Japanese electricity prices have soared to an all-time high as a cold snap coincides with a tight supply of electricity liquefied natural gas Raise fear of power outages in parts of the country.
Utilities asked their customers to leave the heating on but turn off other devices as the power grid hit 99 percent of its maximum capacity in western parts of the country on Tuesday.
The rise in energy prices comes just two months before the tenth anniversary of the Fukushima disaster, the aftermath of which has led Japan to radically rethink its energy mix away from nuclear, and two months after an ambitious plan was announced to become carbon neutral by 2050.
Intraday prices on the Japan Electric Power Exchange hit a record high of 246.8 yen per kilowatt hour on Tuesday afternoon on the spot market, compared to an average of 7.6 kWh / h last January and 15.1 kWh / h in December 2020 Power supply prices also hit records on Wednesday as trading volumes rose to historic levels.
Only three of the 33 Japanese nuclear reactors are warned of possible power outages. Experts believe the current crisis could make the government’s efforts to accelerate the restart program even more urgent and stronger.
A week of unusually bad weather has thrown more than a meter of snow on parts of the country, causing many households working from home because of Covid-19 to turn on the heating.
“If the extreme cold persists, the power supply is scarce, so you can switch off the lights in the other room when the heating is on, for example,” said Energy Minister Hiroshi Kajiyama at a press conference.
With its limited domestic energy supply, Japan has long been one of the leading importers of LNG and relies on super-chilled loads fuel to meet the demand for heating, production and power generation.
Competition has increased, however, as more countries are using LNG to reduce reliance on highly polluting coal, while supplies this winter have been tighter than expected. Although most of Japan’s LNG shipments are secured under long-term contracts, the spot market for cargoes, where dealers and utilities can purchase additional shipments, has hit an all-time high in the past few days.
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Commodities trader Trafigura bought a batch of LNG in Asia on Tuesday 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 only $ 2 per mmbtu last April.
The tightness in LNG markets is also having an impact in Europe, where UK gas prices hit a two-year high at 75p per Therm on Tuesday, an increase of more than 10 percent a day.
“This is evidence of the increased seasonality and volatility that results from the increasing use of LNG for power consumption along with the growth of renewable energy sources to smooth the greenhouse gas emissions curve,” said Richard Holtum, global director for LNG and Gas at Trafigura.
Extreme cold in East Asia and China’s unofficial import ban on Australian coal have brought China to 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 the slate fields near the U.S. Gulf Coast, while other major LNG suppliers like Qatar and Australia had experienced failures over the winter.
Shigeki Matsumoto, an energy company analyst at Nomura Securities, said that while the fuel stocks of various Japanese electricity companies were unknown, it could be expected that fuel would be scarce.
“Electricity companies may have also scaled back LNG sourcing volumes to reduce the risk of an excess of LNG, assuming the pandemic would reduce electricity needs,” Matsumoto said.
Even with its filthiest plants, the industry warned that keeping the lights on could be difficult. “Older thermal systems are at risk of failure, and as demand increases, there is also a risk that these systems will run out of fuel,” said the Association of Electricity Companies, the main industry association.
The industry specifically pointed out that solar panel production was very low and is unlikely to recover in the coming days.
Tom O’Sullivan, a Tokyo-based advisor and analyst with Japan NRG publication, said, “The government and utilities have not done a good job reactivating nuclear reactors. . .[they]Perhaps we will now make the Japanese public the case to turn them on again. “
