Why does Japan believe in domestic fuel cell? Adaptation to European market?

Takahiro Kasuh Osaka Gas Co. Ltd.

Heating 29%

DWH 33% Others

38%

Energy Market in Japan

2

Energy Trend in Japan

Japan Source: Jyukankyo Research institute inc.

France

Heating 73%

DWH 9%

Others 18%

Germany

DWH 7%

Others 9%

Heating 58%

Energy Consumption per Household

1.9

2.8

2.2

0.9

times as much as 1973

Commercial

Residential

Source:Agency for Natural Resources and Energy

0

2

4

6

8

10

12

14

16

18

73 75 80 85 90 95 00 05 10 （年度）

（1018J）

Industrial

Residential

Transportation

65.5%

9.2%

16.4%

43.9%

18.8%

22.9%

Commercial

14.4%8.9%

[FY]

0

100

200

300

400

500

600

700

800

900

2006 2007 2008 2009 2010 2011 2012

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2006 2007 2008 2009 2010 2011 2012

Competing Conditions in Hot Water Supply Market in Japan

3

Electric Heat Pump

Conventional Boiler (instantaneous water heater)

Kerosene Boiler

High Efficiency Hot Water Unit

[103 unit]

[103 unit]

Condensing Boiler

Great East Japan Earthquake

Ene-Farm:Residential fuel cell CHP

ENEFARM type S

(SOFC)

ENEFARM

(PEFC)

MANUFACTURES AISIN, JX ENERGY TOSHIBA, PANASONIC

CAPACITY 700W 700-750W

GENERATION EFFICIENCY (LHV)

46.5% 39.0%

TOTAL EFFICIENCY

(LHV)

90% 95%

PRICE € 21,162 € 15,346 € 1 = \ 130

Natural gas

Grid (No reverse flow)

Residential Cogeneration System Concept

Generator (Fuel Cell)

Electricity

Hot water supply floor heating

Back-up gas boiler

Hot water supply and central heating

unit

Composed of a generator and a hot water supply and central heating unit.

Produce electricity and hot water.

Cell Stack

Fuel Processor

Heat Recovery System

Inverter

Involvement of the government

6

Ministry of Economy, Trade and Industry

Subsidy

Demand forecast Policy proposals

FY 2009 2010 2011 2012

Subsidy unit price € 10,769 € 10,000

€ 8,077–

6,538 € 5,385 –

3,461

Number of units

5,030 4.985 18,067 14,806

End users

Related organization （Advanced Co-generation and Energy Utilization Center Japan）

City Gas companies LPG Companies

Aisin Seiki

JX Nippon Oil & Energy

Joint development / OEM supply

In-house development &

OEM supply Toshiba Fuel Cell Power System Panasonic

€ 1 = \ 130

Market Trend in Japan

7

5 ,030 5 ,030 4 ,98510 ,015

18 ,067

28 ,082

14 ,806

42 ,888

0

5,00010,000

15,000

20,00025,000

30,000

35,00040,000

45,000

（Sales numbers）

2009 2010 2011 2012

One fiscal year

Accumulated Total

(2012.12)

Gas Tariff Plan Providing approximately 25% discount compared to the standard tariff for customers using Ene-Farm.

Utility (Annual) Comparison (Example)

Residential Fuel Cell

Conventional System

Paying to Power Company

Paying to Gas Company

€ 561.5 : Cost Reduction

Paying to Gas Company

Paying to Power Company

Energy consumption Energy Expense

Residential Fuel Cell

Conventional System

Power Consumption

Gas Consumption

Increase

Gas Consumption

Power Consumption

€ 1 = \ 130

Maintenance System

Systems are inspected and some parts are replaced every 3.5 years.

In the unlikely event of a malfunction, repairs are provided for free.

Periodic Inspection Maintenance

"10-Year Full Maintenance Support" Assures the Reliability of Our Residential Fuel Cell Systems

• Replace Parts: Ion exchange resin, Two air filters • Inspection period: 40min

• Failure rate is being improved significantly (about 1/10 compared to 2009)

Influence of Great East Japan Earthquake on Energy Business(11th March 2011)

Electricity shortages stemming from the nuclear power plant crisis and subsequent suspensions of their operations

A rise in interest for distributed power generation

Fuel Cell sales exceeded initial expectations.

We launched new FC which continues to generate power at blackout time.

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Exclusive Outlet of blackout time

Others 7.4%

Thermal 58.6%

Nuclear 34.0%

Nuclear

Thermaｌ

Contribute to higher levels of CO2 emission reduction

Adopted more than 40% of the ENEFARM customers

10

Heat Utilization

Heating

Power Generation

Natural Gas

Electricity

Hot Water Supply

Lighting TV

Shower Gas-Heated-Water Floor Heating

Electricity

Sunlight

Electrical Power Sold

Hybrid Generation System (Combining CHP with Solar Power Generation)

Amount of Electricity sold

Amount of Electricity generated by Ene-Farm

CO2 emission by approx. 3.5 ton per year

Ene-Farm + PV

PV in house consumption

Amount of Electricity Used in the Home

Further Development for Expansion

Future Challenge > Target Price: € 4,000

> Target numbers: 5.3million units in 2030

> Electric Efficiency: 55%(LHV)

> Downsizing: Adaptable to housing complex

Combination with a Smart Energy Network System > Starting field test

Introduction to Commercial market in near future

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Field test unit (55%)

Back-up Boiler

Generator & Hot water supply unit

We cannot solve every problem by Fuel Cell

Change in household compositions of Japan

Reduction in the population in Japan

Requirement to reduce CO2 emission

In the future, penetration of Fuel Cell may be around 10% of the all households and Condensing boiler would be major for single-family homes ??

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The household which has difficult installing FC

single-person married-couple

2000 27.6% 18.9%

2010 32.4% 19.8%

2035(prospect) 37.2% 21.2% Source:National Institute of Population and Social Security Research

Global Expansion (Adaption to European Market)

Panasonic:Viessmann > The Viessmann Group has announced its

cooperation with Panasonic in the field of PEM fuel cells.

> The specific characteristics of this type of fuel cell make it the ideal choice for single-family homes with low heating demands.

Aisin:Bosch > Bosch presents power-generating heating

system integrates generating module supplied by Aishin Seiki into an overall system.

> Field test starts in Germany, United Kingdom, the Netherlands, and France in 2014

13

Yomiuri Shimbun May 10th 2013

Technical Issue

Differences of Gas Quality > Nitrogen, Oxygen, Sulfur Compounds etc.

> Fluctuation of Gas Calories

Differences of Installation Standard > Voltage, Power Quality, Noise etc.

> Compliance with Local Standard & Codes

> Indoor Installation ; basement, wall hung etc.

Adaption for existing heating system and boiler as a retrofit solution > Hydraulic Scheme

> Control Strategy with the existing boiler 14

Economical Issue Comparison of utility charge

15

Electricity Gas Mobile phone

Germany 144 96 241

France 81 89 135

Japan 100 100 100 Source: Survey result by Consumer Affairs Agency (2010)

Promotion Idea Special Tariff for Fuel Cell

Support from Government (Tax, Subsidy)

Establishment of Organization for Sales Promotion

Summary

Japanese Gas Companies have engaged in joint-development ventures with fuel cell manufactures and launched residential micro-CHP (ENEFARM) in 2009.

The cumulative total numbers of ENEFARM sold are steadily increased with the subsidy from the government affected by the Earthquake.

Cost reductions are required for further expansions.

Japanese manufactures are supplying fuel cell units to boiler makers in Europe.

Discount tariff and aids from governments are helpful for smooth take-off.

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