Japan creating fuel guidelines to avoid power shortages

Japan is aiming to create fuel guidelines for power generation, to avoid any repeat of the severe shortage of thermal fuel and electricity supplies earlier this year.

The electricity and gas basic policy committee under the trade and industry ministry (Meti) yesterday released its plan to come up with power fuels guidelines by August. This will cover power producers' fuel management and emergency response measures. The committee plans to submit and discuss the draft guideline in July after hearings with power firms during May-June.

The proposed guidelines could show inventory standards, adequate ways of fuel purchases under normal and tight supply conditions, along with schemes for the government and the cross-transmission authority to detect and resolve any fuel shortage. There will be criteria to detect the possibility of electric power shortages and tackle any emergency.

The committee also suggested Meti should disclose end-month total LNG stocks held by the country's main power utilities, together with their combined monthly LNG purchases and consumption. This is an interim measure to answer requests from power retailers to boost transparency in the power market.

Discussions about whether to disclose fuel inventory data have continued over the past few months, as a lack of such data is cited as one of reasons that caused a national LNG shortage and led to tighter electricity supplies in January. But main utilities have hesitated to make public fuel data, as this potentially discloses their business strategies and may prompt fuel sellers to raise their offer prices during shortages. Meti said it needs to carefully consider ways to disclose fuel information, taking into account the potential impact on purchases and electricity prices during shortages.

Japan experienced severe power shortages in January this year, as a series of irregular factors occurred at the same time. These include extended icy weather, higher than expected electricity demand, lower nuclear and solar output, theunexpected shutdown of coal-fired power units, as well as shortage of thermal generation fuels, especially LNG.

LNG stocks held by main power utilities hit a low of 1.36mn t at the end of December. But the inventories rebounded to 2.37mn t at the end of March, which even exceeded the previous year's 2.11mn t, according to Meti. These figures excluded around 500,000t of dead stocks unable to be pumped up from storage tanks.

The power utilities boosted their LNG purchases to 5.54mn t in January and cut then them back to 5.32mn t in February and 4.1mn t in March, Meti said. The latest purchases account for 57pc of the country's overall preliminary LNG imports of 7.1mn t for March, based on finance ministry data.

By Motoko Hasegawa