Japan utilities welcome LNG auction quotas citing investment certainty

Japan's utilities welcomed a proposal by the government to set dedicated quotas under its long-term power source auction (LTDA) for new liquefied gas-fired power stations, saying that this would increase investment visibility.

Nozomu Muri, Chairman of the Federation of Electric Power Companies of Japan told reporters on Friday that "we view the clear reaffirmation of LNG powered power's importance, and the establishment of an investment support framework, as highly significant. This is especially for improving predictability of investments."

The Organisation for Cross-regional Cooperation of Transmission Operators (OCCTO) estimated that Japan would face a 16 gigawatt shortfall in 2040, if the electricity demand rose to 1,100 TWh. This is even after all the old thermal power plants have been replaced.

In June, the Ministry of Economy, Trade and Industry proposed that 39 GW to 50 GW of LNG-fired generator capacity be built or replaced by 2040. The average time to build a thermal power plant is seven years.

METI intends to secure capacity via the LTDA beginning in the current fiscal, with auction volumes of?about 5.5 GW - 8 GW per year.

The LTDA could support LNG demand for 'the second-largest purchaser of the fuel in the world,' even though Japan is working to increase renewable energy and restart its nuclear reactors.

METI's latest energy plan forecast that Japan's annual demand for LNG would drop to 53 to 61 millions metric tons in 2040, from 66 million tons in 2023. Under a risk scenario where decarbonisation technology develops more slowly, LNG could demand rise to 74 millions tons. (Reporting and editing by Kirsten Doovan; Yuka Obayashi)

(source: Reuters)