Tokyo Electric Power Co. (TEPCO) is currently mulling over plans to cut spending on oil and concentrate power generation from coal-fired plants instead. This plan is in the wake of increasing oil expenditures after the Fukushima nuclear disaster, which caused the government to shut down almost all nuclear power plants in Japan.
TEPCO, which has been reliant on crude and fuel oil to generate the gigawatts of power needed to fill in the gap of the mothballed nuclear power plants, has set targets of bringing down oil purchases by as much as 30%, this according to company statements. The plan would mean that Japan’s biggest utility will either generate or buy 54 percent more electricity from coal-fired plants starting this month. This will result in a reduction of crude and fuel oil purchases by as much as 3.95 million kilometers, according to Osamu Fujisawa, an independent energy expert based in Tokyo. “By establishing new coal-powered plants, thermal power generation costs can be reduced, first by cutting the use of oil-burning units,” said Reiji Ogino, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co. “Japanese government requests to power companies that they lower the rates they charge will encourage movement to coal-fired plants, since coal is a relatively cheap energy source.” TEPCO has already revealed in its plans that 2.6 gigawatts a year will be provided by two new coal-fired plants and electricity bought from Tohoku Electric Power Co.
Since the March 2011 twin disasters, TEPCO’s fuel costs have surged, relying mostly on oil, gas and coal to replace idled nuclear capacity. This month, TEPCO president Naomi Hirose said that the company will do “whatever it takes” to return to profitability and hopes to do so without raising rates for customers. This statement was made because the utility had been operating on an annual loss of 323.7 billion yen (US$3.3 billion) in 2012. This amount was pinpointed from a 13 percent increase in expenses coming from rising fuel prices, and the resulting need to purchase fuel in greater amounts. TEPCO is hoping that the reversion to coal-powered electricity will move the utility on a path back to profitability.
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