Japan Introduces Measures to Tackle Expected Power Shortages

Power producers and power consumers in several parts of Japan are urged to take precautionary measures to tackle potential power shortages this summer. Volue Power Market Analyst Fumi Kumagai has the details.

Power grid lines

Power producers, as well as power consumers in Japan, are urged to take precautionary measures to tackle power shortages in July in areas such as Tohoku, Tokyo, and Chubu. There, the reserve power is expected to barely cover the minimum of three per cent required to secure a stable power supply in case of severe heat. The power shortages are especially noticeable in Tokyo (stay tuned for more updates on this.)

One reason for the possible power shortages is the change in consumer lifestyles due to the prolonged impact of the pandemic. It is thought that this has contributed to an unexpected increase in power demand. This trend has been significant in major areas of Japan since the summer of 2020.

Furthermore, the current political climate revolving around Russia and Ukraine has been a driving force behind the soaring prices of fuels such as LNG increasing the risk of procurement of a sufficient amount of fuel to ensure a stable power supply.

The potential impact of the expected power shortages this summer is critical as it will have a significant effect not only on the power prices creating increased volatility in the market but also on the power market structure leading to changes in the existing energy policies and regulations as outlined below.

Measures to secure a stable power supply

In order to secure a stable power supply this summer, some measures have been put in place by the “Power Supply Demand Committee” in their 7 June meeting.

  • For the supply side, the public tender for procurement of additional kW power supply is open for the summer (1.2 GW) as well as fuel procurement for 1,000 TWh. Currently suspended thermal plants in Chiba (600MW) and Aichi (700MW) are expected to resume operation in early July adding a one per cent reserve power rate to the power shortage areas.
  • For power retailers, bilateral PPA procurement contracts and DR contracts are strongly recommended.
  • For the demand side, daily energy conservation actions, as well as advocacy and expansion of DR contracts among industries and municipalities, are promoted.

In addition to the measures above, several potential structural amendments have been discussed:

  • An additional category for inclusion of suspended power plants for supplementary power in case of power shortage to be traded in the capacity market from 2024.
  • Fuel (esp. LNG) procurement measures and support by the government.
  • New schemes to incentivise investments in the development of power plants (including thermal power plants with the condition to get decarbonised by 2050).
  • Maintenance/upgrades of existing hydro (pump), hydrogen, energy storage systems, distributed energy, upgrades of local grid connections etc.

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