::::: Japan electricity industry disruption :::::

10 years of disruption... June 30, 2014

Japan's electricity sector underwent strong disruption of business models over the last 10 years. Switching off nuclear power contributes to this disruption, but our analysis shows that its unlikely to be the root cause!

Then, if its not switching off nuclear power, what is the root cause for Japan's electricity sector disruption?

We believe its a fundamental switch from top-down grid architectures to a distributed, much more localized energy infrastructure with many competing operators, which is happening all over the world.

With eventful general shareholder meetings completed, we have performed a detailed analysis of the financial results of all ten Japanese regional electric power operators, and several other Japanese electricity companies such as J-Power.

Income of Japan's electricity operators peaked around 2005

Japan electricity operator's income peaked around 2005 and has been declining ever since

Disruption of income models

Our analysis of financial results shows that each of Japan's ten regional electric power operators has different circumstances and different results, however overall income peaked around 2004-2005, about ten years ago, and for most operators has been falling continuously for the last 10 years.

The figure above shows that switching off nuclear power generation after 2011 contributes to the financial problems - but it is obvious that it's not the root cause.

You'll find more details in our blog post and our report - we believe that there are several factors for this obvious disruption of Japan's electricity industry:

Japan's electricity industry's business model was and still largely is "cost + profit". In exchange for regional quasi-monopoly operation, Japan's electricity operators enjoyed a business model where they can charge costs + profit to customers. This model did not encourage costs reductions.
Global trends to move from top-down grid architecture to distributed smart architectures including renewables were delayed in Japan, but are expected in the future. Again opportunities for improvements of efficiency were delayed.

Chubu Electric Power as an example

Income of Chubu Electric Power company has been declining since the peak in FY2005

Chubu Electric Power Company as example:

Chubu Electric Power Company (Chuden) supplies electricity for Chubu: Nagoya and surrounding areas. With Toyota, a substantial part of the world economy is located around Nagoya. The figure above shows that Chuden's income peaked around FY2004, about ten years ago, and has been falling almost steadily ever since. Its obvious that switching off nuclear power generation as a consequence of the Fukushima nuclear accident is not the root cause of Chuden's income problems. Chuden is also one of Japan's electricity operators with the lowest ratio of nuclear generation capacity: only about 10% of Chuden's capacity is nuclear generation, and therefore should only affect 10% of profits.

More details:

::: About us :::

Founded in 1996/1997 in Tokyo, Eurotechnology Japan KK focuses on cloud, telecoms, energy and related technologies.
We work on M&A and help foreign companies grow in Japan, we help Japanese companies globalize.

connect with us

Sincerely,

Your Eurotechnology-Japan Team Eurotechnology Japan K. K.