Kansai EPCo and TEPCO Invest in Transmission Assets to Meet Data Center Demand

With the growing spread of AI, there has been a surge in the construction and expansion of data centers in Japan. This is expected to lead to an increase in power demand, prompting efforts to improve power infrastructure. Recent announcements have come from Kansai EPCo, which plans to invest over JPY150 billion to build and expand substations and transmission lines, while TEPCO is also planning additional investment to strengthen the power grid in Chiba Prefecture.

Kansai EPCo’s subsidiary, Kansai Transmission and Distribution, will enhance four substations starting in 2026, including the Nishi-Osaka Substation (Minoh City, Osaka Prefecture) and the Shin-Ikoma Substation (Ikoma City, Nara Prefecture). By completing transformer expansion work at the four sites between 2027 and 2029, the substations’ electricity handling capacity will increase by about 30%. The plans also include strengthening and adding new transmission lines.

Kansai EPCo and TEPCO Invest in Transmission Assets to Meet Data Center Demand — Kansai Electric Power is bolstering four substations around Osaka, including this one in the city of Ikoma. (Kansai Transmission and Distribution)

In eastern Japan, TEPCO’s subsidiary, TEPCO Power Grid (PG), will invest over JPY200 billion by the early 2030s to reinforce the power grid in northwestern Chiba Prefecture, where data centers are increasingly being clustered. The company aims to build two new substations and will also construct and upgrade transmission lines connecting these substations.

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Market Implications of Rising Data Center Power Demand

According to the Organization for Cross Regional Coordination of Transmission Operators (OCCTO), electricity demand from data centers and semiconductor factories nationwide is expected to surge. From an estimated 3.6 billion kWh in FY2025, to 51.4 billion kWh by FY2034 – a roughly 14-fold increase.

However, the construction and expansion of data centers can pose challenges for general consumers. While data center operators bear part of the cost for connecting their facilities to the nearest substation, power companies are responsible for the high-voltage transmission networks that deliver electricity from power plants to substations. These costs incurred to meet the needs of data centers may partially be passed on to general consumers through higher electricity rates.
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The rising number of planned and operating data centers in Japan is driving a sharp increase in demand for related PPA (Power Purchase Agreement) and NFCs (Non-Fossil Certificates) transactions, with significant implications for the Japanese power market.

Shulman Advisory has extensive experience advising clients in Japanese markets, including market entry strategies and market regulation consulting for grid access, NFCs auction and other markets. If you are interested in learning more about our services, please contact us at info@shulman-advisory.com. Kansai EPCo and TEPCO Invest in Transmission Assets to Meet Data Center Demand

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