According to the latest statistics released
from the electric utilities's association, Japan’s electricity consumption in FY 2013 (Apr
2012 – Mar 2013) dipped three years in a row after the earthquake and
subsequent nuclear accident in Mar 2011. While the percentage change relative
to previous year was only -0.4%, the decline was a surprise to many energy analysts
and planners due to various unfavorable factors such as severe weather conditions
and economic growth associated with Abenomics. In addition, the consumption tax
increase this month caused unusual front-load of spending on all kinds of goods
and services at the end of FY 2013, and the reconstruction demand in
earthquake-stricken regions certainly contributed to the increasing activity in
energy-intensive industries such as steel and cement.
Figure 1: Japan's Total Electricity Consumption
(Source: Federation of Electric Power Companies of Japan)
These unfavorable conditions were perhaps
not strong enough to offset more fundamental changes taking place in Japan. One
of such changes is the sustained nationwide energy saving campaign to avert the
electricity shortage after the nuclear accident. Although many argued that the radical
campaign at the expense of comforts and convenience would not remain effective for
long, a survey shows that many consumers have permanently altered the energy
consumption behaviors. Another fundamental shift is demographic transition; the
total population began to decrease gradually around 2008, and the decline has
accelerated in the past few years as a result of fewer births. Lastly,
technology obviously has played a crucial role in curbing the demand. Technological
breakthroughs and improvements in the past decade are finally paying off, and
the rising electric rates may have become a major incentive for the consumers
to accelerate investment on energy-saving devices such as LED light bulb and
energy-efficient air conditioner.
Figure 2: Electricity Saving Campaign Website
(Source: Ministry of the Environment)
The decreasing demand is certainly good
news to avert electricity shortage and curb greenhouse gas emissions. In the
long run, it also has profound policy implications that could trigger fundamental
changes in energy planning. In the past, the electricity demand was assumed to
grow every year, except for when mild weather sustains and/or economic
recession occurs, and utilities have been encouraged to constantly plan and
build new power stations to meet the increasing demand. The forecast is still
made using this assumption, showing upward trend for a foreseeable future (see
graph below), and the electric utilities are planning to build new power
stations, mostly coal-fired plants. For example, the Tokyo Electric Power Company
(TEPCO), the largest electric utility in Japan and responsible for the accident
in Fukushima, projects 5% increase in electricity demand between 2013 and 2023,
and the utility giant is currently soliciting 6GW worth of power developments
under the conditions favorable to coal-fired plants.
Figure 3: Electricity Consumption Forecasts
(Source: Energy Data and Modeling Center for 2010 and 2013 forecast,
Electric Supply Plans from all electric utilities for 2014 forecast)
The problem is that the predictions not
only lack accuracy but also always overestimate the future demand. The current forecast model is mostly determined by macroeconomic factors such as GDP and population
and does not account for efficiency improvement or changes in industrial
structure. This is why the forecasts have been revised downward repeatedly in
the past, and the needs for the new power source are questionable at best. While
electric utilities argue that the planned power stations will be state-of-the-art
and reduce the emissions by replacing inefficient plants built in the 1960s and
1970s, the sustained decrease in electric demand along with the rapid
development of renewable energy and restart of nuclear reactors make them unnecessary
to begin with. Furthermore, the cheap and abundant supply of electricity from
the new coal-fired plants takes away incentives to save electricity, and in
contrast to the utilities’ argument, this could induce more demand for
electricity and cause more air pollution and climate change.
To avoid the devastating scenario, the electric
utilities and policy makers should first and foremost reflect the downward
trend and likely efficiency gains into the forecast. In addition, the utilities
should also adopt so-called Least Cost Planning (LCP) principle, which looks at
not only the costs and benefits of individual projects but also those of
alternatives, including demand reduction measures such as subsidy for consumers
to purchase energy-efficient home appliances. The bottom line is the latest
statistics should be a signal for utility planners and policy makers to take a look
at the fundamental changes and begin to better manage the limited economic and
natural resources.
