Japan coal plant outage boosts power prices, triggers spot LNG demand

An outage at Unit No. 1 of Japan's Electric Power Development Co. or J-POWER's Matsuura thermal power plant in Nagasaki prefecture has pushed up wholesale power prices and triggered spot LNG demand as Japanese utility sources express concern about tighter energy supply.

It remains unclear when the No. 1 Matsuura coal-fired unit will be restarted after the unexpected outage on Nov. 23 due to a boiler tube leak, J-POWER reported in HJKS, a system operated by the Japan Electric Power Exchange for utilities to report outages.

The affected unit has a power generation capacity of 1 GW and the Matsuura coal-fired plant has two units, taking its total capacity to 2 GW.

A J-POWER spokesperson confirmed the unplanned outage but said no outlook was available on when the unit would be restarted.

However, some LNG traders said the outage has already prompted additional inquiries for spot LNG in the market.

"Matsuura halting will have quite a significant impact on the Japanese downstream power market. This reminds me of last year," a power utility source based in western Japan said.

"We are still figuring out the impact of this in our region," another Japanese power utility source said. "Power output in western Japan is already constrained, so it is not the best timing."

Several power utility and trade sources in Japan expressed concern over the Matsuura coal power plant outage as it is a fairly major coal power plant, with one source comparing it with the power outage at Tachibana last winter that sent Japanese power prices to over Yen 100/kWh.

On Nov. 26, the day ahead 24-hour power price for Nov. 27 was recorded at Yen 21.27/kwh on the Japan Electric Power Exchange, up Yen 1.5/Kwh from the previous day. JEPX wholesale power prices are generally much higher than usual for this time of the year.

"Right now, Japan is in a situation with less generation capacity and fuel, so regardless of whether an issue occurs in Hokkaido, east, west, or Kyushu region, there is no doubt that there is impact on other power utilities in the same region," a trader said.

The trader said that particularly when a base power source like a combined cycle LNG thermal power plant, which usually operates at full capacity in winter, has issues, someone else will have to generate the same amount of electricity in the same area, using a less efficient power plant.

"The impact of this is not small on electricity and fuel procurement cost," the trader said, indicating that the overhang from the Matsuura plant outage could persist.