Japan’s electricity industry suffers huge losses from nuclear to fossil switch

What is the financial impact of Japan’s switch from nuclear to fossil on Japan’s electricity industry?

Japan’s electricity operators switched from profits to huge losses

What is the financial impact of Japan’s switch from nuclear to fossil on Japan’s electricity industry?
Answer: Japan’s electricity operators switched from about US$ 10 billion/year combined net profits to US$ 20 billion/year losses – far more dramatic than the impact of the Lehman shock. – Selected graphics below in this blog, and detailed analysis in our report on Japan’s electricity and energy industry.

annual net income of Japan's electricity operators
annual net income of Japan’s electricity operators

Electricity operator losses may drive innovation

Losses are caused by high costs of fossil fuels and additional generation capacity brought online, and drive innovation, by forcing operators to look for new solutions to time-shift demand such as smart grids, and smart meters.

net margins of Japan's electricity operators
net margins of Japan’s electricity operators

Electricity sales revenues were affected much more by the Lehman shock than by switching from nuclear to fossil
The figure below shows combined sales revenues of Japan’s 10 regional electricity operators. Sales were strongly affected by the industrial downturn after the Lehman shock in September 2009, and have recovered since. There is no strong effect of the Fukushima disaster and nuclear -> fossil switch on electricity sales:

US$ 200 Billion/year = combined annual income of Japan's electricity operators
US$ 200 Billion/year = combined annual income of Japan’s electricity operators

Because Japan’s electricity operators have monopoly status in their regions, their financials are mainly affected by the economic status of their regions. All were affected dramatically on the sales side by the Lehman shock. This figure also shows that Japan’s electricity industry has been very static for many years. Japan’s Governments recent energy strategy provides for liberalization – executing this strategy will be the challenge.

More in our report on Japan’s electricity sector.

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