Japan Begins Mandatory Power Cuts to Avoid Electricity Shortages

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Researched by Industrial Info Resources East Asia (Kofu-shi, Japan)--Today, July 1, the national government of Japan began the implementation of mandatory power usage cuts, the first since the oil crisis of the 1970s. So far, this decision has only been applied to the service areas of Tokyo Electric Power Company Incorporated (TYO:9501) (TEPCO) (Tokyo) and Tohoku Electric Power Company Incorporated (TYO:9506 ) (Tokuden) (Sendai, Japan), the utility companies whose capacities suffered the most damage from the Great East Japan Earthquake Disaster. Before now, the government has only recommended that businesses and residents combine efforts to curb electricity consumption by 15% in order to avoid power outages.

Mandatory reduction of power consumption of at least 15% is to be strictly observed by any entity, such as a business, that uses 500 kilowatts of electricity or more. Services deemed to be critical, such as hospitals, railways and, to a certain extent, data centers, will be exempt from power cuts. Entities in the 23 special wards of Tokyo, well-known areas like Shinjuku and Shibuya, will not be exempt from mandatory power savings; however, the 23 special wards have been removed from power outage schedules. An entity that fails to meet the government demand will be fined at least $12,000 per incidence, a punishment deemed too lenient by some. So far, no mandatory measures have been applied to individual households.

As summer kicks into full swing, the use of air conditioning is increasing drastically. Kanto, the region that falls under TEPCO's service, has already seen temperatures of 95 degrees Fahrenheit or higher. High temperatures this week sapped approximately 93% of TEPCO's capacity, which currently hovers around 51 gigawatts. The hottest period, of the year, July through the end of September, coincides with the economic third quarter, which could suffer as industrial output is likely to be interrupted by power conservation and outages. Japan's economy, already under the pressure of deflation, slid back into recession following the unprecedented disruption of supply chains and plant due to the earthquake and tsunami.

Large companies with manufacturing facilities in the service areas of TEPCO and Tokuden are staggering production days or are increasing on-site power generation capacity in order to meet the government's power cut requirements. For example, both Toyota Motor Corporation (NYSE:TM) (Toyota, Japan) and Nissan Motors Company Limited (TYO:7021) (Yokohama, Japan) will shift production to weekends. Komatsu Limited (TYO:6301) (Tokyo) is planning to add electrical capacity at five production sites served by TEPCO in order to reduce power consumption by 15% at each site. Nippon Steel Corporation (TYO:5401) (Tokyo) plans to restart a 136-megawatt power plant in order to support the company's Kamaishi, Iwate, steel works and the surrounding Tokuden-serviced area.

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