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Analysis: Japan's power supply facing risks as it moves to decarbonize energy mix


Japan to decommission 31 GW thermal power capacity by 2030-31

Almost all thermal power plants to be operating in summer: METI official

'Extremely severe' thermal power outlook for next 5-10 years: official

  • Author
  • Takeo Kumagai
  • Editor
  • Wendy Wells
  • Commodity
  • Coal Electric Power Natural Gas Petrochemicals

The latest power supply outlook for Japan's upcoming summer and winter months highlights immediate energy supply risks during the two peak demand seasons -- a trend likely to continue in the coming years as the country moves to decarbonize its electricity generation mix.

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The government's latest outlook based on local power utilities' regulatory-bound supply plans showed that Japan might not have sufficient electricity supply capacity to meet extreme spikes during the peak demand seasons.

The tight power supply outlook will not be the last in the coming decade as Japan is due to decommission a total 31.2 GW of thermal power capacity -- twice as much as it plans to add by fiscal 2030-31 (April-March) -- as it phases out aging plants, according to the latest Ministry of Economy, Trade and Industry's power supply capacity outlook.

The significant reduction in Japan's thermal power generation capacity, which comprises about 70% of its energy mix, could threaten the country's power supply during high demand seasons without a significant boost in the utilization of the baseload generation source, which is currently nuclear power.

Japan, which aims to achieve carbon neutrality in 2050, is considering a significant boost in renewable energy as part of its efforts to decarbonize its electricity generation mix by measures including the introduction of hydrogen, ammonia and carbon storage technology.

Latest outlook

The outlook from the state power coordinator Organization for the Cross-regional Coordination of Transmission Operators, or OCCTO, 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.

Despite a 3% requirement for maximum demand to ensure stable supply, the Tokyo area is to have minus 0.2% for January and minus 0.3% for February next year, with the central and western Japan regions having 4.9% for January and 3% for February.

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 the peak demand months to ensure stable supply, compared with 8% required for normal supply.

In response to the severe outlook for the coming winter, METI Minister Hiroshi Kajiyama on May 14 issued a rare directive for the ministry to prepare an "emergency response" for the country's severe summer and winter supply outlook by the end of May.

METI's consideration of its emergency response could involve measures such as changing the maintenance schedules of power plants and restarting mothballed plants, verifying thermal fuel procurements, issuing energy conservation and electricity-saving requests.

The latest severe power supply outlook came to light just months after Japan experienced a serious shortage of power supply last winter because of high demand during extreme cold spells in January when local power utilities had to restrict gas-fired power generation due to a fall in LNG stocks.

That was exacerbated by glitches at coal-fired power plants, low hydropower generation due to drought, fluctuating solar power output from bad weather, reduced oil-fired power generation capacity and low nuclear power output.

Capacity reduction

"This is an extremely severe outlook at this moment," Masashi Morimoto, director of METI's office for electricity supply policy, told a press briefing May 14, adding that the outlook for the upcoming winter was the most severe in recent years.

"Almost all [thermal] power plants are expected to be operating this summer but the KW capacity is decreasing," said Morimoto, adding that Japan will have 8.77 GW less thermal power generation capacity in fiscal 2021-22 (April-March) than the year before.

The reduction in capacity was the result of planned decommissioning and scheduled maintenance outpacing the addition of 3.88 GW of renewable power capacity, according to METI.

"In the next five to 10 years, we expect thermal power will continue to have an extremely severe outlook," Morimoto said. "Of course increasing renewable energy and adding storage battery and other tools will be important, but securing the immediate stable supply is becoming a critical issue."

In the next five years to fiscal 2025-26, Japan is expected to decommission 2.56 GW of coal-fired capacity, 4.89 GW of gas-fired capacity and 11.4 GW of oil-fired capacity over addition of 7.58 GW of LNG power capacity and 6.86 GW of coal-fired capacity, according to METI calculations.

In the five years to fiscal 2030-31, a total 12.36 GW of the thermal power capacity is expected to be decommissioned, with coal accounting for 2.43 GW, LNG 3.95 GW and oil 5.98 GW, with no addition of new thermal power generation capacity, the METI calculations shows.

Fuels impact

Japan currently is generating 7.06 GW of power from seven nuclear reactors in western Japan, however five of the seven units are due to shut for scheduled maintenance in the fiscal year to March 31, 2022. Kansai Electric plans to restart its 826 MW No. 3 Mihama nuclear reactor in late June and shut it by Oct. 25, while Shikoku Electric plans to restart its 890 MW No. 3 Ikata nuclear reactor at end-October.

Japan's July-September thermal fuel demand is forecast to decline by an average of 1 GW year on year and its October-December thermal fuel demand to drop by 8 GW year on year due to higher nuclear generation, according to Andre Lambine, Senior Analyst, Global Power Analytics, at S&P Global Platts.

"However, if we look at Q1 2022, we believe the need for thermal fuels will decline only by 2 GW on the year. Even though nuclear is higher, we expect power demand to recover as there should be less impact from the ongoing pandemic," he said.