Tohoku Electric interviewed by Denki Shimbun
Japan’s fourth-largest electric utility company, Tohoku Electric Power, services 7.6 million people in six prefectures. It has been making a concerted effort to optimize its value chain, from the procurement of fuel to the generation of power, as well as its supply and demand operations and wholesale transactions. Tohoku Electric Power has considered a number of solutions to accomplish this, and in spring last year, it chose PLEXOSTM. Though there were other products that were specialized for electricity demand-supply operations, PLEXOS covers a far wider range of functions, from fuel procurement to power generation and wholesale transactions. This was the deciding factor, and having signed a license agreement with Energy Exemplar in April 2022, they began full-scale use of the solution from the second half of 2022. Tohoku Electric Power became the first power company in Japan to adopt PLEXOSTM.
What problems PLEXOS helps Tohoku Electric Power to solve
The main PLEXOS use case for Tohoku Electric Power is visualizing LNG inventory trends up to a year in advance. LNG is the key to the kind of optimization that Tohoku Electric Power is striving for: it cannot be stored for long, there are storage limits, and spot procurement takes around two months. Timing fuel procurement, and making sure they procure the right amount of fuel, is vital. Yuki Abe, the head of the Business Strategy and Demand-Supply Optimization Department of the Power Generation Company, underscored the power of advanced modeling solutions like PLEXOS to provide information in a short space of time, saying that that’s one reason why ‘PLEXOS has been so valuable.’
‘Market conditions change within a few days, and we miss trading opportunities...There was a need to shorten this period.’
PLEXOS’ results can be seen in just half a day, and the results allow Tohoku Electric Power to create an optimal power generation plan based on previously entered futures prices, generator repair/suspension status, and more. It also displays fuel consumption and inventory transitions graphically. Generation capacity and marginal cost are also quantified. Thanks to the quality of the data PLEXOS provides, Tohoku Electric Power can take a more objective approach to decision-making.
‘Because we make decisions based on data without preconceptions, the accuracy is definitely increasing,’ Abe said.
In a recent interview with Denkishimbun, Kaoru Hijikata, Tohoku Electric Power’s Executive Officer responsible for the optimisation of supply and demand, spoke about the volatility and uncertainty of the energy market, and how PLEXOS is helping.
As Hijikata explained, the introduction of renewable energy into the market, combined with the liberalization of the electricity retail market, has introduced a great deal of ambiguity where there once was certainty. Demand, generation volume and prices have become unknown factors, and without the ability to test assumptions and envision future possibilities, the prospect of continued profitability starts to dwindle. PLEXOS, he said, had the benefit of being tried and tested around the world by a wide range of different organizations in a wide range of conditions, as well as providing a means to look at the energy in the round.
‘The benefit of systematization is the ability to handle an overwhelming amount of information at once,’ Hijikata said. ‘Additionally, since the system may provide answers that differ from human predictions, it broadens our perspective. There are several types of tools for this, but among those that have received positive feedback in direct communication with overseas players, PLEXOS is highly regarded. It is already widely used overseas and has been refined.’
One of the many ways in which PLEXOS has shown its value to Energy Exemplar’s clients worldwide, and a key reason that it has won praise, is by giving organizations the power to make sound decisions amid widespread geopolitical unrest. Pointing to continued volatility, Hijikata added that the kind of advanced modeling of which PLEXOS is capable empowers its users to understand whether they will need to make adjustments in response to global events. The war in Ukraine, whose outcome remains uncertain, destabilized the energy markets when it began in February 2022, driving oil and gas prices to historic highs.
‘We need to know how much shortage there will be if gas does not come from Russia, and how different the impact will be between summer and winter,’ he explained. ‘If the damage is significant based on the results, we will develop individual strategies, such as hedging or alternative measures.’
Tohoku Electric Power has ambitions to use the tool in a variety of other ways in future, such as analyzing which markets to trade in to maximize profits and using simulations to create facility plans and income and expenditure forecasts, and make management decisions. It’s an illustration of the range and power of PLEXOS, and the esteem in which Tohoku Electric Power, like Energy Exemplar’s other clients around the world, now hold it.