Japan set for another severely tight electricity supply situation next winter: METI

Japan is set for next winter to have a severely tight electricity supply-demand balance once again, the latest Ministry of Economy, Trade and Industry outlook showed March 25, just days after the issuance of electricity supply shortage alerts for the Tokyo and Tohoku areas following earthquake-related power plant outages.

The Tokyo area is expected to have just a 0.1% reserve power supply capacity ratio in January 2023 and a 1.0% ratio in February 2023, the outlook shows.

All of Japan's 10 power supply areas are required to have a minimum 3% reserve power supply capacity ratio over 10-year high demand during the peak demand months.

Six regions, including Chubu in central Japan and Kyushu in the southwest, are slated to have a 3.7% ratio in January and 3.1% ratio in February, according to documents presented at METI's electricity and gas policy subcommittee.

In response to the severe winter electricity supply outlook, which is based on power utilities' fiscal year 2022-23 (April-March) supply plans, METI said it will consider additional supply capacity measures such as public tenders to secure sufficient capacity, at least for the Tokyo area.

While all of the 10 regions are projected to have above the 3% reserve power supply capacity ratio relative to 10-year-high demand over the summer demand months of July-September, METI cautioned on the potential impact from power plant outages from the March 16 earthquake offshore Fukushima.

Citing uncertainty over restart dates for some of the plants, METI said prolonged power plant outages could significantly reduce the summer supply capacity given potential impacts on fuel procurement following Russia's invasion of Ukraine.

High spot LNG

The Ukraine crisis is having an impact on Japanese power and gas utilities' LNG procurement as companies are increasingly avoiding taking spot LNG cargoes from Russia.

"We are balanced for the next fiscal year's annual [LNG] supply but we are advancing [some term supplies] amid high spot prices currently," said a source with a Japanese power utility. "This may create some need to buy [spot cargoes] should we have extreme hot or cold weather during the peak demand."

With a low inventory outlook for May, a source with another Japanese power utility said it is advancing its term LNG supply to May in order to eliminate exposure to spot purchases given high prices.

On March 24, Asian spot LNG benchmark Platts JKM for May delivery was assessed at $38.045/MMBtu on the back of short-covering demand from Asian utilities and higher prices in the Atlantic, according to data from S&P Global Commodity Insights. This compares with $6.924/MMBtu a year ago and $3.303/MMBtu on March 24, 2020.

Earthquake impact

Six thermal power plants with combined capacity of 3.347 GW remain shut following the 7.4 magnitude earthquake offshore Fukushima in northeast Japan late March 16. A combined 6.479 GW capacity over 14 coal, gas and oil-fired power plants was initially shut, according to METI.

The earthquake had resulted in power outages for some 2.1 million households in the Tokyo area and 160,000 households in the Tohoku area, according to METI.

Amid stronger than usual power demand due to unusually cold temperatures and reduced solar power output, electricity supply shortage alerts were issued for the Tokyo area late March 21 and on the morning of March 22 for the Tohoku area.

The Tokyo area's March 22 maximum power demand after electricity savings came in at 45.34 GW, the highest level for late March since the 2011 Great East Japan Earthquake, according to METI.

This compares with an estimated March 22 maximum power demand of 48.40 GW at 5 pm local time (0800 GMT) March 21, which was more than 1 GW above than the highest March power demand of 47.12 GW since the 2011 earthquake.

The alerts for the TEPCO Power Grid area and Tohoku Electric Power Network's area had both been lifted by March 23 as the supply-demand balance eased following an improvement in the weather, METI said.

Power generation company JERA said March 24 it planned to restart the earthquake-hit 600 MW No. 6 coal-fired unit at the Hirono thermal power plant on April 7.

Tohoku Electric said it expects to restart the 1 GW No. 1 coal-fired unit at the Haramachi thermal power plant early-May and the 523 MW No. 3-1 gas-fired unit at the Shin Sendai thermal power plant early-April.

It was unclear when Soma Kyodo Power Co. will be able to restart the 1 GW No. 1 coal-fired unit at its Shinchi power plant.