TOKYO -- Electricity demand has surged in Japan since a cold wave hit many parts of the country starting last month. But the situation also reveals flaws in the power system and highlights challenges that lie ahead for decarbonization.
Since last week, power companies across Japan have been experiencing days when their capacity factor -- the ratio of actual to maximum output -- exceeds 95% of their generation capacity. Normally, a reserve ratio of 7-8% is required for a stable supply. When the reserve ratio falls below 3%, it becomes difficult for operators to cope with sudden volatility in demand.
Electricity consumption this winter is growing at a pace of more than 10% year-on-year due to an increase in heating demand. Power companies have been sharing electricity with each other; in the last month the Organization for Cross-regional Coordination of Transmission Operators (OCCTO) instructed power companies to share electricity with neighboring regions at least 140 times, an unprecedented figure.
Despite various measures such as requesting power companies to operate at maximum output and expanding the capacity of transmission lines connecting regions, the capacity factor temporarily reached 98-99% in a number of areas in the past few weeks.
This also has exposed issues in the Japanese electricity system.
First, there is a risk of heavy dependence on liquefied natural gas. Power companies were forced to rely on LNG-fueled power plants to cope with demand spikes. In summer, demand tapers off at dusk, but in winter, demand remains high at night due to cold temperatures. As a result, power plants continued to burn LNG, and consequently stockpiles rapidly declined sooner than most companies had planned.
There are a number of reasons why LNG power plants are abundant in Japan. Nuclear and coal-fired power plants take time to start up or stop generating, while LNG-fueled power plants reach full output in a short span of time -- they can play a role in supplying power when there is a sudden change in demand.
In addition, LNG emits the least amount of carbon dioxide of any fossil fuel -- the superchilled gas has gained attention as a "transitional fuel" to pave the way for decarbonization. Another reason Japan relies on LNG is because many nuclear power plants have not been operating due to tightened safety measures since the Fukushima accident.
However, issues surrounding energy security remain. LNG is imported and stored at receiving terminals; in Japan, domestic stocks last only two weeks, and it often takes two months for a vessel carrying LNG to arrive after a new order.
The situation this winter has been exacerbated because the number of oil-fueled power plants has been decreasing. The levelized cost of electricity for oil-fueled power plants is more expensive than that of LNG-fueled plants, but oil is easier to procure, transport and store. Electric power companies have been using oil-fueled power plants to meet peak demand when there is a surge in electricity consumption, but those plants' operating hours tend to be limited because of their higher cost.
As the government has pushed for liberalization in the power market, oil-fueled power plants with high fixed costs and low capacity factors were decommissioned one after another -- this could have been one of the reasons for the unusually tight supply and demand in the past month. A long-standing concern has materialized: Liberalizing the power markets is making it difficult to maintain generation capacity.
Also, output of renewable energy declined in the past month. On Dec. 7, when the cold wave hit northern Kyushu in western Japan, the supply capacity of solar power across the island dropped to 3,240 megawatts, 42% lower than the 5,600 megawatts 10 days later, when the weather was clear. This decrease of 2,360 megawatts is equivalent to the generation capacity of two nuclear power plants.
With many investors building solar plants in Kyushu, the intermittency of renewable energy is becoming an issue in controlling the energy system. Kyushu Electric Power, the transmission company on the western island, occasionally asks solar plants to curtail output on sunny days when the region's power grid cannot absorb all of the electricity. In the past month, however, due to the bad weather, the supply capacity of the solar panels was practically gone.
The drop in supply capacity is not limited to solar power. Kyushu Electric normally utilizes surplus electricity from solar power for pumped storage -- water from reservoirs is lifted to higher reservoirs and later released to generate electricity when demand for power increases. But because of the sun not shining for so many days, Kyushu Electric said it was not able to pump up enough water.
The impact of the intermittency of solar power has been felt by power companies across Japan. The solar power output from Tepco, which supplies the greater Tokyo region, sometimes exceeds 1,000 megawatts on sunny winter days. But on Tuesday, a cloudy day in Tokyo, the output remained almost nonexistent throughout the day.
Japan has experienced regionwide blackouts in the past few years due to natural disasters: the earthquake in Hokkaido, northern Japan, in 2018; and the mega-typhoon that hit Chiba Prefecture, next to Tokyo, in 2019.
But in Japan, discussion surrounding energy policy tends to focus on the benefits of zero-carbon energy and liberalization of the energy markets -- there should be more focus on stable supply, as well as discussion to realize all three goals at once at minimum cost.
The situation in the past month has shown the difficulty of utilizing renewable energy. In order for renewable energy to become a major power source, Japan will need to develop more storage, such as improving efficiency and enlarging batteries.
Moreover, if LNG-fueled power plants are to play a central role in the energy system, they have to become more resilient by addressing the issue of securing fuel, which was highlighted in the past month.
The national division into 10 regional power grids, each under its own utility, is another issue that has to be tackled. In the medium to long term, distributed renewable energy needs to be enhanced. Furthermore, transmission lines need to be restructured in order to make the power system more flexible.