Can Japan keep the lights on? Ukraine’s war turns a major energy bet on its head.

In 2018, when energy company Hope Energy entered the new retail electricity market in Japan, I thought it had a proven strategy. Wholesale energy is getting cheaper than ever as LNG floods global markets. Hope Energy will sell electricity contracts at competitive prices to local governments and utilities, undermining Japan’s old power companies, which have long prioritized stable supply over cost.

But then came the pandemic and the Ukraine war, which drove up LNG prices. Hope Energy couldn’t live up to its price pledges, and it has halted with more than 30 other electricity retailers in Japan. Customers rushed to acquire new service providers.

Now, the world’s third largest economy is once again facing the fragility of its energy system. This has forced a reconsideration of how the resource-poor country can maintain a reliable and affordable energy source in an era of rising geopolitical uncertainty, which is immediately reflected in the growing calls for a Russian energy boycott.

Analysts agree that the reassessment is likely to set back Japan’s efforts to fully liberalize the electricity industry and reach its goal of carbon neutrality by 2050. It also puts new pressure on the country’s economy and politics, as there are concerns about Japan’s ability to supply . itself as its strength rose to its highest levels in more than a decade.

While many countries have suffered from the energy market chaos caused by the Russian invasion of Ukraine, which has led to a rush to new sources of energy and caused suffering to consumers, the rise in LNG prices has become a particular concern for Japan.

Energy security has long been a concern in Japan, where electricity generation is highly dependent on imported fossil fuels. Natural gas is becoming an increasingly important part of the mix, as the country has sought to shut down polluting coal-fired plants and shut down much of the nuclear power industry after the 2011 meltdown at the Fukushima No. 1 plant.

LNG was cheap, plentiful, cleaner than coal and safer than nuclear power, and was seen in Japan as a critical transition fuel as it gradually shifted to renewable energy. But it is no longer cheap or plentiful, with supplies shrinking due to logistical problems related to the pandemic and demand from China increasing as it moves away from coal. Sanctions against Russia, one of the world’s largest suppliers of LNG, further tightened supplies, driving up prices.

In March, Japan’s LNG sold nearly 23% more than it had in the previous month, a problem that was exacerbated as the yen plunged to its lowest level in 20 years against the dollar.

“War, sanctions, a very real stress test” for the Japanese energy system, said Yuri Humber, founder of Japan NRG, an advisory group. He said the results so far “do not look good”.

A Japanese-made LNG tanker docks near a LNG plant on Russia’s Sakhalin Island in February 2009. | Reuters

Japan is the second largest importer of liquefied natural gas in the world after China, which took the lead last year. Even before the Fukushima disaster, LNG produced about 24% of the country’s electricity, a share that grew as the country stopped using coal power.

After the crash, usage skyrocketed, and today more than a third of Japan’s energy comes from fuel. In 2020, Japan bought more than 74 million tons of LNG, more than a fifth of global supplies. (In the United States, 38% of electricity comes from natural gas, but the country produces most of what it consumes.)

About 8% of Japan’s supply comes from a project, Sakhalin-2, which was set up as a joint venture between Russia’s Gazprom, Britain’s Shell and two Japanese companies, Mitsui and Mitsubishi. This has put Japan in a difficult position as the United States and others have called for a boycott of energy exports from Russia, an important source of Japanese liquefied natural gas.

In early April, Japan announced that it would eventually stop its purchases of Russian coal. But Prime Minister Fumio Kishida insisted that his country could not afford to cut support for Sakhalin-2, which he called “extremely important to Japan’s energy security”.

Even without the war and the epidemic, it seemed like an energy crisis was bound to occur in Japan.

Some regions have operated their electric grids close to capacity since the Fukushima disaster. In the warmer and cooler months, regional providers’ power generation surplus often drops below 3%, the minimum level considered necessary to ensure a steady supply. And LNG, unlike other energy sources, is not storable. Japan maintains supplies of only two to three weeks at a time, and this has left the country vulnerable to blackouts in periods of unexpectedly high energy demand.

But the collapse of Hope Energy and other electricity retailers symbolizes the extent to which the two disasters have transformed once-optimistic calculations about Japan’s energy future.

In 2016, Japan began liberalizing the electric power market, allowing retailers to compete with monopolies such as Tokyo Electric Corporation, the operator of the Fukushima nuclear power plant.

Fukushima Nuclear Power Plant No. 1. Natural gas is becoming an increasingly important part of Japan’s energy mix, as the country has sought to shut down polluting coal-fired plants and brought much of the nuclear power industry to a standstill after the 2011 meltdown at Fukushima’s No. 1 facility. | Kyodo

There seemed to be plenty of room for cost savings: US producers were making so much natural gas that in some cases, it was cheaper to burn it at a well than to pay to move it.

In Japan, hundreds of companies have rushed into the newly liberalized energy market. Some, like Japanese internet giant Rakuten, had no industry experience. Not many hedge against the possibility of higher energy costs. Few have invested in their own generation capabilities, avoiding fixed costs. Rather than signing long-term energy contracts or securing low prices through the use of futures contracts, many have tried to keep overheads low by making purchases in line with daily energy demand, and buying at wholesale prices with the shortest possible lead time.

Convinced that prices will continue to fall, companies “mistakenly thought they could do business based on” Japan’s wholesale energy market, Syusaku Nishikawa, energy analyst at Daiwa Securities, said.

Hope Energy, who began her career providing technology and human resources expertise to local governments, founded an energy division in 2018, hoping to use its existing business networks to capitalize on them.

It started off well: By June 2020, the company said it had $95 million in sales, up more than 760% over the same period the previous year. In light of its success, it has separated from its parent company and announced that it is moving towards renewable energy.

However, the sudden rise in prices in early 2021 stunned the company, which was unprepared for the possibility of a significant jump in costs, according to a statement it issued when it declared bankruptcy.

Masaru Tagami, who is in charge of facilities procurement for the central Japanese city of Hida and is a former customer of Hope Energy, said he was surprised by the company’s “sudden” collapse and rising costs as its business was handed over to another company. Corporation.

The city’s annual electricity bill is expected to rise by 40%, he said, adding that the situation has caused chaos in its budget.

“I am very concerned about how long these conditions will last,” he said.

Houses and buildings in Toshima Ward, Tokyo, on March 17, during a power outage after an earthquake REUTERS

Junichi Ogasawara, a senior research fellow at the Institute of Energy Economics in Japan, said energy companies that have been hit hard by the epidemic-related rally expected prices to subside by next March as the effects on supply chains fade.

“But with the Russian invasion of Ukraine, the situation has changed to one in which current conditions will continue,” he said.

Since then, the instability of Japan’s energy situation has become more and more apparent. In March, after an earthquake near Fukushima destroyed part of the electrical grid, a cold snap pushed Tokyo to the brink of continuous blackouts. In the past, coal-fired power plants could have been called for cheap backup power, but the old, inefficient ones were decommissioned.

“We are still in a situation where these kinds of things could happen again” unless the government fixes the problems introduced by deregulation and a patchwork shift to renewables, which is Company analyzing the energy industry in Japan.

In Europe, chaos in energy markets has led to greater calls for the development of renewables. But in Japan, resistance from the biggest energy companies has prevented solar and wind energy — which are less reliable and hard to store — well integrated into the electric grid.

Seeking a quick fix, politicians and companies in Japan are calling for investment in more LNG supplies and a return, in the short term at least, to coal and nuclear power, said Gregory Trencher, an associate professor at Kyoto University who studies energy policy. .

“This just reinforced the mentality that we need a balanced mix of energy sources,” he said, adding that “for people who want to wake up in the morning and see nuclear and coal disappear from the energy mix in Japan, I think this is becoming more difficult.”

This article originally appeared in the New York Times. © 2022 The New York Times Company

In a time of misinformation and so much information, good journalism is more important than ever, and by subscribing, you can help us get the story right.

subscribe now

Photo gallery (click to enlarge)

Sources 1/ https://Google.com/ 2/ https://www.japantimes.co.jp/news/2022/04/28/business/japan-lng-energy-bet/ The mention sources can contact us to remove/changing this article

What Are The Main Benefits Of Comparing Car Insurance Quotes Online

LOS ANGELES, CA / ACCESSWIRE / June 24, 2020, / Compare-autoinsurance.Org has launched a new blog post that presents the main benefits of comparing multiple car insurance quotes. For more info and free online quotes, please visit https://compare-autoinsurance.Org/the-advantages-of-comparing-prices-with-car-insurance-quotes-online/ The modern society has numerous technological advantages. One important advantage is the speed at which information is sent and received. With the help of the internet, the shopping habits of many persons have drastically changed. The car insurance industry hasn't remained untouched by these changes. On the internet, drivers can compare insurance prices and find out which sellers have the best offers. View photos The advantages of comparing online car insurance quotes are the following: Online quotes can be obtained from anywhere and at any time. Unlike physical insurance agencies, websites don't have a specific schedule and they are available at any time. Drivers that have busy working schedules, can compare quotes from anywhere and at any time, even at midnight. Multiple choices. Almost all insurance providers, no matter if they are well-known brands or just local insurers, have an online presence. Online quotes will allow policyholders the chance to discover multiple insurance companies and check their prices. Drivers are no longer required to get quotes from just a few known insurance companies. Also, local and regional insurers can provide lower insurance rates for the same services. Accurate insurance estimates. Online quotes can only be accurate if the customers provide accurate and real info about their car models and driving history. Lying about past driving incidents can make the price estimates to be lower, but when dealing with an insurance company lying to them is useless. Usually, insurance companies will do research about a potential customer before granting him coverage. Online quotes can be sorted easily. Although drivers are recommended to not choose a policy just based on its price, drivers can easily sort quotes by insurance price. Using brokerage websites will allow drivers to get quotes from multiple insurers, thus making the comparison faster and easier. For additional info, money-saving tips, and free car insurance quotes, visit https://compare-autoinsurance.Org/ Compare-autoinsurance.Org is an online provider of life, home, health, and auto insurance quotes. This website is unique because it does not simply stick to one kind of insurance provider, but brings the clients the best deals from many different online insurance carriers. In this way, clients have access to offers from multiple carriers all in one place: this website. On this site, customers have access to quotes for insurance plans from various agencies, such as local or nationwide agencies, brand names insurance companies, etc. "Online quotes can easily help drivers obtain better car insurance deals. All they have to do is to complete an online form with accurate and real info, then compare prices", said Russell Rabichev, Marketing Director of Internet Marketing Company. CONTACT: Company Name: Internet Marketing CompanyPerson for contact Name: Gurgu CPhone Number: (818) 359-3898Email: [email protected]: https://compare-autoinsurance.Org/ SOURCE: Compare-autoinsurance.Org View source version on accesswire.Com:https://www.Accesswire.Com/595055/What-Are-The-Main-Benefits-Of-Comparing-Car-Insurance-Quotes-Online View photos