Blog June 20, 2019

Since an earthquake hit Japan on March 11, 2011, most of the country’s nuclear plants are now offline. Japan substituted much of this power generation capacity with Liquified Natural Gas (LNG) fuelled plants. Figure 1 shows that by 2014, power generation from LNG was 46 percent of all generation. 

Japan power generation in terawatt hours (TWh) over time by fuel type. Source: Ministry of Economy Trade and Industry (METI)
Figure 1: Japan power generation in terawatt hours (TWh) over time by fuel type. Source: Ministry of Economy Trade and Industry (METI)

In the last five years, however, the LNG share of power production decreased. Despite a generation spike in 2018, LNG still fell to 39 percent of total generation. Coal remains relatively stable at around 31 percent of generation from 2014 to present.Meanwhile, non-hydro renewable energy generation power during this period more than tripled from 2.6 percent to 8 percent of total generation, due to generous feed-in-tariffs for primarily solar power and financed by rate payers that subsidise the cost of building new plants.

Price concerns drove down LNG dependence during that period. Figure 2 shows after the 2011 earthquake both coal and LNG prices per unit of imported fuels spiked considerably. From early 2019, however, the LNG price per unit fell while coal rises. This sparked rumours that traders may start sourcing additional LNG imports from the spot market to boost gas usage in power generation. 

Cost per unit converted into USD for LNG and thermal coal from Jan 2010 until Apr 2019. Source: Ministry of Finance Customs Statistics
Figure 2: Cost per unit converted into USD for LNG (left axis, USD/mmbtu) and thermal coal (right axis, USD/t) from Jan 2010 until Apr 2019. Source: Ministry of Finance Customs Statistics

Despite these rumours, the Organisation for Cross-Regional Coordination of Transmission Operators (OCCTO) expects utilisation rates of gas to continue to fall in 2019 and into the next 10 years. Figure 3 shows LNG utilisation falling from 53 percent in 2018 to 33.6 percent in 2028. OCCTO also expects nuclear plant utilization to fall in the future from the already low levels in 2019 of 17.3 percent to 10.9 percent in 2028. 

Actual and forecast utilisation rates for Coal and LNG plants in Japan.
Figure 3: Actual and forecast utilisation rates for Coal and LNG plants in Japan. Source: Organisation for Cross-Regional Coordination of Transmission Operators (OCCTO)

Furthermore, such rumours would also be a strong shift from the previous mindset only a few years ago. In 2016, there were almost 50 coal plants totalling 22.8 gigawatts (GW) of capacity planned or under construction. Figure 4 shows the amount of capacity in megawatts (MW) that was expected to come online as of 2016. In the three years since that time, many of these plants have been cancelled. This is primarily due to popular, as well as government, resistance. The Environment Minister, Yoshiaki Harada stated in March 2019 that the government will ask plants that do not reduce CO2 emissions to cancel construction plans. 

New planned coal plant capacity (MW) operation dates as of 2016
Figure 4: New planned coal plant capacity (MW) operation dates as of 2016. Source: Ministry of Environment (Environmental Impact Assessment Database)

Genscape data helps answer this question: Is there a shift from coal back to now lower-cost LNG in recent months? In Figures 5 and 6, we can see the real-time generation data of all the plants that Genscape monitored for LNG and coal for the past 12 months. Publicly available data usually has a lag of a few months, while PowerRT shows plant generation performance in real time. Figure 7 shows LNG and coal figures overlaid for easy comparison. 

Real-time generation data for the 12 months until 10 June 2019 from PowerRT platform of LNG plants monitored by Genscape
Figure 5: Real-time generation data for the 12 months until 10 June 2019 from PowerRT platform of LNG plants monitored by Genscape.
Real-time generation data for the 12 months until 10 June 2019 from PowerRT platform of Coal power plants monitored by Genscape.
Figure 6: Real-time generation data for the 12 months until 10 June 2019 from PowerRT platform of Coal power plants monitored by Genscape. 
Aggregated real-time generation data for the 12 months until 10 June 2019 from PowerRT platform of LNG vs Coal plants monitored by Genscape.
Figure 7: Aggregated real-time generation data for the 12 months until 10 June 2019 from PowerRT platform of LNG vs Coal plants monitored by Genscape. 

Looking at Figures 5-7, there does not appear to be a clear trend in fuel switching from coal to gas. However, as the summer begins and power demand increases, we could start to see a disproportionate switch to gas if LNG spot prices stay low. Genscape’s PowerRT platform gives you a real time view, allowing you to act on changes. To learn more or to request a demo, please click here.