print PRINT

ECONOMY > Energy

Utilities will take hit in govt’s plan to close low-efficiency coal power plants

  • July 7, 2020
  • , Nikkei , p. 13
  • JMH Translation

The recent announcement made by the Ministry of Economy, Trade and Industry (METI) to close low-efficiency coal-fired power plants is posing a challenge to power utilities. Five major power companies generate about 40% of their electricity from coal. They will surely be hit hard if their access to coal power is cut off. Since alternative energy sources have not arisen and international criticism of Japan is growing, METI’s plan to switch to high-efficiency generation could even be derailed. Japanese utilities may have to shoulder heavy costs as they have failed to address the weaknesses in their energy supply system for a long time.

 

Of Shikoku Electric Power’s three coal-fired generation units, units no. 1 and 2 at Saijo Power Plant (Saijo City, Ehime Prefecture) have been in operation for 50 years. Construction is underway to refurbish unit no. 1. The firm will likely consider shutting down unit no. 2, as it is in the least-efficient “subcritical” stage.

 

It is not easy for power companies to shut down coal-fired stations. One reason is that coal-fired power starts producing profits after asset depreciation ends 10-15 years after the unit goes online. At Tohoku Electric Power, four out of its five coal-fired stations have been online for more than 20 years and they have become more competitive than gas- and oil-fired power generation because the initial investment has been depreciated.

 

Coal-fired power generation is indispensable in some regions of the nation. For example, it is difficult to develop hydro and nuclear power in Okinawa as electricity demand in the prefecture is lower than in the mainland. In fiscal 2019, Okinawa Electric Power generated 55% of its electricity from coal-fired power plants. All four of its units are old and could be subject to METI’s closure plan, but it would not be not easy for the company to build an efficient, high-capacity power plant in the Okinawa main island.

 

Though Hokkaido is considered a suitable site for renewable energy generation, the introduction of renewable energy is not going smoothly due to low transmission capacity and other obstacles. Hokkaido Electric Power topped other utilities except for Okinawa Electric Power in CO2 emissions per kilowatt in fiscal 2018.

 

Chugoku Electric Power and Hokuriku Electric Power also rely on coal-fired power generation as a key energy source. “Utilities may face a long-term risk if they rely heavily on low-efficiency coal-fired power,” said a senior analyst at Daiwa Securities. (Abridged)

 

                                Utilities’ reliance on coal-fired power generation

Company

Coal-fired power as percentage of total electricity generated

No. of coal-fired units

Hokkaido Electric Power

46%

7

Tohoku Electric Power

39%

5

JERA

About 20%

13

Hokuriku Electric Power

50%

6

Kansai Electric Power

10%

2

Chugoku Electric Power

48%

6

Shikoku Electric Power

42%

3

Kyushu Electric Power

29%

5

Okinawa Electric Power

55%

4

J Power

Not disclosed

14

Notes: (1) The table is created based on interviews with each utility.

(2) Percentages are based on latest figures released by the utilities.

  • Ambassador
  • Ukraine
  • OPINION POLLS
  • COVID-19
  • Trending Japan