TOKYO -- Tokyo Electric Power Co. Holdings and three other Japanese utilities plan to grant access to each other's backup power reserves to better handle dips in renewable energy output and other non-emergency situations.
Tepco has agreed on an outline of the arrangement with Kansai Electric Power, Chubu Electric Power and Hokuriku Electric Power. An announcement is expected at the start of next year, with the partners aiming to put the framework into place by fiscal 2020.
Each utility sets aside fossil-fuel power generation capacity equal to about 7% of total demand as standby electricity. A system already exists whereby utilities share surplus electricity across regions and power frequencies in emergencies like a natural disaster. But the latest agreement broadens this to non-emergencies so as to compensate for sharp drops in solar and wind power output due to weather conditions, for instance.
The four electric companies together control 59% of Japan's power market. They are approaching Tohoku Electric Power and other utilities about joining the arrangement.
If nine of Japan's regional utilities were to participate -- all except Okinawa Electric Power which serves the southernmost prefecture of the country -- annual costs could be slashed by 116 billion yen ($1.02 billion), according to Tepco estimates.
The government plans to have renewable energy account for 22-24% of Japan's overall power output in fiscal 2030, up from about 15% in fiscal 2016. While utilities themselves rarely generate renewable energy, they are required to purchase renewable power generated by government-approved operators.
By stepping up collaboration, the quartet will be able to lower costs for managing the backup plants and trim their investment in the facilities.
Tepco included partnerships with other companies in a rehabilitation plan compiled in May. This is the first concrete program to come out of that initiative. The utility is still struggling to repair its finances following the 2011 meltdowns at its Fukushima power plant.
Separately, the government and the power industry are working to revamp rules on grid usage in an effort to raise efficiency, in addition to taking steps to upgrade the grid itself.
The Japanese power sector has undergone gradual deregulation over the decades, culminating in the April 2016 liberalization of the retail power market. This has blurred the borders of the utilities' traditional service areas. The arrangement on backup power is likely to blur them further.