5 Reasons a Return to Nuclear Energy May Be Japan’s Only Option
Four years after the Fukushima meltdown, Japan is finally eyeing a return to nuclear power.
To be sure, some, if not most of Japan’s 54 nuclear reactors will remain offline permanently. But the ruling Liberal Democratic Party is crafting a proposal that could lead to nuclear power reclaiming about 20% of Japan’s electricity market.
It is hard to imagine such a revival. Nuclear power made up just under 30% of the country’s electricity generation before the catastrophic tsunami hit in 2011. Now it is at 0%. Strict new safety standards and strong public opposition will likely keep many of the reactors on the sidelines.
But the ruling party is pressing ahead. In mid-March, the Nuclear Regulatory Authority (NRA) gave the go-ahead to Kyushu Electric Power for upgrades to its Sendai nuclear power plant, removing a hurdle for the plant’s return to service. Kyushu hopes to power up the reactor by June. More approvals could be forthcoming, particularly if the Liberal Democratic Party gets its way.
Assuming that Prime Minister Shinzo Abe is able to muscle through his proposal to bring nuclear back, what would that mean for Japan?
1. Imports of LNG, Coal, and Oil down. Japan is massively dependent on imported energy. It is the world’s largest LNG importer, second largest importer of coal, and third largest importer of crude oil. If Japan managed to ramp up nuclear power to 20% of its electricity, it would be able to slash its purchases of fossil fuels dramatically.
2. Weaker Economics for Energy Exporters. Japan’s sharp increase of fossil fuel consumption for power generation after Fukushima raised international prices, particularly for LNG. Spot LNG cargoes in Asia – the so-called JKM marker – spiked, selling for more than three times the price of natural gas found in the United States. The JKM marker has since come down both because more LNG supplies have come online and due to the collapse in oil prices. A return to nuclear power will obviate the need for elevated imports of LNG, keeping JKM prices from returning to their highs of 2011-2013. That will cap the market for LNG exporters around the world, pushing many LNG export projects into the red – from Western Canada, to the U.S. Gulf Coast, to Australia. LNG will be a major loser of Japan’s nuclear restart.
3. Trade deficit and electricity rates down. In the three years following Fukushima, Japan spent $270 billion on coal, oil, and LNG imports, a 58% increase over what it otherwise would have spent had its nuclear fleet remained online. That forced Japan to run a trade deficit for the first time in 30 years. Japan’s trade balance went from a $65 billion surplus in 2010 to a $112 billion deficit three years later, owing mostly to higher fossil fuel imports. That also translated into higher electricity prices. Japan’s electricity rates increased by 30% for industry and 20% for residential homes, respectively. Nuclear power can help reverse the ballooning trade deficit and rising electricity costs.
4. Greenhouse Gases. The loss of nuclear power has taken a toll on Japan’s climate posture, as Japan’s greenhouse gases hit a record in 2013. In the absence of nuclear power, Japan is planning on building a lot more coal plants. It has backtracked on its commitment to reduce greenhouse gas emissions. That could change if nuclear power plays a larger role in the future. More nuclear power generation would mean burning through a whole lot less coal, oil, and natural gas. That would significantly help keep a lid on Japan’s greenhouse gas emissions.
5. Going Against the Public. Still, despite all the positives that would come from bringing its nuclear reactors back online, nuclear power is horrifically unpopular in Japan at this point. A strong majority of the public opposes turning back to nuclear power, with some opinion polls showing as much as 60 percent of the country opposes restarting any reactors. If Prime Minister Shinzo Abe succeeds in reviving the nuclear industry, he will need to steamroll a very skeptical public.
Due to the destroyed reactors at Fukushima along with several others that have been mothballed because of inadequate safety or high costs, only 43 reactors out of the original 54 have the potential to be switched back on. Of that amount, in all likelihood, only a few will see a return to action. In a 2014 report, Reuters projected that fewer than one-third of Japan’s reactors would be able to pass new safety rules or, “clear the other seismological, economic, logistical and political hurdles needed to restart.” That means Japan may fall far short of Prime Minister Abe’s goal of meeting 20% of the country’s power needs from nuclear power.
Originally written for OilPrice.com, a website that focuses on news and analysis on the topics of alternative energy, geopolitics, and oil and gas. OilPrice.com is written for an educated audience that includes investors, fund managers, resource bankers, traders, and energymarket professionals around the world.
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