IT substitution for energy leads to a resilient structure for a survival strategy of Japan's electric power industry

Abstract

The dramatic surge in information technology (IT) around the world, and an evolving global economy, are subjecting firms to megacompetition. This is the case, particularly in Japan's electric power industry, where the power rate is one of the highest in the world; hence it is noted that Japan's industry has lost its price competitiveness in the world market, resulting in stagnation of production, hence leading to stagnation in power demand. In addition, an increase in trends of customer's preferences and the variety of participants in the power supply race, have put electric power companies at the mercy of customers with alternative supply sources. Given that uncertainty with respect to energy security, as well as power generation and distribution systems safety increases, as strongly cautioned by the recent blackout in the US and Canada, a dramatic conversion of existing strategies would be indispensable for electric power companies. A conversion from a high-demand-elasticity dependent, supply structure to a resilient structure is required. While the former aims at constructing a high-demand-elasticity supply structure, based on the myth of high growth of demand, the latter aims at maintaining profit, while minimizing the elasticities of factors with high uncertainty, such as energy resources and costly capital investment linked to a fluctuating power demand. This paper demonstrates the significance of IT substitution for energy through consortia structure, thereby utilizing IT spillover and leading to resilience and leveraging consortia structure as Japan's electric power industry survival strategy. An empirical analysis using Japan's nine leading electric power companies over the last quarter century has been conducted.