Power companies gear up for surge in electricity demand over winter

The Yomiuri Shimbun

10:10 JST, December 28, 2021

As winter sets in, power companies are implementing measures to prevent a repeat of problems that occurred last winter, when a cold wave and fuel shortages hampered electricity supply, especially in western Japan.

As a severe cold snap is also expected this year, companies are building up liquefied natural gas (LNG) inventories and restarting aging thermal power plants to ensure the stability of electricity during winter, when the use of heating devices pushes up demand.

Electricity use rose to as high as 96% on the evening of Dec. 6 in the service area of Tokyo Electric Power Company Holdings, sending the electricity supply indicator to “severe,” the second-worst level.

In addition to an increase in the use of heating devices, there was a shortage of solar power generation due to bad weather and a temporary shutdown of a thermal power plant in Chiba Prefecture due to equipment trouble.

According to the Economy, Trade and Industry Ministry, a severe cold wave this winter could lead to an electricity reserve ratio of 3.1% in TEPCO’s service area in February — 3% is considered to be the yardstick for stable supply. The situation has stoked fears of a massive power outage if something unexpected happens.

The reserve ratios for the service areas of six other regional power companies, including Kansai Electric Power, Chubu Electric Power, and Kyushu Electric Power, are expected to be 3.9%.

“There are concerns that electricity supply is going to be tight again this winter,” said Kazuhiro Ikebe, chairman of the Federation of Electric Power Companies of Japan. “We will make every effort to ensure there are no disruptions to services.”

JERA Co. Inc., a power generation company established by TEPCO and Chubu Electric Power Co., will restart in January a reactor at its Anegasaki thermal power station in Chiba Prefecture that has been out of operation due to its age.

“During inspections, we conducted repairs to broken pipes and steam leaks,” said the plant director. “There are no problems with restarting the plant.”

Kansai Electric Power Co. has secured capacity by postponing the planned suspension of reactors at Takahama nuclear power station and Oi nuclear power station, both of which are in Fukui Prefecture and were scheduled to undergo regular checkups, starting this winter.

The tight supply situation in January this year was partly caused by a shortage of liquefied natural gas, a fuel for thermal power generation.

Tohoku Electric Power Co. has secured a stable and inexpensive LNG procurement system by increasing the number of short-term contracts that last for one to three years.

Last winter’s power shortages also led to a deterioration in the business performance of new energy firms because the price of electricity skyrocketed in the wholesale market and procurement costs also increased significantly. According to Tokyo Shoko Research, Ltd., six companies went bankrupt.

New power companies have been increasing their trading in the electricity futures market in an attempt to reduce the impact of the price hikes. Although they will suffer losses if electricity prices drop, it is considered to be an effective way to significantly reduce risk.

Investment in thermal power generation has stagnated amid a push for decarbonization, and the restart of nuclear power plants has been delayed. The precarious situation concerning electricity demand and supply is likely to continue.

Muneharu Hashimoto, a senior credit analyst at SMBC Nikko Securities Inc., said, “It’s necessary to discuss how power companies, new electricity firms and consumers should share the burden of funding measures to avert the risk of power shortages.”