The Ministry of Economy, Trade and Industry has obligated power utilities to carry out Grid Separation in 2020 by revising Electricity Business Act.
Prior to this, TEPCO implemented a company split in April 2016, and placed three business companies, or Power generation, Grid and Sales, under mother company.
The greatest impact of split is that the power plant is separated from grid and it will be exposed to free competition. In fact, construction plans for coal-fired power plants and high efficiency LNG, which are regarded as inexpensive power sources, are being planned in various places. With such construction plans in the electric power industry in which there is no hope for rapid growth of demand, there is a big concern of excessive competition of power supply in the 2020s (From that concern, a power plan to announce the withdrawal has also begun ).
As it is exposed to competition, power producers will make a construction plan with the most emphasis on economic rationality. Rather than looking at national energy security and the impact on the environment, it is natural for companies to place emphasis on return on investment in facilities.
However, the era when cost recovery was guaranteed by price regulation was over. Risk of threatening investment recovery is rather rising.
The investment recovery period of the thermal power generation equipment is generally about 15 years. In the meantime, there is no guarantee that the power competitiveness will not change due to introduction of environmental taxes, soaring LNG prices, restart of nuclear facilities, etc. It can easily be imagined that the operation status of thermal power generation is greatly influenced depending on the operation of nuclear power plant, and it was a phenomenon which really occurred in the past.
In the past, it was possible to enter the power generation market after signing a purchase agreement for 10 to 15 years with an IPP contract with a power utilities. Recently, however, most of the announced power generation facilities construction plans have entered the market without preparing such risk avoidance measures.There is no guarantee that the power supply will continue for a long period of 10 to 15 years. In addition, the contract period of industrial consumers for power purchase is one year (at most 2 to 3 years). The purchasing side can freely transfer to new retailers holding relatively competitive power supplies in a short period of time.
There is a big gap between the investment collection period of power generation and the customer’s electric contract period. Looking at these risks, it seems that the power development plan published in the 2020s has very serious concerns today. It is inevitable to raise the risk of individual power supply and it is better to think that there will be additional withdrawals.