Japan's TEPCO Turns to Coal-fired Power as LNG, Oil Bills Soar After Fukushima Disaster

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Japan's power generation industry is being strained by the ongoing shutdown of all but two of the country's nuclear power fleet. Tokyo Electric Power Company (TYO:9501) (TEPCO) announced this week that it will open bidding for the construction and operation of fossil fuel-fired power plants to supply the utility with 2,600 megawatts (MW) of power. Bidding will begin today and will end May 24, TEPCO said.

Many TEPCO executives see coal-fired plants as the only viable option under the company's self-imposed cost restrictions, given coal's relative cheapness as a fuel. The utility is working to rehabilitate and rebuild itself, following the Fukushima nuclear plant disaster in March 2011.

TEPCO's use of liquefied natural gas (LNG), crude and heavy oil has significantly increased. In the first 10 months of the current financial year (ending March 2013), the company consumed 19.64 million tons of LNG, up from the 18.85 million tons consumed in the same period in the last fiscal year. In the same period ending January 2011, prior to Fukushima, TEPCO's LNG consumption was 16.65 million tons.

TEPCO recently agreed on the initial terms of a 20-year contract with Mitsui & Company Limited (OTC:MITSY) (Tokyo) and Mitsubishi Corporation (OTC:MSBHY) (Tokyo) for the supply of 800,000 tons of LNG annually from the Cameron project in Louisiana. A further 1.2 million tons will be secured from multiple sources. The utility said that these are the first steps toward its goal of securing the delivery of up to 10 million ton of LNG annually.

Over the same period, April 2012 to January 2013, TEPCO consumed 6.16 million liters of heavy oil and 2.71 million liters of crude oil. This represents a 46% increase in heavy oil use and a 51% rise in crude oil use when compared to April 2011 to January 2012, when consumption was 4.23 million liters and 1.79 million liters, respectively. Data indicates that TEPCO's oil use has now more than doubled since the Fukushima crisis.

TEPCO's use of coal fell in the 10-month 2011-12 period and a further 2.8% in 2012-13 to 2.3 million tons.

The company supplies about 33% of Japan's electricity. Prior to March 2011, nuclear power accounted for nearly 27% of the company's installed capacity. Gas accounted for 41%, oil 17% and hydro 14%.

Utilities have been increasing their use of fossil fuels to meet power demand, and LNG imports increased 11% year-over-year in 2012.

The Environment Ministry has expressed concern about the increased carbon dioxide (CO2) emissions from new coal-fired plants, but the Ministry of Trade and Industry has indicated that it will support TEPCO's plans.

TEPCO has decided to plough on with coal-fired projects as uncertainty surrounds the Japanese government's position on the future of energy, and in particular on the place of nuclear power.

For related information, see January 30, 2013, article - Redefined 'Active Fault' Could Force Closure of World's Biggest Nuclear Plant in Japan.

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