Summer blackouts loom for Japan's economic heartland

TOKYO (Reuters) - Japan’s economy may not feel the harshest blow from this month’s disasters until summer, when surging power demand could spark a new round of power blackouts in Tokyo and its neighbouring prefectures which account for 40 percent of the country’s GDP.

Tokyo Electric Power Co, Asia’s biggest power utility, lost about 20 percent of its operating thermal and nuclear power generation in the earthquake and tsunami that struck northeast Japan on March 11, and is unlikely to get enough back online to meet its usual levels of peak demand in the summer.

More outages, following the rolling blackouts in the immediate aftermath of the disaster, would force factories, shops and offices to close, while making it difficult for many workers to commute and keeping would-be consumers at home.

“It’s going to be nip and tuck,” said Sam Perry, senior investment manager of Pictet Japanese Equity Selection Fund.

“If we have a cool summer that will be fine. But if we don’t you are going to see brownouts, you are going to see an issue with supply.”

Tokyo Electric has said it would likely be able to secure 54 gigawatts of supply by summer, up from around 35 gigawatts now, as it restores some of the damaged thermal plants and brings on other plants that were mothballed or down for maintenance.

But even if it can reach its target, that would still fall short of the 60 gigawatts it would typically need to meet peak summer demand.

“In particular in the areas TEPCO serves, users are expected to see power supply falling short of demand substantially during summer,” the Institute of Energy Economics of Japan said in a report on Tuesday.

“Industry, offices and homes will all have to step up their power conservation efforts and we call on the government to consider how to curb demand, given the possibility of tight supply conditions continuing for a long time,” it said.

BIGGEST RISK

The magnitude-9.0 earthquake, Japan’s biggest on record, and the tsunami it triggered knocked out 5,800 megawatts (MW)of thermal power that was in operation at three big Tokyo Electric power plants.

It also shut its two Fukushima nuclear plants, with about 9,100 MW of capacity including units that were shut for maintenance, and the accident that followed may well render the plants unusable after the release of radioactivity.

The thermal power units that are coming back online are helping, but may not be enough.

“It is certainly better than it was. It was looking like it could be a lot worse, but things are coming back online,” said Pictet’s Perry.

“But I think the biggest risk that we face for GDP and overall economic growth is that they are stuck with rolling brownouts or blackouts come the late summer months.”

Tokyo Electric also will be unable to rely much on other power companies for help.

Tohoku Electric Power Co, which usually sells one-third of its power to Tokyo Electric, was also hit hard by the disaster, and is unlikely to be able to supply extra power to its Tokyo-based neighbour for several months, said Satoshi Manabe, research director at the Japan Electric Power Survey Committee.

The Tokyo utility is also unable to get much surplus power from its peers in the undamaged western part of the country, which operate with a different power frequency in Japan’s fragmented system.

The 50 hertz frequency in eastern Japan and the 60 hertz of the west, adopted during the Meiji era more than a century ago and formally instituted at the end of World War Two, would be hugely expensive to unify, given different standards for electric motors and appliances.

“The capacity for linkage between the west and the east is only 1,000 MW. It will take at least two to three years to double or triple that capacity even if there is a will to do so,” Manabe said.

Tokyo Electric resumed rolling blackouts on Tuesday, the first in four days as the capital returned to work after a three-day holiday weekend.

While customers have responded by shutting off escalators, lowering lighting and cutting back business hours, the utility has said the outages, affecting about 3 million customers at a time although so far sparing central Tokyo, could continue until the end of April.