Japan’s Saibu Gas has called off plans to start construction of an LNG-fired power plant, saying the 1,600 MW project was “postponed” – some observers say indefinitely. The decision was made after Kyushu Electric hesitated to sign a power purchase agreement.
Kyushu Electric, Japan’s fourth-largest power company, had been targeted as one of the key buyers for the power output of Kyushu’s proposed LNG-to-power project. Toshio Sakemi, Saibu Gas’ president said project would be “pushed back” but declined to disclose an updated timeline for future construction works.
Initially, construction of the four-unit CCGT was scheduled to start in spring 2018 at a site adjacent to an LNG import terminal. Saibu Gas had planned for the first 400 MW power unit to start operation during the 2020 fiscal year, followed by the second during 2021, the third in 2024 and the fourth in 2026.
The Hibiki LNG, built by a Saibu Gas subsidiary, started operations in November 2014 and could cater for berthing and discharge of large LNG carriers due to its two 180,000 cubic metre storage tanks.
Nuclear restarts derail gas power projects
When Saibu Gas first announced plans for its Hibiki LNG-to-power project in early 2014, all of Kyushu Electric’s nuclear power plants were all shut in line with the total nuclear lockdown following the 2011 Fukushima disaster.
By now, Kyushu Electric has resumed operations at first reactor of the Sendai nuclear power plant in September last year followed by the second reactor unit in November.
Moreover, competition is intensifying in the Japanese power market following the full liberation of the country’s retail market in April. Kyushu Electric Power has lost some of its customers to new market entrants – another reason for it to walk away from ambitious new gas power projects.
Japan’s gas use for power gen falls
Gradual restarts of Japan’s nuclear power plants now dampen the need for gas-fired power generation. For the 2015/16 financial year, the nuclear plant utilisation rate rose to 2.8 percent, marking the first nuclear power generation in two years. Starting with units 3 and 4 of the Takahama nuclear power plant in the Fukui prefecture Japan’s Nuclear Regulation Authority (NRA) has approved a number of restarts that are gradually being carried out.
As a consequence, Japanese utilities in early May reported the first drop in gas use for power generation in six years. According to figures from the Federation of Electric Power Companies of Japan, LNG consumption for power generation continues to fall, down 3.9% year-on-year. In total, utilities generated 73.74 billion kilowatt-hours of electricity in March, a 3.4% decline.