Strategies by Business
Domestic Electricity Business
Power Generation & Sales
1 Overview of the Kyuden Group 2 Value Creation Story 3 Strategy and Performance 4 Creating Value through Business 5 A Foundation for Creating Value 6 Data Section
Table of
Contents 27
KYUDEN GROUP INTEGRATED REPORT 2023
Domestic Electricity Business ~Power Generation & Sales~
Executive Director,
Energy Service Headquarters
Masaru Nishiyama
Using changes in the business
environment as an opportunity
for greater growth through
carbon neutrality
We aim to achieve our management vision of "providing more prosperous,
comfortable living to become our customers’ No. 1 choice" and 75円 billion
in ordinary income from the Domestic Electricity Business (50% of the 150円
billion consolidated ordinary income target for 2030) by providing a stable
supply of environmentally-friendly energy and energy services that meet the
diverse needs of our customers.
Power Generation· Top-level ratio of non-fossil fuel power sources among major Japanese power companies (obtained SBT initiative* certification, the first for a
major Japanese energy company)· Both a cost competitive and stable supplier thanks to stable nuclear power operations and a well-balanced energy mix
Retail· Offering rate plans and services that use non-fossil fuel source certificate· A customer base built on close ties to the local community with 50 sales offices throughout Kyushu
Energy Trading & Supply-Demand Coordination· Optimized procurement and sales operations in both fuel and electricity markets based on trends in demand for retail and wholesale electricity
■しかく Vision for the Future
■しかく Strengths· Despite posting an ordinary loss for FY2022 for several reasons, including the
impact of a time lag from fuel cost adjustment due to an increase in the cost of
fuel and a reduction in the utilization of nuclear power plants, we expect to see
a dramatic improvement in profitability for FY2023 due to an increase in nuclear
power station utilization and a favorable change in the impact of the time lag
from fuel cost adjustment system· Ensured maximum supply capacity through the coordinated operation of
our nuclear, thermal, pumped-storage and other power generation facilities,
achieving a stable supply of electricity throughout the year, including the
summer and winter months when supply and demand is tight
Ordinary Income
2021 20252.671.5*2022(72.4)*752030
(Billions of Yen)(FY)(Entire Domestic Electricity Business)
*Excluding the delayed effects of fuel cost adjustments
(133.4)75■しかく FY2022 Assessment and Progress*: (SBT: Science Based Targets)
International joint initiative to verify and certify that greenhouse gas emission reduction targets set by companies are based on science in order to achieve Paris Agreement targets
FY2030 Management Targets· Total electric power sales of 120 billion kWh (incl. overseas)· Permanent pursuit of a reasonable price for electricity· Reduce supply chain GHG emissions by 60%
(Reduce by 65% for domestic business (compared to FY2013))· Contribute to the electrification of Kyushu
(Household: 70%; Commercial: 60%)
FY2025 Forecast· Total electric power sales of 105 billion kWh (incl. overseas)
The Kyuden Group is robustly moving forward with efforts centered on Carbon
reduction/decarbonization in power sources and Promotion of electrification
as movements toward achieving carbon neutrality accelerate both in Japan and
overseas.
In March 2023, we were the first major Japanese energy company to obtain
Science Based Targets (SBT) certification, confirming that our initiatives are in line
with the standards of the Paris Agreement.
Regarding Carbon reduction/decarbonization in power sources we will make
the greatest use of nuclear power as a price competitive base load power source,
which includes positioning renewable energy as a primary power source, with
safety as our highest priority and the understanding of local communities as a
prerequisite.
In addition, since thermal power is an adjustable power source and necessary for
the maximum introduction of renewable energy, we will work to not only reduce
CO2 emissions through high-efficiency operations but also move forward with
introducing carbon-free fuels, such as hydrogen and ammonia.
Turning to Promotion of electrification, we will expand sales by providing energy
services that meet customers’ needs and changes in the social environment,
including promoting all-electric homes, encouraging the use of EVs, and actively
attracting companies using the strengths of our power mix.
We will also take on the challenge of achieving carbon neutrality. As a corporate
group that leads the way in decarbonization, the Kyuden Group will not only
achieve its 2030 earnings targets but also generate even greater growth through
opportunities provided by changes in the business environment.
Strategies by Business
1 Overview of the Kyuden Group 2 Value Creation Story 3 Strategy and Performance 4 Creating Value through Business 5 A Foundation for Creating Value 6 Data Section
Table of
Contents 28
KYUDEN GROUP INTEGRATED REPORT 2023
■しかく Business Environment ■しかく Business Strategies
■しかく Efforts to Create Corporate Value
Main relevant materiality
Growth rate
Income
Cost of capital
Corporate value
(economic value) = −
Efforts to address materiality
(1) Maximize short-term opportunities
(2) Expand medium to
long-term opportunities
(3) ReduceriskBy promoting the stable supply of
electricity and the low-carbon or
decarbonization of power sources,
we aim to maximize the value of
electricity itself and to promote
electrification, ultimately working
towards achieving our profit
targets.
· Stable power supply
Our Domestic Electricity Business has been providing a stable supply of electricity. However, considering recent fuel price hikes and the increasing prices in
the wholesale electricity market, the importance of stable supply is further emphasized. We will do our utmost to ensure a stable power supply by taking an
agile approach to procuring fuel in response to market movements, maximizing our use of nuclear power and its advantages in terms of energy security, and
adjusting our thermal power plant maintenance schedule to ensure adequate supply capacity during periods of heavy load.
· Promoting carbon neutrality
In response to society’s need for decarbonized sources of power, we will strive to make renewable energy a primary power source by promoting its
development Group-wide.
Thermal power generation plays an important role as an adjustable power source to maximize the adoption of renewable energy, and as such, we will push
for greater efficiency and the use of carbon-free fuels. Alongside these efforts to provide lower carbon intensity and decarbonized sources of power, we will also
trade the nonfossil value generated by our non-fossil power sources, promote electrification across all parts of society, engage in face-to-face sales to make the
most of our direct contact with customers, and develop proposals for renewable energy rate plans based on the growing need for decarbonized electricity.· Increasing expectations from society
regarding the importance of stable
power supply· Advancement of electrification· Growing customer needs for low
carbon intensity or decarbonized
electricity due to accelerating global
efforts to become carbon neutral· Increasingly large factories, such as
in the semiconductor sector and other
fields are locating in the Kyushu region· Volatility in the fuel, wholesale
electricity, and foreign exchange
markets· Increased investment expenditures
and costs related to lower carbon
intensity and decarbonized power
sources· Decrease in opportunities for thermal
power generation due to expanded
adoption of renewable energy· Unplanned power supply outages· Changes in regulations related to
electric utilities
Opportunities
Risks
Leading the Way toward a Decarbonized Society
Implementing Continuous Improvements in Energy
Services
Strengthening Governance1) Maximize short-term
opportunities
(Increase profit)· Optimize fuel and electricity procurement and sales operations based on market trends· Maintain safe and stable thermal and nuclear power station operations by consistently carrying out daily inspections
and periodic self-inspections· Develop renewable energy Group-wide to make renewable energy a primary power source· Provide rate plans and services that meet the growing needs for decarbonized electricity· Promote electrification through the expansion of points of contact with customers and individual proposals to customers
in all fields· Develop a state-of-the-art low CO2 emission LNG combined-cycle power station
(Hibiki Power Station expected to begin operation in FY2025)3) Reduce risk
(Lower the cost of capital)· Hedge against the risk of market volatility in fuel prices and exchange rates by trading derivatives· Use transition finance to achieve carbon neutrality, such as through the introduction of LNG-fired thermal power stations· Develop a response to multiple energy mix scenarios, taking into account national energy policies and other factors2) Expand medium to
long-term opportunities
(Increase growth rate (future
growth expectations))
Leading the Way toward a Decarbonized Society
Implementing Continuous Improvements in Energy
Services
Strengthening Governance· Collaborate on the development of hydrogen and ammonia supply chains and establish co-firing technology
(consider collaboration with Yara International, the world’s largest ammonia chemical company)· Enter the aggregation business* that leverages distributed energy resources, such as massive battery storage*: Business that provides various services, including those necessary for the effective use of renewable energy, by bundling
distributed energy resources, such as battery storage and EVs
Related pages P43 P44 P46 P47 P59 P61
Strategies by Business
Domestic Electricity Business
Power Generation & Sales
Leading the Way toward a Decarbonized Society
Implementing Continuous Improvements in Energy Services
Strengthening Governance
1 Overview of the Kyuden Group 2 Value Creation Story 3 Strategy and Performance 4 Creating Value through Business 5 A Foundation for Creating Value 6 Data Section
Table of
Contents 29
KYUDEN GROUP INTEGRATED REPORT 2023
■しかく Vision for the Future
■しかく Strengths· The transmission and distribution business accounted for 14円.1 billion of the
Domestic Electricity Business’ ordinary income· Used technologies and other assets cultivated by Kyushu T&D and Group
companies to promote such efforts as demand generation activities utilizing all
points of contact throughout our work, the creation of new services and businesses,
and participation in the Overseas Business to achieve carbon neutrality
Ordinary Income
2021 20252.671.5*2022(72.4)*752030
(Entire Domestic Electricity Business)
*Excluding the delayed effects of fuel cost adjustments
(133.4)75(Billions of Yen)(FY)■しかく FY2022 Assessment and Progress
Ordinary revenue rose 18.5% over the previous year to 711円 billion on account of growth in
wholesale electricity sales accompanying an increase in purchases from renewable energy
sources, growth in imbalance-related revenue, higher unit prices of adjusting subsidies
related to the supply-demand adjustment market, and growth in the final guarantee supply
Ordinary expenses increased 17.6% over the previous year to 696円.9 billion due to an
increase in imbalance and final guarantee supply-related expenses and an increase in
purchases from renewable energy sources
Reliable Operation of Transmission & Distribution Facilities
Supporting Kyushu’s Power Supply· Transmission lines: 11,223 km, distribution lines: 144,198 km· Substations: 653· Internal combustion power stations: 29· Interconnected renewable energy: 15,820 MW
World-class Electricity Quality· Power outage frequency: 0.15 times/household
(0.04 times/household: excl. disasters such as typhoons)· Power outage duration: 115 mins./household
(3 mins./household: excl. disasters such as typhoons)
Kyushu Electric Power Transmission and Distribution Management Philosophy
We will deliver power to Kyushu and revitalizing society
With a mission of providing a stable, efficient supply of electricity, we will contribute to customers’ prosperity and solutions to social problems
Trust
Evolution
Co-creation
We will become Japan’s leading infrastructure company through our technological capabilities
and digital transformation
We place the greatest value on the trust of stakeholders
We anticipate change and autonomously transform the organization
We create greater value by leveraging diversity
Purpose
Value
Vision
Domestic Electricity Business ~Transmission & Distribution~
Toward a rapid and radical
organizational transformation
through technological
capabilities and DX
Our business environment is undergoing major changes, and thus we must respond
to such social problems as achieving carbon neutrality, reinforcing resilience, aging
facilities, and introducing a new wheeling fee scheme (revenue cap system) based
on these considerations, as well as expand our business domains to generate
growth.
At this time of massive changes in the business environment, we newly formulated
a Kyushu Electric Power Transmission and Distribution Management Philosophy in
April 2023 as a foundation for undertaking autonomous and stable management.
This management philosophy incorporates the desire to expand business activities
that emphasize the values of trust, evolution, and co-creation based on the purpose
of "delivering power to Kyushu and revitalizing society" while aiming to become
"Japan’s leading infrastructure company through our technological capabilities and
digital transformation."
We recognize the need for a quick launch of a fundamental organizational
transformation to achieve the Vision in our management philosophy, and we will
promote initiatives that combine our core technological capabilities (disaster
recovery capabilities, technical capabilities for network infrastructure construction
and maintenance, and technical capabilities related to supply/demand and system
operation for greater use of renewable energy) and digital transformation (DX).
President and Chief Executive Officer,
Kyushu Electric Power Transmission and
Distribution Co., Inc.
Takeshi Hirowatari
Strategies by Business
Domestic Electricity Business
Transmission & Distribution
1 Overview of the Kyuden Group 2 Value Creation Story 3 Strategy and Performance 4 Creating Value through Business 5 A Foundation for Creating Value 6 Data Section
Table of
Contents 30
KYUDEN GROUP INTEGRATED REPORT 2023
■しかく Business Environment ■しかく Business Strategies
■しかく Efforts to Create Corporate Value
Main relevant materiality
We are making the following efforts to achieve the Vision in the Kyushu Electric Power Transmission and Distribution Management Philosophy.
· Efforts to prevent another information leak
Recognizing the seriousness of the loss of society’s trust in us as a general transmission and distribution company, we are working to prevent this type of incident from ever occurring again
and to regain the trust of society.
· Achieve a balance between stable power supply and lower costs
We will steadily work to balance the provision of a stable power supply, which is our basic mission, with lower costs.
· Build a next-generation power transmission and distribution network to achieve carbon neutrality
In order to achieve carbon neutrality, we will move forward with creating a next-generation network to maximize Kyushu’s renewable energy potential.
· Generate demand and increase earnings using our technological capabilities and assets
We will take on the challenge of generating demand and expanding business domains using the technologies and other assets accumulated by the transmission and distribution business and Group companies.
· Strengthen our business foundation
We value the trust of our stakeholders above all else, and while autonomously transforming our organization, we will continue to create higher value.· Expansion of renewable energy and
generation of demand to achieve
carbon neutrality· Introduction of a new wheeling
fee scheme to secure capital for
investments· Advances in AI, IoT, and other digital
technologies· Information leaks· Gradual decline in demand for
wheeling services· Progressive aging of facilities· Increasing severity of natural
disasters
Opportunities
Risks
Leading the Way toward a Decarbonized Society
Implementing Continuous Improvements in
Energy Services1) Maximize short-term
opportunities
(Increase profit)· Upgrade and improve the efficiency of maintenance and installation work by utilizing new technologies and promoting DX· Secure a stable power supply through efficient facility formation and maintenance2) Expand medium to
long-term opportunities
(Increase growth rate (future
growth expectations))
Leading the Way toward a Decarbonized Society
Implementing Continuous Improvements in
Energy Services· Build a next-generation power transmission and distribution network to fully utilize the potential of renewable energy· Develop demand generation activities (promoting electrification, attracting companies, etc.) utilizing all points of contact
throughout our business operations to achieve carbon neutrality· Create new businesses and promote the Overseas Business by utilizing our proprietary technologies and assets, and by
strengthening cooperation amongst Group companies
Implementing Continuous Improvements in
Energy Services
Strengthening Governance3) Reduce risk
(Lower the cost of capital)· Fundamentally strengthen internal controls to ensure neutrality and reliability· Aim for efficient facility formation through streamlining, etc. in light of slowing growth in demand· Maintain and update supply facilities in an efficient and appropriate manner, including measures to prevent aging· Strengthen internal and external collaboration aimed at quickly restoring power and sharing information after outages
Related pages P45 P46 P60
Growth rate
Income
Cost of capital
Corporate value
(economic value) = −
Efforts to address materiality
(1) Maximize short-term opportunities
(2) Expand medium to
long-term opportunities
(3) ReduceriskStrategies by Business
Domestic Electricity Business
Transmission & Distribution