Japan Government Reduces Electric Power Charge by Over 80% for Energy-Intensive Industry

The Democratic Party of Japan, Liberal Democratic Party and Komeito arrived at an agreement for amendment of Renewable Portfolio Standard Law of renewable energy including to installation of charge relief measure to energy-intensive industry, such as steel industry on Thursday. Content of amendment is that government reduces electric power charge by over 80% of a company which uses electric power more than prescribed electric power usage by government ordinance. Government aims to minimize reduction of international competitive power and hollowing of Japanese companies. Steel Industry, especially, electric furnace steel makers had been apprehended for the law, while most integrated and electric furnace steel makers’ charge is reduced by amendment.

Three parties search actual condition of electricity use rapidly, hold a council and take action. Electric power purchased price is set by independent organization, and is decided as government ordinance by Ministers of Ministry of Economy, Trade and Industry, Ministry of Agriculture, Forestry and Fisheries, Ministry of land, infrastructure, transport and Tourism, and Ministry of the Environment.

Japanese manufacturing industry’ international competitive power is threatened by electric power shortage and boost of electric power rate due to alternative electric power from atomic power generation.

Traditionally, electric power charge for industry is US$ 0.12 per kilowatt-hour in Japan, but is US$ 0.11 in Germany, and US$ 0.06 in South Korea. Japanese charge is high than other major countries. But Japanese industry must remain in sever international competition. It is apprehended to acceleration of overseas transfer of manufacturing industry and hollowing of industry.

There is possible that Japanese all atomic power generators shut down operation at 54 bases after regular check and stress test by government until April 2012. Short-term alternate means is increased operating rate of heat power plant by LNG and heavy fuel oil when heat power plant by coal’ operating rate is already high. Variable cost is higher heat power plant by LNG than atomic power plant up by 8/22 yen per kilowatt-hour, heavy fuel oil up by 13.46 yen, and up by average 10 yen. Total increased cost becomes at 3.5 trillion yen by shutoff of all atomic power generation.

Japanese integrated steel makers’ electric generating capacity is estimated at about 14 million kilowatt including home generation of electricity, joint thermal power plant and independent power producer. They can cover the needs of electric power by own electric power generation, and are enhancing electric power supply to electric power companies for electric power shortage. But electric furnace steel makers purchase electric power from electric power companies.

Stable and inexpensive electric power is very important for manufacturing industry. One integrated steel maker source said government should allay fear for electric power supply before overseas transfer of manufacturing industry.