TOKYO -- Tepco Power Grid, the transmission unit of Tokyo Electric Power Co. Holdings, has asked commodities companies with private power generation equipment to help it provide electricity, as Japan faces a power outage, Nikkei learned Wednesday.
A series of cold spells has caused a surge in demand for liquefied natural gas, or LNG, a fuel used to generate heat. As Japan faces a shortage of LNG, Tepco Power Grid is hoping to buy electricity from other industries, an unusual move that hints at a severe outlook, so that it can continue to supply its customers.
Major oil, steel and chemical companies have power generation facilities at some of their plants that they use to generate power for production activities. Tepco Power Grid has asked many companies with such facilities, including JFE Steel, Sumitomo Chemical and ENEOS Holdings, to sell it any surplus electricity. Tepco has also requested that they ramp up power generation to help it meet demand.
A spokesperson for JFE, which has power generation facilities in the cities of Kawasaki and Chiba, close to the capital, said the company will help as much as it possibly can.
This is not the first time that Tepco Power Grid has reached out for help. It procured electricity from other power-generation companies immediately after the Fukushima earthquake and tsunami in 2011. However, it is unusual for the company to procure electricity from companies outside of the industry.
Demand in the Kanto area including Tokyo and its neighboring prefectures has surged after a series of cold spells. Tepco Power Grid had already bought electricity from its peers such as Chubu Electric Power and Hokuriku Electric Power on Sunday and Monday.
The cold spell is expected to continue over the next few days and Tepco Power Grid now faces a shortfall. Across the country, power supply and demand is tight. Electricity demand in December was nearly 4% higher than a year ago, according to the Organization for Cross-regional Coordination of Transmission Operators, a group that oversees nationwide electricity supply and demand.
On the supply side, there is a nationwide shortage of LNG. The power transmission and distribution unit of Kansai Electric Power has also purchased electricity from other power companies.
Although LNG thermal power plants account for 40% of total power generated in Japan, the world's top buyer, the gas cannot be stored for a long time, which makes it difficult to increase output to meet sudden surges in demand.
There is also little option to procure LNG at short notice as a spot contract takes about two months to deliver. LNG producers in Australia and Malaysia have also had equipment failure lately which has led to tighter exports. Furthermore, LNG shipments from the U.S. have been delayed due to extra coronavirus prevention procedures.
As a result of this global shortage, LNG prices have been soaring. The price for LNG spot cargo in Asia is now at $14.6 per million British thermal units, up 80% from a month ago.
"Unlike the U.S. and Europe which can obtain gas through pipes, it is challenging for Japan as an island country to procure LNG in a short amount of time," said Junichi Ogasawara, senior research fellow at the Institute of Energy Economics in Japan.