TOCOM Energy

Japan plans crash program to build gas-fired power plants

THE NIKKEI via scoutAsia

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December 6, 2022 3 min read
Japan plans crash program to build gas-fired power plants

Japan is seeking to enlist private companies in a program to boost the countrys natural gas-fired power capacity by the equivalent of seven or eight power plants to cope with projected power shortages, Nikkei has learned.

The Ministry of Economy, Trade and Industry envisions 6,000 megawatts coming on line by fiscal 2030. Support will be given to recovering building and investment costs, a move to counter hesitation by corporations to take part due to unpredictable LNG prices and the overall movement toward decarbonization.

Companies will be recruited between fiscal 2023 and 2025. The power target is equivalent to 3% more than the country’s peak demand in winter and summer. Support will be provided not only for new projects, but for projects that have already begun design and construction in time for the fiscal 2030 target date.

About a third of conventional fossil-fuel power plants owned by major power companies have been in operation for 20 to 29 years. METI estimates that this aging infrastructure risks lowering output 9,000 MW by around 2030.

Modern gas-fired power plants have relatively low carbon dioxide emissions, and if coal-fired power plants are rebuilt to use gas, emissions can be cut in half.

Japan has been relatively slow to introduce renewable energy and restart nuclear power plants. Natural gas is a major power source, accounting for the largest share of the country’s power generation at 34% in fiscal year 2021.

In fiscal 2023, Japan will launch a program to support decarbonization that collects money from electricity retailers to fund a pool from which power generators can earn a certain set amount of income for the first 20 years of operation, making it easier to project payback on investments.

Originally, this program targeted the construction of plants that would use co-combustion with fuels such as hydrogen, which emits no CO2 when burned. But the emission reduction measures will be postponed, and allow hydrogen co-combustion to be introduced within the first 10 years of a plant’s operation and a target of zero emissions by 2050.

Japan‘s power grid has been pushed to the brink several times this year. An earthquake off the coast of Fukushima prefecture in March caused several fossil-fuel power plants to shut down, triggering a warning of a tight power supply-demand balance. METI is calling for electricity conservation nationwide beginning this month following a similar call in summer.

Costs will be key in determining whether power companies and others decide to build the plants, which take several years to construct. Profitability of conventional generation operations tends to deteriorate as more renewable energy is adopted.

Construction of a fossil-fuel power plant requires an investment of around 100 billion yen ($740 million), and even with government support, it is uncertain power companies and others will join in.

Although the support will be conditional on longer-term decarbonization, the program could be interpreted abroad as a short-term retreat from decarbonization, which may influence the thinking of companies and financial institutions.

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The English translations provided through this service are the result of automatic and mechanical translation of contents written in Japanese and created by Nikkei or licensed by a third party, by an automatic translation system provided by a third party after certain processing of the contents by Nikkei. Nikkei disclaims all warranties, express or implied, related to the English translations, including any warranty of accuracy, reliability, validity and fitness for a particular purpose. Users shall use this service with the full understanding that it employs an automatic translation system that automatically and mechanically recognizes and analyzes information and outputs the results.