Monday, July 8, 2013

Market Forces Rising

Nikkei Shimbun carried an interesting story in mid-June about the evolving role of Tokyo Electric (TEPCO) with the "electric industry village" now that TEPCO is majority owned by the government's Fukushima accident compensation fund.

TEPCO was traditionally the leader of the 10 regional electric utilities.  It was the biggest by revenue, personnel, profit and visibility, and it took the lead on most matters of policy, with the other companies generally following behind and stepping into line.

Recently, however, TEPCO has been different.   It seems that one condition to the (first -- more to come) bailout was that TEPCO act as a positive force for change in the industry, in line with METI/government policies.  Initially, the group of electric utilities became leaderless.  Now, however, others are stepping up, and TEPCO is positively excluded from some of the discussions among the group presidents (which are commonplace, and are conducted via the Denki Jigyou Rengo Kai -- a group housed within the Keidanren Building and formed of the presidents of the utilities.  Needless to say, this group does not support major structural reforms of the industry, and so excludes TEPCO from some of its recent meetings.

How can TEPCO have an impact?  One recent example is through procurement reform.  From planning solar PV projects, we know that the prices we are told for construction of 66kV interconnect lines/towers in Japan is some significant multiple of what it would be in Europe, and the reason seems to be that the work has traditionally been doled out to affiliates/subsidiaries of the utilities (and their friends).

According to the Denki Shimbun July 4, 2013, TEPCO has recently announced that it has reformed its procurement of construction of transmission facilities, implementing a new competitive tender system.  In its first series of tenders, TEPCO saved 30-40% over the prices it would get previously.  Still higher pricing than elsewhere, but a big difference.  And a huge change if it carries over into the amount that we need to pay in planning larger solar PV projects.

Apparently, the other electric utilities are concerned they will be found out as not trying hard enough to obtain market-based pricing, and are struggling how to respond.  ...

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