Japan to focus on coal and LNG power

Japan is expected to commence operations at 14 new gas and coal-fired power plants by the end of 2014, moving its focus away from oil.

Regional power monopolies will build 12 gas-fired units in 2014, while two coal power plants are expected to be completed by end of this year, according to a Reuters survey.

The new power plants will use liquefied natural gas (LNG) and coal in an attempt to scale back on the use of crude oil and fuel oil, which are both becoming increasingly expensive source of power.

Nuclear shutdown

Japan is looking towards gas and coal as Tokyo struggles with a shutdown of nuclear reactors and energy imports drive a record trade deficit. Nicholas Browne, a senior analyst at Wood Mackenzie explained the benefits of moving the focus to LNG and coal: “What this will do is introduce an additional reserve margin into the power network, particularly in areas where some nuclear is coming back”.

Expanding gas and coal-fired generation is the only viable option in a nuclear-free Japan to power its industrial and commercial sector at the same time as keeping electricity prices low enough for Japanese businesses to remain global competitors.

US$ 7 billion

The 14 new gas and coal power plants will cost an estimated US$ 7 billion to build, according to data from the International Energy Agency (IEA). In total, they will add 6.4% more fossil fuel capacity by the end of 2014.

Mitsubishi Heavy, General Electric, Hitachi and Mitsubishi Electric are among the companies that will benefit from construction.

Coal power

The two coal-fired units due to commence operations by the end of the year will add 1.6 GW to production, and will cost an approximate US$ 2.4 billion, according to the IEA.

Japan's coal imports are set to reach record levels over the next year.

LNG power

Gas-fired units due to commence next year will add 5.2 GW of capacity (7.8%) to the 66.3 GW the power firms already operate. The IEA estimates plants with this power output would cost approximately US$ 4.5 billion.

"With oil prices staying this high and peak summer demand behind us, the utilities have quickly dropped usage of crude and fuel oil in favour of LNG," said Akitsugu Takahashi, a marketing executive for JX Holdings.

Japanese imports of LNG will increase by approximately 5 million t to 72.5 million t in 2014, up from 62.7 million t in 2013.

Japan's total LNG demand this year is expected to stand at 85.7 million t, increasing slightly to 86.4 million t in 2014 on higher demand for power that will accompany the new power plants.

Adapted from press release by Katie Woodward

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