EIA: Japan’s electricity price up despite drop in LNG, coal price

The average retail electricity price in Japan rose for four consecutive fiscal years (2011–14), despite a decline in the price of imported coal and liquefied natural gas. 

Following the Fukushima accident, Japanese electricity generation mix shifted away from nuclear energy towards the increased use of coal and LNG for power generation, according to a report by the United States Energy Information Agency.

However, according to the data from Japan’s 10 utilities, in the fiscal year 2015, as LNG prices fell by 37 percent and coal prices fell by 19 percent, Japan’s retail electricity price fell by 2 percent.

Because Japan has little or no domestic resources of natural gas or coal, the country relies heavily on imports of coal and LNG. As nuclear generation was shut down following the incident at the Fukushima Dai-ichi plant, electricity generation from coal and natural gas plants increased.

From 2011 through 2014, Japanese imports of LNG and coal increased by 8 percent and 9 percent, respectively, EIA said.

In 2015, however, LNG imports decreased for the first time since 2009, as low coal prices led to increased imports of coal.

LNG prices fell 37 percent from 2014 to 2015 as a result of oversupply in the global LNG market, but this price decrease was not enough to make LNG imports more economic than lower-priced coal, particularly as Japanese utilities dealt with stagnant or declining electricity demand. Continued price drops could lead to increased imports of LNG in the near future, as LNG supply continues to grow and transportation logistics provide access to new markets. However, the long-term potential for LNG demand growth in Japan is limited.

Continued price drops could lead to increased imports of LNG in the near future, as LNG supply continues to grow and transportation logistics provide access to new markets. However, the long-term potential for LNG demand growth in Japan is limited, EIA said.

Ten regional utility companies currently supply more than 90 percent of the electricity in Japan, and in order to spur competition, the country initiated reforms aimed at deregulating the electricity sector in three phases by 2020.

The first phase established an independent system operator to dispatch electricity across the national grid in 2015. On April 1, 2016, regional monopoly control of existing utilities was removed, so competition could enter the market and give consumers the choice of supplier. The removal of pricing regulations and unbundling of the utilities’ transmission, distribution, and retail businesses are the final steps in deregulating Japan’s electricity market by 2020.

Japan is looking to restart a portion of its nuclear fleet and increase coal capacity in order to continue lowering its electricity prices.Two nuclear reactors at the Sendai nuclear plant have been restarted in 2015. Two additional reactors at the Takahama nuclear plant had been restarted by early 2016. However, on March 9, 2016, a court-ordered injunction called for a shutdown of the Takahama reactors. Another reactor, Ikata Unit 3, was restarted in early August.

 

Related news

List of related news articles