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
NA N
A
Average Age Coal
PM 2.5
0.25
0.29
0.2
0.3
0.13
0.13
0.55
0.24
0.08
0.12
0.12
0.26
0.91
0
0.08
0.17
0.17
0.05
0.08
0.12
0.15
0.07
0.05
0.89
0.1
0.15
0.07
0.28
0
0.08
0.19
0
0
0
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
Baseline Water
Stress
26%
67%
53%
71%
44%
73%
100%
0%
87%
100%
100%
50%
22%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
100%
100%
0%
100%
0%
0%
100%
0%
100%
100%
100%
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
CCS Potential
(Fraction)
0.64
0.54
0.55
0.67
0.33
0.58
0.84
0.94
0.49
0.29
0.29
0.96
0.94
0.88
0.35
0.44
0.44
0.3
0.81
0.29
0.44
0.39
0.29
0.92
0.9
0.88
1.13
0.88
0.45
0.45
0.44
0.42
0.42
0
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
Heat Stress
8936
702
4276
7619
1100
885
0
17263
15108
1100
1100
17263
14577
2022
876
1100
1100
820
11851
1100
1100
12029
17263
1100
4699
17263
2070
2022
4699
820
820
3617
3617
3617
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
Average Potential
Nuclear (MW)
Values for Average CO2 Intensity, Average Age, PM 2.5, Baseline Water Stress, CCS Potential, Heat Stress, and Average Potential
Nuclear are weighted according to the MW capacity of each constituent plant.
Joint ownership of plants is taken into account by fractional attribution of MW capacity according to ownership percentages
Coal Planned Capacity
5357
4020
3462
2355
1500
1445
1300
1100
750
667
667
600
508
500
500
500
500
400
390
333
320
292
180
124
120
110
100
70
56
56
56
15
15
0
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
105
All Planned Capacity
14722
4339
4220
2701
2648
1445
2900
1100
838
700
667
826
513
500
500
500
500
400
519
943
320
377
180
124
120
110
100
70
56
56
56
15
15
0
1,726
873
634
623
365
101
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
MW
Average Age

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Stranded Assets and Thermal Coal in Japan:

An analysis of environment-related risk exposure

About the Sustainable Finance Programme

Global Advisory Council

About the Authors

University of Oxford Disclaimer

INVESTMENT RISK HYPOTHESES .................................................................................... 33

3 POTENTIAL SCALE OF STRANDED ASSETS FACING COAL-FIRED POWER

REFERENCE LIST ..................................................................................................................... 91

BNEF (2015) global trends in renewable energy investment 2015

Table 1: Replacement of retiring capacity by fuel type

Under Construction and

Utility exposure to LRHs

LRH-3: Local Air Pollution

LRH-#: LOCAL AIR

LRH-2: PLANT AGE

Table 3 Summary of financial and environment-related risk exposure

Table 4: Units of measurement of LRHs

Carbon intensity of generated electricity

Average temperature change in 2035 above preindustrial levels

Utility exposure to NRHs

Table 5: Summary of National Risk Hypotheses

NRH-1: Future Electricity Demand

NRH-6: Growth of Gas-Fired Power

NRH-4: Growth of Decentralised Renewables and the Utility Death Spiral

Scale of potential asset stranding

Estimated Unrecoverable Cost (bn)

Planned and Under Construction

Table 6: Estimates of total stranded assets ( billion/US$)

Utility case studies

Table 8: Selected utility estimates of total stranded assets(billion)

OPR 40% 58% 88% 55% 32% 53% 53%

Table 9: Units of measurement of LRHs

Carbon intensity of generated electricity

Average temperature change in 2035 above preindustrial levels

Table 10: Environment-related risk exposure of J-Power operating plants

LRH-6: FUTRE HEAT STRESS

LRH-7: REGIONAL NUC.

LRH-4: WATER STRESS

LRH-3: LOCAL AIR POLLN

LRH-2: PLANT AGE

LRH-1: CARBON INTENSITY

Table 11: Environment-related risk exposure of J-Power planned plants

Tokyo Electric Power Company

Table 12: Environment-related risk exposure of TEPCO operating plants

LRH-7: REGIONAL NUC.

LRH-6: FUTRE HEAT STRESS

LRH-5: CCS RETROFITABILITY

LRH-4: WATER STRESS

LRH-3: LOCAL AIR POLLN

LRH-2: PLANT AGE

LRH-1: CARBON INTENSITY

Table 13: Environment-related risk exposure of TEPCO planned plants

Chubu Electric Power Company

Table 14: Environment-related risk exposure of Chubu EPCO operating plants

LRH-6: FUTRE HEAT STRESS

LRH-7: REGIONAL NUC.

LRH-4: WATER STRESS

LRH-3: LOCAL AIR POLLN