Japan is moving to temporarily lift restrictions on the operations of inefficient coal-fired power plants in the April 2026-March 2027 fiscal year to conserve LNG on rising uncertainty over imports from the Middle East and ensure stable electricity supplies.
The trade and industry ministry Meti on 27 March unveiled an emergency plan to suspend in 2026-27 the capacity market rule that requires coal-fired plants with design efficiency below 42pc to keep their annual capacity factors at 50pc or lower. Plants that exceed the limit would face a 20pc reduction in capacity market revenues.
Uncertainty remains over future LNG supply, especially from Qatar, in the event of a prolonged or worsening situation in the Middle East, although there is no immediate risk to short-term supply, Meti said. Power and gas utilities currently hold roughly 4mn t of LNG inventories, equivalent to one year of imports through the strait of Hormuz, and efforts to secure alternative procurement are ongoing.
Assuming that inefficient coal-fired units operate at the average rate for coal-fired plants in 2026-27, the power sector could save around 500,000t of LNG, which is equivalent to a little over 10pc of the 4mn t/yr imported through the strait of Hormuz, according to Meti.
Meanwhile, the emergency measure would increase Japan's demand for thermal coal, whose supply sources are not exposed to the conflict in the Middle East. Japan imported 8.7mn t of steam coal in February, sourcing 76pc from Australia, 10pc from Indonesia, 5pc each from the US and South Africa respectively, 3pc from Canada and 2pc from Russia, according to preliminary data released today by the finance ministry.
Japan has pledged to phase out inefficient coal-fired plants by 2030, while promising not to build new unabated coal-fired plants. But coal remains a vital power source, accounting for 29pc of Japan's power mix in 2024-25, close to the 32pc share of gas.
Japan's latest power capacity market auction, covering delivery year of 2029-30, secured around 166GW of generation capacity. The auction results did not specify the source of awarded capacity, but the breakdown of bidding volumes shows 38.15GW from coal fired units, including 5.27GW from inefficient coal fed plants.
