Eurus Energy May Scrap Project as Wind Power Flounders in Japan 

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By Yoshifumi Takemoto

Sept. 1 (Bloomberg) – Eurus Energy Holdings Corp., Japan’s biggest wind power supplier, may scrap a plan to build turbines in the north of the country after the regional utility said it will cut purchases of wind-generated power because supply is unreliable.

The project for Hokkaido island would not be profitable under a power purchase plan offered by Hokkaido Electric Power Co., Eurus Energy President Kiyoshi Haraikawa said in an interview on Aug. 22. Hokkaido Electric in June told wind power companies bidding to supply the utility that it wants to buy 25 percent less electricity than offered.

A national plan to triple use of electricity generated from the wind is being undermined by utilities such as Hokkaido Electric and Tohoku Electric Power Co., which are concerned about power surges from wind farms. Unlike Germany, the world’s largest wind-power generator, Japan lacks the national grid needed to iron out supply fluctuations from wind projects.

“The reluctance of utilities to buy power from windmills will make it difficult for the government to triple the use of wind power,” said Chuichi Arakawa, a Tokyo University professor and vice chairman of the Japan Wind Energy Association. “It’s an urgent government task to form networks between power suppliers.”

Soaring crude oil costs and restrictions on carbon-dioxide emissions, blamed for global warming, mean that more countries and utilities are investing in renewable power sources. Wind power is benefiting from government subsidies across Europe and in the U.S. as governments try to boost output from pollution- free sources.

`Unreliable Supply’

Japan’s government drafted a plan in May 2005 to boost wind power generation to 3 million kilowatts in the five years to March 2011. As of March, Germany had 14.61 million kilowatts, the U.S. 6.35 million kilowatts and Japan 1.07 million kilowatts. Power from Germany’s 17,600 wind turbines can meet about 6 percent of the nation’s demand.

“It’s understandable that power companies are buying less wind power out of concern over unreliable supply,” said Arakawa.

Power surges can be a problem for industrial customers, said Hirotaka Hayashi, a spokesman at Hokkaido Electric. Utilities often need to cut back power generation at other plants to lessen the effect of excess power from wind energy.

“Continental European countries such as Germany and Denmark can transfer excess power from windmills to other countries,” said Arakawa. “The electricity networks of Japan’s 10 utilities aren’t connected like those in Europe. That’s the reason why it’s difficult to install windmills in Japan.”

To ensure steady supply, Tohoku Electric Power Co., Japan’s fourth-biggest generator, in March started requiring owners of new windmills to store energy in batteries before distribution rather than send the electricity direct to the utility, said spokesman Satoshi Arakawa.

Increased Costs

That requirement has increased wind project installation costs to 300,000 yen ($2,560) per kilowatt, from 200,000 yen, according to Toshiro Ito, vice president of EcoPower Co., Japan’s third-biggest wind power supplier.

“We can never make money unless utilities accept a price increase from the current 9 yen per kilowatt, which is very unlikely,” said Ito. EcoPower is a subsidiary of a machinery maker Ebara Corp.

Eurus Energy’s Hokkaido project “will be unprofitable if we stop supplies for a quarter of the year as Hokkaido Electric demanded,” said Haraikawa.

Eurus Energy, which is 60 percent owned by Tokyo Electric, Asia’s biggest power producer, and 40 percent by Japanese trading company Tomen Corp., operates 10 wind farms in Japan with total generating capacity of about 240 megawatts. The Tokyo-based company is also involved in projects in the U.S. and Europe.

“If the government really wants to triple wind power, it should subsidize operators,” said Satoshi Abe, a power and gas analyst at Daiwa Institute of Research in Tokyo. “But that’s probably impossible as it already helps with about 10 billion yen ($85 million) a year to windmills.”

Bird Killers

The expansion of wind power in Japan and elsewhere also faces opposition from an unlikely quarter – ecologists. Not all environmentalists support wind turbines due to their noise level and negative effects on bats and birds.

Japan’s Wild Bird Society is demanding a stop to four projects because wind turbines caused the deaths of five white tailed eagles, designated by the government as an endangered species, since 2004 and six black kites since 2003.

“It’s natural that people oppose windmills as they’re very noisy machines,” said Daiwa Institute’s Abe.

To contact the reporter on this story: Yoshifumi Takemoto in Tokyo at ytakemoto@bloomberg.net .