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Analysis: Japan's winter power fuel security under scrutiny after lessons learned in Jan

Energía | Energy Transition

Global Integrated Energy Model

Analysis: Japan's winter power fuel security under scrutiny after lessons learned in Jan

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With autumn only just beginning, Japan's power supply security is already under scrutiny for winter after the lessons learned from a severely tightened supply-demand balance in January prompts both the government and power utilities to be better prepared for contingencies ahead of the peak demand season.

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A series of measures are underway both by the government and power utilities to ensure winter power supply, which was complicated last winter by factors including restrictions on gas-fired power generation as a result of robust demand during extreme cold spells in January.

The steps taken by the government range from monitoring major power utilities' fuels inventories as well as making sure Japan has sufficient power supply capacity to meet over 10-year high demand as the Tokyo area has not secured a required 3% reserve power supply capacity ratio during the peak demand months.

Power utilities, which typically require a two-month lead time to adjust their LNG receiving volumes to balance their requirements, are moving to secure fuels early for winter, with some having already secured enough LNG, coal and oil, according to industry sources.

The measures taken by some Japanese power utilities include reducing their exposure to spot LNG by increasing short-term supplies as well as changing scheduled maintenance at a nuclear power plant away from the peak winter demand season.

Overall Japan will have greater nuclear output this winter, which will not only reduce the country's seasonal fuel requirements but also stabilize its electricity supply during snow storms, which reduced solar power output last winter.

Fuels response

Tohoku Electric for one is working to reduce its spot LNG ratio as part of measures for its winter fuel procurements by securing multiple-cargo LNG supplies for winter months following an upsurge in spot prices during last winter, a company official said.

The S&P Global Platts JKM reached an all-time high of $32.50/MMBtu on Jan. 13 as LNG importers in Japan, South Korea and China were scouring the market for prompt cargoes, with gas inventories sinking to critical levels in some regions amid a widespread severe cold snap.

Most recently Platts JKM spot LNG price breached the $20/MMBtu mark on Sept. 6, a record high for this time of the year, on delivery concerns from Malaysia's Bintulu.

Amid the rising spot LNG price, some Japanese power utilities have moved to secure fuel oil domestically, with some having filled their tanks in the summer, said a source with a Japanese refiner. Hokuriku Electric confirmed it has already secured enough oil for winter, along with coal and LNG.

Last winter saw Japan significantly boosting its crude and fuel oil use for power generation to make up for shortfalls in LNG stocks during peak demand in January, with oil continuing to be among the generation fuels in the mix this winter.

JERA, which had bought 3 million mt of spot LNG for arrival over November 2020-February 2021, is undertaking measures including a trial of estimating its area and retail demand in an effort to better optimize its LNG procurements and stocks for winter, a company official said.

Nuclear output

Kansai Eclectic, which had boosted its oil and coal use as a result of cold spells amid low nuclear output last winter, has changed the scheduled start of maintenance at the 1.18 GW No. 3 nuclear reactor at its Ooi nuclear power plant from Dec. 1 to Aug. 23, 2022 as part of its response to ensure winter supply, a company official said.

The move gives Kansai Electric an additional 1.18 GW of supply capacity during winter, when it is operating a combined total of 4.1 GW of nuclear power over four reactors after it shuts the 826 MW No. 3 Mihama nuclear reactor for maintenance on Oct. 23. The change in the No. 3 Ooi nuclear reactor maintenance still falls within a 13-month cycle for scheduled maintenance.

Kyushu Electric, which is shutting down 2.96 GW of nuclear power capacity over three of its four currently operating reactors with a total 4.14 GW output in winter, has "secured LNG for normal winter requirements inclusive of volumes for upside demand increase risk," a company official said. The utility will shut the 890 MW No. 1 Sendai nuclear reactor as one of the three reactors in mid-October for scheduled maintenance until late December.

Shikoku Electric plans to restart its 890 MW No. 3 Ikata nuclear reactor in autumn.

Over December 2020-January, Kyushu Electric's two nuclear reactors with a combined capacity of 2.07 GW were the only two nuclear units fully operating in Japan, until they were joined by the restart of Kansai Electric's 1.18 GW No. 4 Ooi nuclear reactor on Jan. 17.

Supply scrutiny

On the government front, the Ministry of Economy, Trade and Industry is working to ensure the country's winter power supply on both a KW and KWh basis in its response to the tight supply outlook, particularly for the Tokyo area, as well as putting in place precautionary measures against fuel shortages.

METI, which has been surveying major power utilities twice a month on their actual LNG stocks compared with what was planned, does not currently expect LNG stocks be extremely low in winter, a METI official said.

"We do not expect the stocks to be largely below the level in an average year at this moment for November and December," the official said. "This does not mean this winter will be fine."