As the season grows colder and colder, consumers expect electricity costs to go higher and higher as well. But if negotiations between Tokyo Electric Power Co (TEPCO) and U.S. energy companies go well, this might not be the case in the next few years. By importing shale gas for half the price it pays for liquefied natural gas, rates will not balloon anymore.
TEPCO aims to import 2.4 million tons of shale gas by 2016 from companies such as Cheniere Energy Inc and Sempra Energy, both based in Louisiana, USA. Fuel costs for thermal power generation has been steadily rising, especially after the nuclear power plant meltdown in Fukushima Prefecture. In 2011, TEPCO spent 1.5 trillion yen in importing 24 million tons of LNG, up 45% than the previous year. The consequence of this is an average of 8.46% increase in household electricity rates.
The utility imports LNG mostly from Middle Eastern countries and Australia and Malaysia. Because shale gas is a lot cheaper than LNG, if the deal is reached, it will cost TEPCO only half the price it is currently spending for importing LNG.
Another problem TEPCO might encounter is the lack of a free trade agreement between Japan and the US. Since natural gas is a strategic commodity, Japan will need approval from the US government to be able to import shale gas. The Economy, Trade and Industry Ministry is already working on getting approval through backdoor channels.