Japan’s TEPCO, Tohoku Electric discuss joint grid operations to lower cost

Japanese electric utility companies Tohoku Electric Power Co. and Tokyo Electric Power Company Holdings, Inc. (TEPCO) are considering joint distribution grid operations to lower costs. The companies are looking to form a concrete plan as early as fall.

TEPCO has divided its power distribution, generation and retail operations into different businesses under the holding company. The distribution unit delivers the electricity generated at power facilities to final users such as homes and factories. Besides maintaining a quality power grid with a stable alternating current frequency, the distribution unit also must match power supply and demand. By merging operations of two adjacent grids with the same frequencies, the two companies likely would achieve swift cost reductions.

Tohoku Electric, based in the northeastern city of Sendai, aims to reduce procurement costs via the joint purchase of facilities such as cable and transformer stations. To cope with the increasing amount of highly variable power supplies such as solar and wind, the two companies could jointly tap their hydropower and fossil-fuel facilities, thereby using their infrastructure more efficiently.

TEPCO estimates that forming a national grid from all the power companies in Japan would save nearly 120 billion Yen (US$1.08 billion) in annual costs. The utility will look to share grid operations with other partners beyond Tohoku Electric.

But other power companies are wary of combining their businesses with TEPCO, which needs to find some 22 trillion Yen to deal with costs from the 2011 Fukushima nuclear disaster. Kansai Electric Power, Chubu Electric Power and Hokuriku Electric Power announced in June that they would link their grids, a plan that did not include TEPCO. To ease the concerns of other utilities, TEPCO will call for partnerships without business integration for now.

TEPCO hammered together a new management plan in May. Following the merger of its fossil-fuel generation operations with Chubu Electric in fiscal 2019, the company hopes to integrate distribution operations with other power companies in the 2020s.