Argus Media Limited

11/24/2021 | News release | Distributed by Public on 11/24/2021 11:31

Jera steps up to ensure Japan's power market stability

Japan's largest power generator, Jera, has announced measures to ensure power market stability during the December 2021-February 2022 peak heating period, in a bid to avoid a repeat of last winter's power shortage.

Jera said it will take measures to maintain a minimum 3pc electricity reserve margin throughout winter, as set out in the government's supply-demand verification report. The measures aim to secure power capacity, fuel and stable electricity supply to Japan Electric Power Exchange (Jepx).

To secure power capacity, Jera will adjust its plant maintenance schedule. In the Tokyo area, it has already secured 460MW of additional thermal generation capacity in January and 420MW in February. Jera has also secured 480MW of additional thermal capacity in the Chubu area for February, and is also preparing to restart the 600MW Anegasaki thermal unit 5 in January. The Anegasaki plant, in Chiba prefecture, can be fuelled by LNG and LPG.

The company said it has set up a committee to ensure a prompt response to market developments, and that it aims to closely monitor crucial equipment, such as seawater cooling systems and boiler combustion gas systems.

And Jera has taken measures to ensure spot power prices are more reflective of fluctuations in spot fuel costs. It has revised its power supply contract with Tepco Energy in order to become a direct participant on Jepx's wholesale day-ahead power market from this month. Jera will also revise how it calculates marginal cost to improve price formation on Jepx to "send appropriate price signals to the market".

Jepx spot prices have been determined by a weighted average of term and spot contracts, where short-term marginal costs were not reflected, leaving generators with less incentive to produce more power in the event of a fuel price spike. This partly explains the power shortage in Japan earlier this year, as power price gains failed to offset faster growth in fuel prices.

To better reflect fuel prices in the power market, additional fuel procurement costs will be reflected in power prices, so any additional fuel price rise will more directly translate into higher prices on the Jepx spot market bid price increase. Fellow Japanese utility Tohoku Electric Power announced last week it would start using a similar mechanism on 24 November.

Jera aims to maintain a higher level of LNG inventories in Japan, and optimise its global LNG portfolio by diverting Europe-bound US LNG cargoes to Japan in the event of a sudden increase in domestic demand. And it will begin to assess the amount of electricity it needs to generate based on historical data and forecasts for power demand and plant availabilities at other utilities to increase fuel procurement flexibility.

By Evelyn Lee