Oil Wholesaler Builds Solar Plant Near Coal Mine

Oil Wholesaler Builds Solar Plant Near Coal MineHiraoka Sekiyu is an oil dealer based in Jizohamacho, Kishiwada City, Osaka Prefecture. It faces Hannan Port. It has two mega (large-scale) solar power plants in eastern and western Japan. In the east is the 2MW-output plant in Kisarazu City, Chiba Prefecture, and in the west is the 2.75MW (2MW + 0.75MW systems)-output plant in Arao City, Kumamoto Prefecture (Fig. 1).

As a medium-sized oil dealer, whose marketing area covers six prefectures (Osaka, Kyoto, Hyogo, Shiga, Nara and Wakayama) in the Kinki area, Hiraoka Sekiyu runs a solar power generation business in Kyushu and the Kanto area, with which it has no direct connection.

Domestic sales of gasoline, heavy oil and other petroleum fuels have been declining since the peak in the mid-2000s, excluding those needed for power generation after the Great East Japan Earthquake. Automobile oil sales dropped because of the penetration of fuel-efficient vehicles while commercial and industrial oil sales fell because of efforts to enhance energy conservation and conversion for environmental protection.

Hiraoka Sekiyu's mainstay business is fuel delivery and wholesale, targeting plant boilers and heavy machinery at construction sites, and delivering light oil and heavy oil by lorries (Fig. 2). With sales reaching ¥10 to 11.5 billion (approx US$98 million to 113 million) and revenue remaining flat over the last few years, Hiraoka Sekiyu's business is not necessarily showing any particular signs of stagnation.

"We cannot be optimistic about our future, considering this industry is easily affected by the economy," President Kenichi Hiraoka said.

The company has also been attempting to diversify its business by running three gas stations for passenger cars and trucks in Kishiwada, Settsu and another city in Osaka Prefecture. Although the sales to drivers are small-lot, Hiraoka said, "The demand is steady compared with plants and construction sites." He said this move is meant for risk management purposes.

Hiraoka Sekiyu embarked on the photovoltaic (PV) power generation business in early 2011. It took over HUG Energy Co Ltd (Sakai City, Osaka Prefecture), which was a constructor specializing in PV power generation systems.

"We were looking for another mainstay business that would come next to fuels," Hiraoka said.

Entry to EPC business by taking over constructor

Nevertheless, the PV power generation business is something completely different from its mainstay business of fuel dealing. In fact, the presence of Director Yoshiyuki Nose, general manager of the Business Strategy Department, was a significant factor behind Hiraoka Sekiyu's PV power generation business. Nose previously worked for Teikoku Databank Ltd, an established corporate credit research firm. And Hiraoka Sekiyu was one of the companies with which he was engaged when he was working at Teikoku Databank's Sakai branch. He transferred to Hiraoka Sekiyu and then urged President Hiraoka to take over HUG Energy.

At that time, most home-use solar panel constructors were each affiliated with a certain panel manufacturer. But HUG Energy was one of the few constructors that could handle any manufacturers' panels. It was the time when the introduction of the feed-in tariff (FIT) program in 2012 started to be felt. Nose, who was expecting growth in the reusable energy area, focused on HUG Energy.

"HUG Energy was then just a subcontractor only entrusted with installation work by solar panel dealers, but it was a group of experts who could install and construct any manufacturers' panels," Nose said, highly valuing HUG Energy's potential. "Should sales power be acquired on the basis of these engineering capabilities, we could start to provide engineering, procurement and construction (EPC) services and receive orders for solar power plant construction following execution of the FIT program."

Despite the fact that HUG Energy was just a local enterprise with fewer than 20 employees, President Hiraoka accepted the opinion of Nose, who had been directly communicating with local small and medium-sized firms as part of his job to collect credit information. Nose believed "Hiraoka Sekiyu can start a new business by combining its reputation established through more than 50 years of business, HUG Energy's construction technology and my data collection skills," and formulated a growth strategy.

While entering the EPC service business for PV power generation systems through HUG Energy, Hiraoka Sekiyu also embarked on its power generation business. The 2MW-output mega-solar power plant completed in Arao City in April 2013 was its first project.

According to a newspaper report (May 2, 2013 issue of Nishinippon Shimbun) on the completion ceremony, Arao City's Mayor Junji Maehata said in his complementary speech, "The completion of a mega-solar power plant in a place from where the Manda Coal Mine can be viewed is a symbolic event that reflects energy transition. We would like to make the most of it as a teaching material to disseminate municipal history and information about the environment by word of mouth."

Coal mine aiming to be World Heritage site

The Manda Coal Mine was one of the mine mouths at Japan's largest coal mine complex, the Mitsui Miike coal mine, which was shut down in 1997. Although the Manda Coal Mine itself was closed down in 1951 (Showa 26), the infrastructure and facilities such as the second shaft tower (an iron tower that transports miners in a cage up and down the mine shaft) and the wire winches for bringing the cage up and down have been kept as they were when the mine was in operation (Fig. 3 & 4).

The mine is also being focused on as an industrial heritage site that supported Japan's modernization, with the local municipality continuing in its efforts to make it a World Heritage site as one of the "modern industrial heritage sites of Japan's Meiji era" highlighting such fields as iron, coal mines and shipbuilding (Fig. 5). In September 2013, the Japanese government decided to propose the Manda Coal Mine as a World Heritage candidate to UNESCO.

'Arao City's 1st mega-solar power plant'

Hiraoka Sekiyu, which had been looking all over Japan for a construction site, chose this location because it fulfilled the conditions of a "suitable place." Nose said, "I could leverage my experience and connections from my previous job, which handled corporate information, across Japan when seeking land and negotiating rent."

The 30,000m2 site is reasonably close to the Manda Coal Mine as well as Kyushu's largest amusement park, Greenland, which was developed on idle land belonging to Mitsui Kozan Co Ltd, the former owner of the Miike coal mine complex. Greenland Resort Co Ltd, which owns the land and runs the amusement park, had once considered developing a golf course there, but the land was eventually left unused.

In the field investigation, Nose and other staff members confirmed that there was nothing to block the sunshine despite the surrounding small mountains and hills (Fig. 6). There was also a power cable running relatively close. It was October 2012, three months after the FIT program was implemented, that Hiraoka Sekiyu signed a 20-year rent contract at an annual rate of 200 yen/m2 with Greenland Resort.

Looking back, President Hiraoka said, "Our early engagement in mega-solar power plants boosted our standing in local society as a result." Local papers reported the news as "Arao City's first mega-solar power plant construction" immediately after the land lease contract was signed.

Many municipalities are promoting mega-solar power plant construction in Kyushu, where sunshine is abundant, and Kumamoto Prefecture, where Arao City is located, is also proactive. In its "General Energy Plan" formulated in 2012, Kumamoto Prefecture set a goal to "provide power equivalent to the amount consumed by all homes in the prefecture (1,000,000kL on a crude oil basis) by facilitating new energy introduction and enhancing energy-saving efforts."

Stable income from solar power helps corporate management

Kumamoto Prefecture is also striving to attract mega-solar power plant construction. One of its promotional measures is the "triangular agreement" signed by the prefecture, the municipality and the enterprise that has finalized a construction plan in the prefecture.

The agreement's content is not unusual, including items such as "the prefecture and the municipality would cooperate to enable smooth construction," "the enterprise would strive to develop regional industries" and "the three parties would endeavor to diffuse PV power generation and enlighten people," but Kumamoto Prefecture announces the agreement at a press conference and on its website every time a new triangular agreement is signed. Such assistance was helpful for a small and medium-sized firm outside the prefecture like Hiraoka Sekiyu to smoothly carry out the business.

The mega-solar power plant that Hiraoka Sekiyu constructed in Arao City adopted a solar panel manufactured by Germany's leading Hanwha Q Cells GmbH of the Korean Hanwha Group and a PV inverter manufactured by Toshiba Mitsubishi-Electric Industrial Systems Corp (TMEIC). HUG Energy designed the PV power plant and procured the materials while the construction was contracted to local constructors paying respect to the triangular agreement.

HUG Energy's semiconductor material engineer chose the panel, visiting Hanwha Q Cells' plant and confirming the cell material quality including the manufacturing process (Fig. 7). HUG Energy employed semiconductor engineers when entering EPC services. Partly thanks to the elaborate investigation of plant location and panels, the amount of power generation surpassed the manufacturer's estimate by 21% in the first year after the completion.

The power selling business at its Kisarazu and Arao plants, with a total output of 4.75MW, brings a stable income to Hiraoka Sekiyu. As the oil dealer business is growing more severe, there could be a stage where a small difference in corporate strength decides which companies survive in the competition against their industry peers.

As a concept, President Hiraoka hopes that the new PV power generation business will help Hiraoka Sekiyu's mainstay business stabilize. The mega-solar power plant, which an oil dealer built in a place that had once prospered thanks to a coal mine, reflects the energy transition over the last 100 years.