Surprised by cheap clean energy, coal stalwart adds renewables

[TOKYO] Marubeni Corp, the Japanese trading house for whom coal makes up about a quarter of its power generation, never expected renewable energy prices to plunge as much as they have.

Seizing those falling costs, the company plans to add one gigawatt of clean energy over the next five years as it halves its coal-fired generation by 2030, according to Masumi Kakinoki, chief executive officer of the company's electricity generation business.

"No one thought the cost of renewable energy would drop this much," Mr Kakinoki said in Tokyo during an interview last week. "There have been breakthroughs in energy technologies all over the industry."

The falling cost of renewables has strengthened the business case for shifting away from coal so much that even developing countries added more clean power capacity than fossil fuel generation for the first time ever last year, according to Bloomberg NEF. The cost of solar power generation has plunged 53 per cent from the first half of 2015 while that of onshore wind dropped 39 percent, according to BNEF.

Marubeni said in September it will cut its coal-fired power generation capacity to about 1.5 gigawatts by 2030 from roughly three gigawatts as part of its efforts to tackle climate change. The company also said it will double the share of clean energy to 20 per cent of its total power generation capacity by 2023.

The trading house plans to reduce its coal capacity by selling projects or not extending existing contracts. Mr Kakinoki declined to say which ventures are under consideration for sale.

At least two of the company's coal-fired projects abroad have yet to begin operation. The Nghi Son 2 project in Vietnam, which has drawn criticism from anti-coal activists because it uses so-called supercritical technology and is slated to begin operation in 2022, won't upgrade to a more advanced system because it would require another environmental assessment, said Mr Kakinoki. Marubeni's Cirebon Expansion project in Indonesia is expected to start running in 2022.

Marubeni, which is Japan's largest independent power producer, is active in 25 countries including Japan and has about 12.2 gigawatts of capacity. It's also considering supplying new gas-fired power plants in Asia, Mr Kakinoki said.

"We want to expand our service to procuring gas, beyond just being in charge of power generation," Mr Kakinoki said, with Vietnam, Bangladesh and Myanmar seen as potential markets.

BLOOMBERG