Corporate Japan strives to beat power crunch


  • Economy
  • Friday, 27 Sep 2013

With no sign of the post-Fukushima power-crunch abating, most organisations plan to save more energy and looking for alternatives, including solar energy – Reuters photo


TOKYO: Automatic doors are blocked at offices, subway escalators are disabled and much of the headquarters of Japan's biggest utility sits in semi-darkness - all evidence of how a 2½-year power crunch has forced companies to re-think energy use.

As expensive imported fuel has sent corporate electricity prices surging by more than a third since the Fukushima nuclear disaster, firms have scrimped and employees have grown used to sweaters in the winter and open collars in the summer.

Adding to the pressure, Japan is without nuclear power for only the third time since 1970 after the last of its 50 nuclear plants was closed for routine maintenance on Sept 15.

"Electricity fees will rise further and further," said Yukio Noguchi, a professor at Waseda University in Tokyo. "We are just at the beginning of the problem."

Before the massive 2011 earthquake and tsunami that wrecked the Fukushima nuclear plant and prompted the shutdown of the industry, nuclear power supplied about 30% of the energy needs of the world's third-biggest economy.

With no sign of the post-Fukushima power-crunch abating, most organisations plan to keep responding just as they've been doing: by cutting costs and trying to save more energy, a Reuters survey shows.

A few companies are seeking to exploit the high electricity prices, but for most it's a matter of soldiering on.

About two-thirds of the firms in the Reuters Corporate Survey say they will increase their energy conservation efforts and a similar number will cut costs to combat continuing rising power costs.

Some larger firms are making efforts to generate their own power, and high energy costs are also a factor in the growing trend of production shifting overseas.

 

TRADE DEFICIT

The Reuters poll of 400 big Japanese companies was conducted from Aug 30 to Sept 13; 262 firms answered the question on electricity countermeasures.

Conservation efforts have affected life across the country, with rolling blackouts in Tokyo shortly after the disaster and offices adjusting their thermostats to cut air conditioning bills and reduce heating costs ever since.

Power consumption by large industrial users last fiscal year was down more than 5% from before the disaster, trade ministry data shows. Overall, annual power demand in Japan was around 6% lower in the 12 months to March than it had been in the year to March 2011.

Electricity fees make up a small portion of total costs for Japanese firms, but any rise is a heavy burden due to the slim profit margins many companies face.

Japan's No 2 convenience store chain, Lawson Inc, has cut electricity use by 30% since roughly the time of the March 2011 tsunami, by switching to LED light bulbs, adding solar panels and adopting other energy-saving measures in many of its outlets.

Electric utilities themselves have spent billions of dollars importing petroleum, gas and coal, driving Japan to a trade deficit for the 14th straight month in August, the longest such streak since 1979-1980.

Power conservation measures imposed out of necessity in March 2011 have become routine. Fukushima operator Tokyo Electric Power Co has lights dimmed throughout much of its main office in Tokyo, while on the city's subway some stations have cut the number escalators operating.

Yet corporate efforts to wring every bit of production out of pricier electricity can only achieve so much in a resource-poor country already long famous for its energy efficiency.

Power costs for businesses have risen by just over a third since the disaster, according to the Bank of Japan, and many expect them to keep growing due to increased use of costly thermal fuel, higher import costs from a weaker yen and the future costs of decommissioning nuclear plants.

 

AT THE LIMIT

A few companies are benefiting from the power squeeze.

MXVR Co, which counts Toyota Motor Corp and Sharp Corp among its clients, says sales have more than doubled since the disaster for its machine that helps reduce power use by regulating the voltage from supplied electricity.

Companies' attempts to simply use less energy "have reached their limit, and for further cuts, companies will have to adopt energy-conservation equipment", said Daisuke Sato, president of the unlisted MXVR. "Higher electricity prices have been a tailwind for us."

He said firms have room to cut power use by an additional 40-50% through the wider adoption of energy-efficient technology.

Andrew DeWit, a professor at Rikkyo University in Tokyo, said that since the tsunami, "there's been a realisation among the big players – Toyota, Hitachi, shipbuilders – that there's a huge opportunity in power."

A Toyota subsidiary is among more than 100 companies that have registered with the government to be power producers and suppliers, joining many major manufacturers in selling excess electricity produced in-house, at rates often lower than the those of the regional power monopolies.

Since the 2011 disasters, Toyota has installed several gas co-generation units and increased its solar-energy generation capability, using the power produced at its facilities as well as selling it to a wide range of nearby businesses – including a factory for Bain Capital-owned restaurant chain Skylark and a paprika grower.

Sacrifice remains the default response among Japanese firms to the crunch, but about one-fifth of the manufacturers in the Reuters survey are considering on-site power production or storage, something many Japan firms have adopted recently.

In July, Honda Motor Co Ltd added a gas co-generation unit at its Yorii factory 80km (50 miles) northwest of Tokyo. Along with plans to use the excess heat the plant produces and other conservation measures, Honda expects the steps to cut energy use at the plant by 30%.

Still, Waseda's Noguchi said the only fundamental solution to high electricity costs was to shift operations abroad – a choice that a fifth of the manufacturers in Reuters poll are considering.

"Energy conservation will not be enough to offset the rising prices, because often the costs required to undertake it will not be enough to justify the benefits" – Reuters 

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