Kansai Electric Seeks `Loose' Alliances Amid Nuclear Uncertaintyby and
Utility wants flexibility ahead of power market deregulation
Japan to liberalize retail electricity market in April 2016
Kansai Electric Power Co., Japan’s second-biggest power utility, is seeking “loose partnerships” with energy companies amid uncertainty over the timing of nuclear restarts in Japan and ahead of the deregulation of the country’s retail electricity market.
The Osaka-based utility, which agreed to cooperative partnerships with London-based BP Plc and the French company Engie this year, is seeking to boost flexibility to respond more quickly to changes in supply and demand, Tatsushi Fujiwara, the general manager of the fossil fuel office, said in an interview this month.
Asia’s third-largest energy market, long dominated by 10 regional monopolies, will open its 8.1 trillion yen ($67 billion) retail electricity market in April even as Prime Minister Shinzo Abe pushes for the return of nuclear power after the 2011 Fukushima disaster led to the shutdown of the country’s atomic plants. Kyushu Electric Power Co. in August restarted the first of the country’s 43 reactors under new safety rules introduced by the Nuclear Regulation Authority. Additional restarts are dependent on NRA and local approval.
“We are seeking to restart nuclear reactors right now, but we don’t know when it will happen,” Fujiwara said in an interview. “The deregulation of the retail market will begin next fiscal year and that could dramatically change demand trends. There will be uncertainty in both supply and demand sides.”
Kansai Electric purchased a record 9.4 million metric tons of LNG in the year ended March 31, and 4.16 million kiloliters of crude as its nine nuclear reactors remained idle over the period. The company’s strategy differs from rivals.
Tokyo Electric Power Co., known as Tepco, and Chubu Electric Power Co., two of Japan’s biggest power companies, plan to merge thermal power operations and combine their fuel purchasing demands to get lower prices. In September, the joint venture known as Jera Co. said they would no longer sign supply contracts for liquefied natural gas that restrict reselling cargoes by limiting the destination of shipments they buy.
A Singapore unit of BP and Kansai Electric agreed to explore cooperation in the LNG business including trading and optimization of ship operations in May. French utility Engie, formerly known as GDF Suez SA, and Kansai Electric agreed to consider a similar cooperation in July.
“Bigger is not always better,” Fujiwara said Oct. 9 at the company’s Osaka headquarters in western Japan, referring to how larger purchases can get cheaper prices. “A larger volume can be more troubling as the demand and supply balance tightens and loosens in a short span in the energy market.”