Fears of power outages in Japan as electricity prices hit record highs

Electricity prices in Japan have reached all-time highs as a cold snap coincides with tight supplies of liquefied natural gas raising fears of blackouts in parts of the country.

Power companies pleaded with their customers to leave the heat on but turn off other appliances as the electrical system reached 99% of its maximum capacity in the west of the country on Tuesday.

The surge in energy prices comes just two months before the tenth anniversary of the Fukushima disaster – the consequences of which prompted Japan to radically rethink its energy mix away from nuclear – and two months after announcing an ambitious plan to become carbon neutral by 2050.

Intraday prices on the Japan Electric Power Exchange hit a record high of ¥ 246.8 per kilowatt hour on Tuesday afternoon in the spot market, compared to an average of 7.6 kW / h in January and 15.1 kW. / hr in December 2020. Power supply prices also hit record highs on Wednesday as trade volumes hit historic levels.

Warnings of potential outages come with just three of Japan’s 33 nuclear reactors in operation, leading experts to predict that the current crisis could add urgency and force to government efforts to speed up the restart program.

A week of unusually severe weather dumped more than a meter of snow over parts of the country and prompted many households, who are working from home because of Covid-19, to turn up the heat.

“With the extreme cold that persists, the electricity supply is restricted, so while continuing as usual with the heating on, for example, you can turn off the light in the other room,” the minister said. Energy Hiroshi Kajiyama at a press conference.

With limited domestic energy supplies, Japan has long been a major importer of LNG, relying on super-cooled fuel shipments to meet the demand for heating, manufacturing and power generation.

But it faces increased competition as more countries use LNG to reduce their reliance on highly polluting coal, while supplies have been tighter than expected this winter. Although most of Japan’s LNG shipments are secured by long-term contracts, the spot cargo market – where traders and utilities can source additional shipments – has hit an all-time high in recent days.

Commodities trader Trafigura on Tuesday bought a cargo of LNG in Asia at a record price of $ 39.30 per million British thermal units (mmbtu) for delivery in February, according to pricing agency S&P Global Platts. LNG prices were as low as $ 2 per mmbtu last April.

The tension in the LNG markets is also having an effect in Europe, where gas prices in the UK hit a two-year high on Tuesday at 75 pence per thermometer, up more than 10% on the day.

“This is evidence of the increased seasonality and volatility resulting from the increasing use of LNG alongside the growth of renewables for electricity consumption to flatten the curve of greenhouse gas emissions,” said said Richard Holtum, Global Head of LNG and Gas for Trafigura.

Extreme cold in East Asia and China’s unofficial ban on Australian coal imports have brought China into the LNG markets as an unusually strong buyer.

Traders said there was also a shortage of available tankers due to delays on the Panama Canal, the main route from shale fields near the U.S. Gulf of Mexico coast, while other major LNG suppliers such as Qatar and Australia had suffered blackouts during the winter.

Shigeki Matsumoto, an energy company analyst at Nomura Securities, said that while the fuel stocks of various Japanese electric power companies were unknown, it could be assumed that the fuel was in short supply.

“Power companies may also have reduced the volume of LNG supply to reduce the chances of having excess LNG on hand assuming the pandemic would reduce the demand for electric power,” Matsumoto said. .

Even using its dirtiest plants, the industry has warned it may struggle to keep the lights on. “There is a risk of blackouts in older thermal power plants, and with the increased demand, there is also a risk of running out of fuel for these plants,” said the Federation of Electricity Companies, the main body of the ‘industry.

The industry has stressed that production from solar panels is very low and is not expected to pick up in the coming days.

Tom O’Sullivan, Tokyo-based consultant and analyst for the publication Japan NRG, said: “The government and utilities have not done a good job of reactivating nuclear reactors. . .[they]can now ask the Japanese public to reactivate them.