Japan's JERA secures LNG, coal, other utilities; sees no summer fuel issues: sources

Japan's JERA has secured sufficient LNG and coal for Japan's peak summer demand over July and August, while other Japanese power utilities are not expecting any major issues with fuel procurement for the approaching demand season, sources with direct knowledge of the matter told S&P Global Platts June 8.

The fuel procurement for Japan's summer power demand came to light after the Ministry of Economy, Trade and Industry said on May 25 that it will formally request power utilities to secure "sufficient" LNG and ensure stable electricity supply, while asking consumers and industries to conserve energy, part of its response to the country's tight summer power supply outlook.

The response was approved on May 25 during METI's power and gas policy subcommittee meeting, where the ministry also endorsed its course of action for the country's severe winter supply outlook following a May 14 ministerial directive to compile the ministry's "emergency response" by the end of May.

In their latest procurement of power fuels, the Japanese utilities do not see any major issues in securing fuels required for summer, according to preliminary procurement plans seen by these sources.

Summer demand

It was, however, not immediately clear whether Japan's summer power fuels demand will increase from a year ago as the country will see a year-on-year decline of at least 8.3 GW in thermal power generation capacity from major power utilities due to decommissioning exercises and unplanned outages.

The summer heat, COVID-19 restriction measures and the Tokyo Olympics and Paralympic Games are among key variables for the country's electricity demand this summer, according to local industry sources.

The 2020 summer saw a significant decline in Japan's need for power fuels due to a reduction in electricity demand as a result of the economic slowdown brought about by the coronavirus pandemic.

Japan's LNG and coal consumption for power generation dropped 12% and 11.2% year on year to 3.7 million mt and 8.79 million mt in July 2020, which was followed by the 17.9% and 1.3% year-on-year drop in consumption to 4.81 million mt and 10.18 million mt, respectively, in August, according to METI data.

Tight outlook

METI's set of May 25 actions follows the outlook by the state power coordinator, the Organization for the Cross-regional Coordination of Transmission Operators, or OCCTO, which showed that Japan's reserve power supply capacity ratio at the time of maximum demand would average 3.7% for July and 3.8% for August for most areas of the country.

Japanese power utilities must have the 3% reserve power supply capacity ratio, which is based on the 10-year high demand over supply capacity, during months of peak demand to ensure stable supply, compared with 8% required for normal supply.

The latest severe power supply outlook came to light just months after Japan experienced a power supply shortage last winter because of high demand during extreme cold spells in January, when local power utilities were forced to

restrict gas-fired power generation due to a fall in LNG stocks.

In METI's power supply outlook released on May 25, Japan's thermal power supply capacity will decline by around 6.8 GW during maximum power demand in August.

LNG will account for roughly 59% of this summer's year-on-year decline of around 8.3 GW of thermal power generation capacity, with JERA accounting for 2.99 GW, or 36% of total outage, according to the METI data.