[Analytics] Japan’s post-Fukushima and future energy landscape

The energy sources for generating electricity in Japan have undergone dramatic changes since Tokyo Electric Power Company Holding’s Fukushima No. 1 nuclear power plant suffered core meltdowns after it was flooded by the tsunami in the March 11, 2011, Great East Japan Earthquake. Takamitsu Sawa specially for The Japan Times.

Since 1995, nuclear power has accounted for around 30 percent of the nation’s electricity. But the share of nuclear energy plummeted to 1.7 percent in 2012, and all nuclear power plants across the country were shut down in 2014. What made up for the loss of nuclear power were energy-saving efforts, natural gas-fired thermal power plants and renewable energy.

Utilities in Japan had long been positioned as public service businesses guaranteed regional monopolies. Deeming nuclear power as a quasi-domestic source of energy, the government made it a key pillar of its energy policy to promote the construction of nuclear power plants to increase the nation’s energy self-sufficiency and to reduce per-unit cost of power generation (to prevent power rates from increasing). The power companies, as public service firms, had no choice but to follow the government’s policy.

The government has estimated the unit cost of nuclear power at ¥10.1 per kilowatt-hour (kWh)— lower than any other sources of electricity. Such estimates vary according to the conditions at the basis of the calculations, and anti-nuclear economists charge that the unit cost of nuclear power is indeed much higher. With the decontrol of electricity supply business, the chances are close to zero that the power companies, as ordinary private sector firms, will embark on building new nuclear power plants or reactors, for the following reasons.

First, any future increase in power demand is likely to be minimal, given the nation’s shrinking population. Second, the cost of building a new nuclear power plant has tripled since before the Tepco plant accident due to the additional expense of safety investments needed to obtain approval of the Nuclear Regulation Authority, which was established as a sub-agency of the Environment Ministry after the 2011 nuclear disaster.

Third, the collapse of the myth that nuclear power plants are “absolutely safe” has made it difficult to convince municipalities and residents of the candidate sites into accepting the plants. Fourth, plans to build new nuclear power plants or reactors in other countries — both Western advanced economies and developing countries, except in China and Russia — are making little headway.

Why then are power companies eager to restart their idled reactors? Each of the plants must have cost them ¥300 billion to ¥500 billion to build. Money spent on building them is deemed a “sunk cost” in the sense that the cost has already been incurred and cannot be recovered. In other words, the existing plants can make profits only when they are put back into operation.

The marginal cost of a nuclear power plant (the incremental cost for increasing power generation by 1 kWh) is estimated to be around ¥1. That means a power company can sell what it produces at a cost of ¥1 for the current market rate of around ¥20 per kWh in large volumes if the plant is put back online. It makes sense for the power companies to want to restart their idled nuclear power plants.

Coal — another baseload source of power along with nuclear energy — is also facing strong headwinds. Under the Paris Agreement to combat climate change, which took effect in November 2016, environmental NGOs charge that coal-fired thermal power plants should be eliminated by 2030 — and lash out against Japan for relying on coal for some 30 percent of its power supply. Furthermore, financial institutions, investment banks and government pension funds — in their emphasis on ESG (environment, society and governance) investments — are beginning to curb investments in or lending to companies that rely on coal.

As the world faces the growing threat of global warming, it is becoming nearly impossible to build new conventional coal-fired power plants. There are two ways for coal-fired plants to survive. One is to build next to it a facility that extracts and collects carbon dioxide from the plant’s emissions and bury it underground. The other is to adopt a new system that drastically reduces per-kWh carbon dioxide emissions, such as the integrated coal gasification combined cycle and the integrated coal gasification fuel cell combined cycle. Since it would take at least 10 more years before such technology becomes commercially available, however, little hope can be placed on coal immediately replacing nuclear energy as a prime source of power.

It was natural gas-fired thermal power plants that made up for the loss of nuclear power following the Fukushima accident. Natural gas is the least polluting among fossil fuels, since it emits only 60 percent of carbon dioxide compared with coal. Even so, if the goal of zero emissions by 2050 is to be pursued, natural gas, too, will eventually be forced to exit from the power supply mix.

The principal energy source for power generation in Japan has shifted from hydropower to coal, petroleum, nuclear and natural gas. The global trends for decarbonization call for minimizing the reliance on thermal power. The energy sources free of carbon dioxide emissions are hydropower, nuclear and renewable energy. Japan has nearly exhausted its hydropower sources, while little or no hope can be placed on building new nuclear power plants or reactors. The only alternative left for Japan will be renewable energy, such as micro hydropower, solar, wind, geothermal power, biomass and so on.

Promoting the use of renewable energy has become a worldwide trend. In 2018, renewable energy accounted for 65 percent of power generation in Canada, 39 percent in Italy, 33 percent in Britain, 26 percent in China, 19 percent in France, 18 percent in Japan and 17 percent in the United States.

It was long maintained within the power industry that renewable energy cannot possibly be a main source of power because of its high cost and unstable supply. Yet, many European countries today are relying on renewable energy for more than 30 percent of their total power generation. Germany has adopted a goal of raising the share of renewables to 80 percent by 2050, as part of its efforts to end nuclear and coal power.

The marginal cost of generating power with renewable energy is zero. Once solar panels are installed, it costs nothing to generate electricity. But renewable energy is still deemed expensive because of the high initial cost of installing the panels. It must be remembered, though, that the installation costs have been halved over the past decade.

If storage batteries become less expensive in the future, surplus electricity could be stored in large quantities, covering the problem of supply instability of solar power and ensuring self-sufficient power supply even at night. When power stored in batteries runs out, electricity needs to be purchased from a utility. Utility companies will play the role of backup suppliers.

Seeking to raise the share of renewable energy as close as possible to 100 percent could resolve many problems. It would eliminate the risk of nuclear power plant accidents, reduce carbon dioxide emissions, end concerns over oil price fluctuations and fully decarbonize electric vehicles.

Takamitsu Sawa is vice director of the International Institute for Advanced Studies in Kizugawa, Kyoto Prefecture.

Tags: Japan