In the post-war era, integrated trading companies led Japan's economic growth and played an important role as a bridge between Japan and the rest of the world. Today, people, goods, and money move freely across national borders as economies and societies undergo dramatic change. What roles are required of integrated trading companies? This content, in an eight-installment series, attempts to redefine the roles of present and future integrated trading companies, while showcasing the wide range of business activities of Sumitomo Corporation.
Electric power is one of the most important infrastructures for a country and its development. However, some emerging countries cannot develop their electric power infrastructure fast enough to keep up with the pace of their economic development. Among those countries is Indonesia, a country experiencing steady economic growth and continuous population growth. As a solution to ever- growing power demand in the country, environmentally friendly geothermal power generation is expected to play a greater role, and many geothermal power stations have been or are being developed in Indonesia. To many of those development projects, Sumitomo Corporation has made a contribution by fully utilizing its capabilities and strengths.
Naoto Yamada has been involved in the power generation business since 2001. After joining Sumitomo Corporation in 1986, he was in a department in charge of industrial machinery and assumed overseas positions in Hanoi and other foreign cities. "The sheer size of projects and being able to participate in work with great responsibility are the attraction of the power generation business," says Yamada, "Everything surrounding me, such as my work at Sumitomo Corporation and my family are my treasure."
President Yudhoyono, who was selected by the country's first democratic direct election in 2004, announced the Master Plan for the Acceleration and Expansion of Indonesia's Economic Development in 2011, which aims to make Indonesia one of the world's 10 biggest economies by 2025. The target does not seem to be impracticable for the following reasons:
The county has established a democratic system and maintains political stability. It also has the world's fourth largest population of about 240 million and the population of working age will be increasing in the future. In addition, the country is rich in natural resources.
Indeed, the country has already established its position as the third largest emerging power in Asia after China and India. Since several years ago, some have argued that the term BRICs should include an additional "I" to represent Indonesia.
Achieving that level of economic growth requires the development of electric power infrastructure to meet growing power demand. Currently, the Indonesian government is working to achieve the "best mix" of power sources by developing renewable energy sources. In other words, it seeks to create an optimal combination of power generation sources and develop the most efficient power infrastructure. To this end, the government is aiming to increase the representation of renewable energy in the country's portfolio of power sources to 17%, of which geothermal power will account for 5%.
The Indonesian government is focusing its efforts on the development of geothermal power plants because the country is home to the world's second largest geothermal resources after the U.S. Specifically, what do geothermal resources refer to?
The mechanism of geothermal power generation is relatively simple. Hot groundwater heated by magma existing deep underground is taken out and the steam generated during the process is used to operate the turbine to generate electricity. Simply explaining the mechanism is there is little or nothing to add. It is hot groundwater used in this process which constitutes the geothermal resources in question, of which Indonesia has one of the world's largest reserves.
Sumitomo Corporation's geothermal power team has been deeply involved in the efforts to such geothermal power generation facilities. Naoto Yamada, leader of the team explains, "Geothermal power stations in Indonesia have a total power generation capacity of about 1,500 megawatts and the potential capacity is estimated to reach to dozens of times the current volume. No one would pass up the opportunity to use abundant geothermal resources lying beneath the ground to develop electric power infrastructure, a key element to sustain the nation's development. Our job is to help turn the opportunity into reality. "
Geothermal power generation has many advantages. First, major part of the used hot groundwater is returned underground, meaning little resource depletion risk. Like other renewable energy sources, its CO2 emission levels are minimal. Unlike solar power generation or wind power generation, its electricity output does not depend on weather conditions, meaning the facilities can be operated 24/7 under any weather conditions and the utilization rates can be higher. Due to the high stability and reliability, geothermal power generation is often called the only renewable energy-based power generation which can serve as a base load power, or a core power source in a country's overall power source portfolio.
Yamada says, "Another important advantage is that it does not involve the necessity of procuring natural gas, oil, coal or other resources from other counties. Electricity demand in the country can be met by using domestic resources only. In other words, geothermal is an energy source which enables "local production and local consumption" of electricity.
Tsukasa Oshikiri is in overall charge of geothermal projects. He joined the Sumitomo Corporation's geothermal power team as a temporary assignment from Sumisho Machinery Trade Corporation. "I feel a sense of accomplishment every time I solve everyday issues one by one. Words of thanks from business partners make me feel that I am fortunate to work in this team."
It is a little known fact that Japanese companies are the leader in the world's geothermal power generation market. Indeed, about 80 percent of turbines for geothermal powers are produced by Japanese manufacturers. In partnership with one of those companies, Fuji Electric, Sumitomo Corporation has engaged in several geothermal electricity development projects in Indonesia.
Sumitomo Corporation entered the electricity-related market in Indonesia in the 1970s. "We started with supplying electric cables and other parts and then gradually expanded to exporting power generators and other equipment, and operating related businesses. Indonesia is the market the geothermal power team of Sumitomo Corporation is currently focusing on most. We are involved in the development of various power stations, including geothermal, gas, coal-fire, and hydro power stations," Yamada explains.
The latest geothermal power station project Sumitomo Corporation has completed is the Ulubelu geothermal power station on Sumatra Island. The project was commenced in February 2010 and the construction of the units 1 was and 2 were completed in September 2012 and October 2012, respectively.
Sumitomo Corporation has strength in its EPC (engineering, procurement and construction) model, which is also adopted for the Ulubelu project. An EPC contractor is in charge of the entire process from engineering and civil and mechanical construction to trial operation and to completion. "The management of the entire project to develop the Ulubelu geothermal power station, including communicating and discussing in details with the project owner, a local state-owned power company, and implementing the project with our project partners, Fuji Electric and a local engineering company without delay, was conducted by Sumitomo Corporation," explains Tsukasa Oshikiri, who is in overall charge of geothermal projects.
Although the mechanism of geothermal electricity generation itself is very simple, as mentioned earlier, the specifications of turbines and other plant facilities need to be carefully customized according to the conditions of the project site, particularly the temperature and substance contained in the hot underground water of the site. Japanese companies boast world-class technologies for achieving optimal designs for the highest power generation efficiency. Sumitomo Corporation was involved in almost half of the active geothermal power stations in Indonesia as an EPC operator, which was made possible by the technological excellence of the partner manufacturer and the capabilities and endurance of the trading company to manage projects that last two to three years.
Most geothermal power stations are located in remote mountain areas. Yuki Sato, who worked at the construction site in Ulubelu as a project member, recalls his challenging life in a middle-of-nowhere place by saying "The power station site was one hour drive away from the nearest village. We lived in that village and drive unpaved mountain roads to and from the construction site every day for two and a half years. I still remember clearly that how difficult it was to find local people who would work deep in the mountain, that we had to stay alert to possible animal attacks and that we found a huge rock in the ground of the project site and had to destroy it, among other things." Shoji Ebato, another then project member, adds, "We had little access to food products in the neighborhood and had to take a grocery shopping trip every 10 days by driving two hours one way. We also had a hard time in finding a cook."
The development of geothermal power stations in Indonesia will without doubt gain further momentum in the future. In those projects, Sumitomo Corporation will also take an even bigger role, leveraging its hard-earned experience and expertise to date. Yamada says his team would like to make the most of the company's long-time experience in the Indonesian electricity business as well as abundant experience in geothermal electricity development gained in its projects in the U.S., El Salvador, Iceland, the Philippines, New Zealand and other markets. He also says, "Through building power infrastructure, we can help a country grow bigger and bigger. That is what excites me most about my job." "Power station development projects cannot be achieved without collaboration among the various players involved," emphasizes Oshikiri, "In addition to the geothermal power team, there's the company's accounting, legal, and finance department, local staff, partner manufacturers, local partners, and the client. Putting together all those parties involved and managing the overall project is our role."
The development of a growing number of geothermal power stations, a new power infrastructure, in Indonesia, a country in the midst of a spurt of substantial growth, will open the door to a bright future for the country—and the door to a bright future for Sumitomo Corporation's geothermal power team.
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