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Approach to Wind Power Business with a Global Vision

January 2011

Establishment of a new department to expand business beyond Japan’s borders

Wind power is currently being attracted widely as a clean and an environmentally-friendly source of energy, and installation in countries such as the United States of America, China and Europe are recently accelerating. Sumitomo Corporation, within its approach to the renewable energy business field, regards wind power as one of its strategic focus, and is developing global wind power business under the newly-created department, the “Wind Power & Water Infrastructure Business Department,” established on April 1st, 2010.

The mechanism that works in wind power generation is very simple. As the wind blows, the gigantic blades rotate, which spins the electricity generator installed inside the turbines to generate electricity. The latest wind turbines are approximately 60 to 100 meters tall, with blades reaching 40 to 50 meters. The prevailing winds which are moderate and blow predominantly from a single general direction are considered to be the ideal wind condition for wind power.

When constructing large scaled wind power plants, needless to state the wind conditions, outspreaded land which does not create issues caused by the operating wind turbines, such as the low frequency noise, the aesthetics, shadowing (light shielding) and impact on the ecosystem is essential. Also, government support programs, such as feed in tariff system are indispensable. This requirement comes from the nature of the higher cost of energy produced by wind power plant compared to that of such plants as thermal power plants. Power transmission facilities that are capable of handling fluctuations of power generation, caused by the variance of wind conditions, are also an essential factor.

Installation of a wind turbine. The mechanism which will be set up on the top of the tower (the Nacelle) is about the size of a large-sized bus.

Dynamic approach towards world’s two largest markets

Remarking on the domestic activities, Sumitomo Corporation’s power business subsidiary, Summit Energy Corporation, owns two wind power plants, one in Sakata in Yamagata Prefecture and another in Kashima in Ibaraki Prefecture. Sumitomo’s business expansion to overseas is based on the experience accumulated here through the operation of these wind power plants in Japan, and Sumitomo is currently conducting several projects both in Japan and abroad.

In terms of cumulative installed wind power capacity of each country, as of the end of 2009, the U.S. came in first followed by China in second. However, it is expected that China, which overtook the U.S. in newly installed capacity in fiscal 2009, will soon become the world’s largest wind power generating country in terms of both new and cumulative installed capacity, possibly in 2010. Sumitomo is therefore actively expanding its business in these two leading markets.

As the first step in the U.S. wind energy market, in July 2009, Sumitomo purchased an interest in the Stanton wind farm (120MW) in Texas, which was already in commercial operation.

On the other hand, for China, Sumitomo signed a joint venture agreement with China Datang Corporation (CDT), one of the country’s five largest power companies and the world’s sixth-largest wind power plant operator in terms of installed capacity, and Kyushu Electric Power Company in April 2007. Under this agreement, the Datang Sino-Japan (Chifeng) wind power station (50MW) was constructed in Inner Mongolia in China, and started commercial operation in September 2009. This was the first and still is the only Sino-Japanese joint wind power generation initiative.

Stanton wind farm project in Texas

With the know-how built up in China business and trust developed with Chinese partners

There were a number of challenges involved in the wind farm project in Inner Mongolia. Sumitomo was confronted with many issues, such as the different ways of thinking and pace of work between the Japanese and Chinese partners. Even during the first stage of the project, which involved deciding on which part of this vast land the wind farm should be constructed, the project became deadlocked a number of times. But every time a new difficulty arose, Sumitomo, together with its local staff, deployed its coordination skills—one of the company’s unrivalled strengths—and managed to deepen the understanding between the partners and overcome all hurdles.

Sumitomo has ample experience developing a wide range of projects around the world and has been conducting business in China for many years. Above all, the team involved is familiar with the customs and conditions in both Japan and China and is capable of negotiating with Chinese partners in Chinese. Persistent efforts made by Sumitomo to find solutions while respecting the viewpoints of partners and making adjustments where needed have resulted in the company winning the trust of its partners and ensuring the projects are successfully brought to completion.

Highly appreciating Sumitomo’s coordination and risk management skills along with its global network, CDT agreed to sign the Framework Cooperation Agreement for Renewable Energy with Sumitomo in July 2010 to reinforce efforts to develop cooperative renewable energy projects in China and other countries. In the Chinese market, Sumitomo will work together with CDT to increase China’s wind power capacity from the current 50MW to 300MW as early as possible. Sumitomo and CDT will also cooperate to actively develop projects in other countries. As such, the experiences and know-how Sumitomo has built up from scratch in China are beginning to bear another bountiful harvest.

Sumitomo and CDT have further consolidated their cooperation in the renewable energy sector.

Sumitomo’s objective: to become a lead developer of projects within a few years

Sumitomo aims to increase its total wind power capacity globally from the current 97MW to 1,000MW within a few years.

To this end, Sumitomo will further expand its business in the U.S. and China, the two largest markets, by fully utilizing its know-how and experience accumulated through the Stanton project, and the Datang Sino-Japan (Chifeng) wind farm projects.

Sumitomo will also actively work on creating new projects in emerging wind energy markets other than the U.S. and China, aiming within a few years to become a lead project developer by bringing together all of its know-how on wind power generation gained through various international projects.

Sumitomo’s future plans include not only land-based projects but also offshore developments in which wind turbines are constructed in the sea, where wind condition is ideal and there are no physical obstacles blocking its path.

Wind power is a clean energy with no CO2 emissions and is compatible with agriculture and the raising of livestock on the surrounding land. When the project comes to an end, the original environment can be restored by simply removing the turbines—another reason why wind energy is said to have a low environmental impact. For all of these reasons, Sumitomo will devote even greater efforts into wind energy as part of its renewable energy business strategy in fulfillment of its social mission to protect the environment.

Wind farm project in Inner Mongolia, China. Cattle and sheep are pastured around the turbines.

Related Tag

  • Environment & Infrastructure Business Unit
  • Japan / U.S.A. / China
  • Electric Power & Energy

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