Japan utilities welcome LNG power auction quotas, citing investment certainty
Japan's utilities have welcomed a government proposal to set dedicated quotas for new liquefied natural gas-fired power plants under its long-term decarbonization power source auction (LTDA), saying the move would improve investment visibility.
"We view the clear reaffirmation of LNG-fired power's importance and the establishment of a support framework as highly significant, particularly for improving investment predictability," Nozomu Mori, chairman of the Federation of Electric Power Companies of Japan, told reporters on Friday.
A 2025 report by the Organisation for Cross-regional Coordination of Transmission Operators estimated Japan could face a 16 gigawatt power shortfall by 2040 if electricity demand rises to 1,100 TWh, even after replacing all the country's ageing thermal power plants.
To address the potential gap, the Ministry of Economy, Trade and Industry (METI) in June proposed building or replacing 39 GW to 55 GW of LNG-fired generation capacity by 2040. Thermal power plants typically take around seven years to build.
METI plans to secure the capacity through the LTDA starting in the current fiscal year, with annual auction volumes of about 5.5 GW to 8 GW.
Large-scale construction or replacement of LNG-fired plants under the LTDA, which guarantees a fixed level of revenue, could also support LNG demand in the world's second-largest buyer of the fuel, even as Japan makes efforts to expand renewable energy and restart nuclear reactors.
In its latest energy plan, METI forecast Japan's annual LNG demand would decline to 53 million to 61 million metric tons by 2040 from 66 million tons in 2023 if emissions-reduction targets are met. However, under a risk scenario in which decarbonization technologies develop more slowly, LNG demand could rise to 74 million tons.
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