The renewed mandate Japan’s Prime Minister Shinzo Abe received from voters in the snap election in December will have big implications for the Japanese energy industry. Abe is set on re-starting closed nuclear reactors – and scaling back renewables subsidies. A recent report from the Institute of Energy Economics in Tokyo backs him up, saying that “renewable power generation capacity has increased too rapidly”. But a majority of Japanese are still against nuclear power, writes Alex Forbes, editor of World Energy Focus, a publication of the World Energy Council.
Shinzo Abe’s decision to call a snap election in December paid off with a decisive victory, renewing the mandate of the ruling coalition. Having framed the poll as a referendum on his economic revitalisation programme, dubbed “Abenomics”, Abe saw his Liberal Democratic Party (LDP) win 291 of 475 seats in the lower house, while the junior coalition party, Komeito, won 35. Crucially, this meant that the coalition held onto the two-thirds majority needed for the lower house to pass laws without recourse to the upper house. This renewed mandate leaves Abe in a strong position for the coming four years, with big implications for the energy industry. The most important is that Abe strongly supports re-starting closed nuclear reactors.
Surveys tend to show that more people are against nuclear re-starts than for them
Until the events at Fukushima in March 2011, it was inconceivable that Japan would today have no nuclear power generation capacity online. Japan’s 54 reactors were then providing 30% of the nation’s power – a vital contribution, in terms of cost, self-sufficiency and reduced greenhouse gas (GHG) emissions. Now, with all reactors closed, pending safety reviews and approvals from the new Nuclear Regulatory Authority (NRA) and local government, the country is more than 90% dependent on energy imports.
Despite impressive energy conservation efforts on the part of Japan’s people and businesses, imports of fossil fuels rose to offset the loss. With oil at over $100/barrel and liquefied natural gas (LNG) priced on the basis of linkage to oil, the nation’s energy bill rocketed. In December 2014 Japan recorded a 30th straight monthly trade deficit, despite a plummeting yen.
It now looks likely that two reactors at the Sendai nuclear power station, owned by Kyushu Electric Power Company, could re-start in the first half of this year. The NRA concluded in September that the reactors conformed to new safety standards. In November, the local government of the region that hosts the power station and the Kagoshima Prefecture governor agreed to re-starts. Final NRA approval is expected within a few months.
How many more reactors will follow and over what timescale is a question addressed in a report recently published by the Institute of Energy Economics, Japan (IEEJ) – entitled Economic and Energy Outlook of Japan for Fiscal Year 2015 (FY2015, which begins at the start of April). The authors – Yanagisawa Akira, R. Ikarii, S. Iwata, I. H. Hwang, K. Tomokawa, Y. Shibata and K. Ito – have formulated four scenarios that project what the future might hold.
In the “Nuclear Mid-Level Case”, the two Sendai reactors and another seven re-start by the end of FY2015. These nine reactors operate for an average period of six months, generating 44.4 TWh during the year. This compares with the 288.2 TWh that the nuclear industry generated in FY2010.
A key bottleneck in getting reactors re-started is the level of expertise and the number of staff that the NRA is able to deploy to conduct the complex and time-consuming engineering studies required for safety reviews and approvals. In the “Nuclear High-Level Case”, the authors assume that the NRA expands its staff and rationalises plant examination procedures, based on its experience to date, reducing the impact of the regulatory bottleneck. A total of 20 reactors start up by the end of FY2015, operating for an average of seven months and generating 95.8 TWh during the year.
The “Nuclear Low-Level Case” illustrates just how much uncertainty surrounds the question of nuclear re-starts. In this scenario only the two Sendai reactors start up towards the end of 2015, generating a negligible 1.0 TWh during the year.
The authors also include what they describe as a “hypothetical reference case”. This scenario assumes that all of the reactors in Japan’s remaining fleet of 48 that still have reasonably long operating lives – 32 in total – come on stream during the year and operate at a load factor of 80%, generating 233 TWh – establishing a theoretical ceiling (effectively not far off what the situation would be now had the events at Fukushima not happened).
The economic impacts of these scenarios are tempered by the oil price plunge and by the relatively low average load factors that the reactors would achieve in their first year of operation. The authors assume an average CIF (cost, insurance and freight) oil price for FY2015 of $67/barrel. Japan is already feeling the benefits of lower oil prices but has yet to feel the full benefit of lower gas prices because LNG prices are linked to oil prices with a three-month lag.
In the mid-level scenario, power generation costs are up JPY3.0/kWh (US¢2.5/kWh) on the 2010 figure of JPY8.2/kWh (US¢7.0/kWh). In the hypothetical case the increment is a much lower JPY1.3/kWh. Oil consumption is down 16.5 Gigalitres (Gl) on 2010’s 232.3 Gl, because demand in the transport sector has been falling and because nuclear electricity would tend to push oil-fired generation out of the mix first. In the hypothetical case, oil consumption is down by 25.1Gl. LNG imports are 14.5 million tonnes (Mt) higher than the 70.6 Mt imported in 2010. In the hypothetical case, they would be 1.5 Mt lower.
“Renewables power generation capacity has increased too rapidly, resulting in a fast burden expansion and turmoil”
Environmental impacts are significant, highlighting the role that nuclear power can play in reducing the overall GHG emissions of electricity generation. In the mid-level case, energy-related CO2 emissions are up 45 Mt on 2010’s 1,123 Mt, while in the hypothetical case they are down 52 Mt. To look at it another way, in the mid-level case, emissions are 2.9% lower than in FY2005, while in the hypothetical case they are 10.9% down. This is particularly significant given that Japan needs to submit its plans for mitigating GHG emissions to the UN Framework Convention on Climate Change by the end of the first quarter of this year, as part of the run-up to the December climate change talks in Paris. Assumptions over nuclear re-starts will make a big difference to what is feasible.
The high level of uncertainty in the IEEJ scenarios is largely a reflection of public opinion in Japan over the role that nuclear power should play in the energy mix of a country prone to earthquakes. Surveys tend to show that more people are against nuclear re-starts than for them. For example, a survey conducted in November by broadcaster NHK, found 57% of those asked against nuclear re-starts and only 32% in favour. However, attitudes have been shifting over time. They are affected by a range of factors, one of which is that electricity bills are significantly higher than they were – and not just because of the nuclear shut-downs. Also significant are the perceived prospects for alternatives to nuclear power.
One of the policy responses to the nuclear power crisis has been a push to promote renewable energy sources, especially solar power. In mid-2012, the previous government introduced feed-in tariffs (FITs) that with hindsight look over-generous – and expensive. The result has been a stampede to develop new projects that has had two significant impacts. One is the cost of the subsidies; the other is the effect on the stability of electricity grids of a sudden surge of intermittent renewable energy sources.
In the IEEJ report, the authors have calculated that: “Cumulative burdens for authorised renewable power generation capacity would be JPY46 trillion (US$390 billion) [over 20 years], equivalent to 11% of electricity rates for households and 21% of those for large industrial users. At the end of FY2015, renewable power generation capacity in operation will reach 50GW.” Most of this will consist of non-residential photovoltaics, so-called “mega-solar”.
The attractions to Japan of boosting renewable energy are clear: they constitute a domestic energy source in a country heavily dependent on energy imports and emit no carbon dioxide, thus potentially providing two solutions as a replacement for nuclear power. But, says the IEEJ report: “Renewables power generation capacity has increased too rapidly, resulting in a fast burden expansion and turmoil.” Not surprisingly, the government has already been taking action to reduce subsidies and curb the rate of expansion.
The issue of grid network stability should not be underestimated either. “FIT contract applications have increased too rapidly in some regions, threatening to destabilise electricity supply,” says the IEEJ report. “Five electric utilities have frozen response to grid connection applications.”
In the very first issue of World Energy Focus (published in July 2014), we ran a Country Focus in which Teruaki Masumoto – Chair of the Japan Energy Association and the nation’s WEC Member Committee – described Japanese energy policy as a “muddle” caused by “a lack of understanding of energy issues”. With his renewed mandate, Abe and his administration have the opportunity to re-start not just some of Japan’s nuclear reactors but the nation’s energy policy.
This article was first published in World Energy Focus, the monthly magazine of the World Energy Council.
World Energy Focus is produced by Energy Post and edited by Alex Forbes. You can access World Energy Focus for free upon registration.