- Utilities seek cost cuts through more efficient gas generation
- Upgrades at Tepco plant to save company 8 billion yen annually
Japan’s biggest power utilities are pushing ahead with plans to spend more on new turbines to improve the efficiency of their gas-fired power plants in an effort to lower fuel bills amid a protracted debate over the role of nuclear power.
Chubu Electric Power Co. signed an agreement with General Electric Co. on Sept. 1 to upgrade eight turbines at a gas-fired plant in Joetsu City, about 209 kilometers (130 miles) north of Tokyo. Tokyo Electric Power Co., the nation’s biggest utility, is replacing eight turbines at its 3,352-megawatt gas-fired facility in Yokohama, south of Tokyo. Kansai Electric Power Co. in March completed installation of some of the most efficient turbines in the world at its Himeji No. 2 plant in southern Japan.
The upgrades occur against the backdrop of rising electricity prices -- power bills in Japan have increased about 15 percent since the Fukushima reactor meltdowns -- and a squeeze on profits at the utilities, which were forced after the nuclear disaster to rely on more expensive fossil fuels for power generation. Tokyo Electric, known as Tepco, estimates savings of as much as 8 billion yen ($67 million) a year once all the turbines at its Yokohama plant are replaced by January 2018.
“In an area with relatively high fuel costs, like Japan, efficiency improvements will have more value over the life of the plant,” Michael Rutkowski, the Chicago-based managing director of energy practice at Navigant Consulting Inc., said by e-mail.
Between 2010 and 2014, power utilities in Japan increased their consumption of LNG by more than a third, according to data compiled by the government. The increase was largely a result of the Fukushima disaster in March 2011, which ultimately led to the shuttering of the nation’s nuclear plants for safety checks. Japan relied on nuclear power for more than a quarter of its electricity generation before the Fukushima accident.
More than two-thirds of Tepco’s current electricity generation is derived from LNG, compared with less than half before the Fukushima disaster, according to the company’s 2014 factbook.
In the absence of nuclear power, Japan’s top three utilities posted a combined net loss of 961 billion yen in the year ended March 31 2013, compared with a profit of 370 billion yen for the same period in 2010. More than four years after Fukushima, just one nuclear reactor unit has resumed operations under new rules, though more could come online shortly.
Though a drop in the price of natural gas boosted profits for Japan’s power utilities in the last quarter, electricity rates will automatically adjust to reflect the cheaper fuel and profits are expected to decline this quarter. The cost to generate electricity from LNG is 36 percent higher than nuclear and 11 percent higher than coal, according to data compiled by the government.
It isn’t just Japan where utilities are improving facilities to cut costs. Emera Energy Inc. signed an $80 million agreement with General Electric in July that includes upgrading its 265-megawatt Tiverton Power station in Rhode Island with higher-efficiency gas turbines. The company estimates savings of $1 million a year on fuel costs through the upgrade.
Japan’s utilities would cut LNG consumption by more than a third if the nation’s entire fleet of gas-fired plants were to achieve the same efficiency as Tepco’s Yokohama plant by 2030, according to data compiled by the Kyoto, Japan-based Research Institute of Innovative Technology for the Earth and the Federation of Electric Power Companies of Japan.
“The necessity to cut fuel cost has increased since the Fukushima accident,” Mayumi Yoshida, a Tepco spokeswoman, said in an interview. “We’re planning multiple ways to do that, and one is to replace turbines with more efficient ones.”
Tepco declined to say how much it’s spending on the new turbines.