July 18, 2017

Forecast Highlights

  • Japan will not abandon nuclear energy entirely, and its reactors are slowly restarting. But it will not return to the level it saw before the Fukushima disaster anytime soon, if ever.
  • Japan’s long-standing quest for energy independence will be largely unrealized in the medium term.
  • The trajectory of the country’s renewable energy sources will be a critical source of uncertainty that bears watching in the long run.

More than six years after the disaster at the Fukushima Dai-ichi nuclear plant, Japan is apparently on its way to restoring nuclear energy as one of its biggest sources of electric power. Five nuclear reactors in the country have already been restarted, and a June court ruling cleared the way for two more to open. But 43 of Japan’s 54 original reactors are still offline. Japanese Prime Minister Shinzo Abe, for his part, has promoted a policy of restarts, but he is politically weaker now than at any time since his 2012 return to power. Therefore, it’s worth assessing just how far Japan’s nuclear revival can go, and how it and other factors, such as the rise of renewable energy, may affect Japan’s longtime desire for energy independence.

The Mihama Nuclear Power Plant in the town of Mihama, Fukui Prefecture, about 320 km west of Tokyo.


The Roots of Japan’s ‘Energy Angst’

As the only country in the world to have suffered a nuclear attack, it’s little wonder that a major anti-nuclear movement blossomed in Japan in the aftermath of World War II. At the same time, Japanese nationalists such as former Prime Minister Nobusuke Kishi (Abe’s grandfather) were open to Japan possessing nuclear weapons in the future. In 1968, Prime Minister Eisaku Sato’s “Four Pillars” policy became the compromise that adopted a middle path between these preferences, firmly rejecting weaponization but wholeheartedly embracing nuclear energy.

Of course, Japan’s eventual embrace of nuclear energy was not merely a result of a compromise between domestic interest groups. It was also a logical solution to what John Hopkins University’s Kent Calder has famously called the country’s “energy angst” — the almost complete lack of domestic fossil fuels that has led Tokyo to anxiously search for ways to minimize its dependence on foreign energy exporters. And successive Japanese governments have indeed prioritized energy independence.

But true energy independence is impossible for any modern, globalized economy, let alone one with Japan’s resource constraints. Still, political elites make energy decisions in a national economy, and the results of their actions can shift energy mixes and strengthen or weaken support for certain technologies. In Japan, this dynamic played out first with nuclear energy.

The World’s Nuclear Leader

Japanese leaders of old saw nuclear energy as a path to energy independence. Though nuclear energy couldn’t eliminate the need for importing other fuels entirely, it could greatly reduce it. Moreover, Japan laid out an ambitious roadmap to eventually achieve a closed-cycle solution, which involved reprocessing and then recycling spent nuclear fuel.

Construction of Japanese nuclear reactors began in earnest in the 1970s. By the 1990s, the country’s nuclear capacity had grown considerably, eventually bringing its share of Japan’s electricity production to nearly 31 percent in 2006 — its highest ever. By then, Japan had also developed one of the world’s few full-spectrum nuclear equipment industries. Toshiba, General Electric Co. and Mitsubishi Heavy Industries emerged as global leaders, with international acquisitions and tie-ups further strengthening their positions in the market. By the 2000s, this supply chain involved 10,000 domestic companies, $15 billion in revenue and 80,000 jobs. Eventually the equipment industry began tapping major export markets, targeting places like Vietnam, Turkey, Jordan and India.

Nuclear equipment makers in Japan also formed close alliances with the country’s powerful electric utilities and bureaucrats, forming an influential lobbying group that further cemented nuclear products’ position in Tokyo’s energy strategy. The national energy plan unveiled in 2010 called for building 14 additional reactors to give nuclear energy a 53 percent share of all electricity production by 2030.


When Disaster Strikes

This pro-nuclear environment was the backdrop for the 2011 Fukushima disaster. The meltdown led not only to serious environmental contamination and the evacuation of 100,000 citizens, but also to the revival of a flagging anti-nuclear energy movement. In the wake of major anti-nuclear protests, the government, then led by the Democratic Party of Japan, shut down all 48 of the still-operational reactors (six were disabled at Fukushima). The party also began signaling its intention to dramatically reduce the country’s reliance on nuclear energy. The government revamped its nuclear safety system as well, establishing the Nuclear Regulatory Authority and mandating new safety inspections at all functional reactors.

Houses are swept by water following a tsunami and earthquake in Natori City in northeastern Japan March 11, 2011.

Successive governments led by the Democratic Party of Japan ultimately opened the door to nuclear restarts, and Japan’s Institute of Energy Economics has projected the reopening of 19 reactors by March 2018. But the pace has been slow. Both the Nuclear Regulatory Authority and local governments must sanction any reactor reopening, and opponents always have the option of going to the courts to try to block the process. Though district courts have tended to side with the activists, higher courts have usually reversed the rulings and allowed the reopenings to proceed. The anti-nuclear movement hasn’t succeeded in influencing national elections since the Fukushima disaster, either. In fact, elections have yielded two victories for Abe’s pro-nuclear Liberal Democratic Party.

The safety concerns of nuclear energy have not gone away, however. Several smaller nuclear accidents before and after the Fukushima incident have caused injuries and deaths. Japan recently marked the anniversary of the 2007 earthquake that struck near the Kashiwazaki-Kariwa nuclear plant, nearly leading to a meltdown comparable to Fukushima. Many pro-nuclear voices may claim Fukushima as an exceptional moment that is unlikely to be repeated anytime soon. But the same isolated geography that drives Japan to embrace nuclear energy contains active seismic zones, meaning there’s a significant chance that another similar disaster could occur.

Meanwhile, Japan’s ambitious plans for a closed-cycle nuclear solution have run into serious problems. The breeder reactor at the Monju nuclear power plant, a key part of Tokyo’s strategy, suffered a major accident in 1995 and has had smaller accidents since the Fukushima crisis. It is now slated to be decommissioned. A major reprocessing plant is being built in the village of Rokkasho, but the project’s cost has ballooned to four times the planned amount, and the completion date has been postponed so many times that it is now 21 years behind schedule.

Japan’s nuclear export industry is saddled with challenges, too. Westinghouse Electric Corp. filed for bankruptcy earlier this year. GE-Hitachi Nuclear Energy is struggling financially. And Mitsubishi’s alliance with Frace’s Areva is not in good health after Paris forced Areva into major restructuring.


Renewables to the Rescue?

All of this has raised the questions of whether nuclear energy can regain its original clout in Japanese energy planning, and how far Tokyo can go in easing its energy angst. The answers have become more complex with the rise of renewable energy. Solar and wind power together with nuclear power, in principle, could satisfy most of Japan’s energy needs. Renewables also have the advantage of posing practically no safety hazards to the public. Could they be the answer to Japan’s energy woes?

When it comes to wind power, Japan’s geography doesn’t lend itself to massive capacity. Few large, windy areas are available; those that are rest mainly on the island of Hokkaido and in the Tohoku region of Honshu. Lightning strikes present problems as well, as does fixed offshore wind, thanks to the steep continental shelf off Japan’s coast. Floating offshore wind is more expensive and difficult to establish because of adverse natural conditions such as typhoons and heavy seas.

Solar power, on the other hand, is more promising. Japan was in fact the leader in solar energy production in the 1990s, when the sector was still on the fringes of the global energy industry. The Japanese government passed pioneering alternative energy legislation in 1980. Companies such as Kyocera Corp., Sharp Corp. and Sanyo Electric Co. innovated the manufacture of solar panels, and the government offered incentives for research into and the adoption of solar power. However, as solar power became more prominent in the rest of the world in the 2000s, Japan deprioritized the technology, embracing nuclear power instead.

That changed after Fukushima. In July 2012, the Abe government unveiled a generous program of feed-in tariffs, or fixed rate payments to solar power generators, usually well in excess of wholesale market prices. This led to a major ramp-up in capacity to nearly 43 gigawatts, mostly in the past three years. Solar energy now makes up 5 percent of all electricity production in Japan — equivalent to the output of 13 nuclear reactors. And renewables as a whole, including hydropower, now account for 14 percent of Japan’s total electricity production.

As of this year, solar prices in global auctions have dropped to 3-6 cents per kilowatt-hour (kWh). That’s equal or very close to the cost of coal power in many parts of the world, and well below the cost of Japanese nuclear power (9 cents per kWh). Japan does not yet have a reverse auction process, an established way to achieve lower costs that would mean more renewable watts for the dollar. But offering a feed-in tariff has and continues to be an effective way to quickly scale up Japan’s solar capacity, though payments are steadily coming down as solar power becomes a commodity just like any other energy source.

Still, solar power faces barriers in Japan, too. Perhaps unsurprisingly, geography is a major one. The large amounts of land needed for centralized solar projects are most available on the island of Hokkaido, but demand is concentrated on Japan’s main island of Honshu. The intermittent and variable nature of solar electricity means that grid integration and balancing is crucial to any national plan to make solar energy a large part of electricity production. But Japan’s grid is highly fragmented, divided into 10 regional utilities with isolated grids that have low capacities for transmission among them. The western and eastern parts of Japan even run on different frequencies.

Substantial investments in these areas will be required before solar power can hope to be a significant electricity source in Japan. Even then, lower-cost storage solutions will still be needed, along with further deregulation in the electricity sector. With advancements in battery technologies and the rise of smart grids, the dynamism of solar power will make it a critical sector to watch. It has some clear limitations, but given technological shifts and a major grid revamp, it may emerge as a dominant component of the Japanese electricity mix in the long run.


What About Fossil Fuels?

After the Fukushima disaster, Japan increasingly relied on fossil fuels to meet the resulting shortfall in electricity supplies. Mothballed coal plants were revived, and liquefied natural gas and oil imports climbed. Declining prices of energy commodities since 2014 have certainly helped ease fuel import bills for Tokyo. But ultimately, fossil fuel imports simply do not align with Japan’s drive for energy independence.

LNG and coal are projected to make up 27 and 26 percent, respectively, of Japan’s electricity mix in 2030, according to the country’s 2015 energy plan. Gas-fired plants have the additional utility of providing peaking power capacity while Japan ramps up its solar output to eventually do the same. Meanwhile, transforming transportation with electric vehicles or hydrogen is a long-term project, though the first fuel cell-powered car was rolled out by Toyota in 2014. In the medium term, there is no escaping the fact that fossil fuels will continue to be an important source of Japanese energy.


The Politics of It All

Underlying these technological and governance challenges in the quest for energy independence is politics, particularly concerns for the future of Japan’s ruling Liberal Democratic Party. Abe and his pro-nuclear party have been instrumental in advocating nuclear restarts, winning elections despite public opinion that has turned decidedly against nuclear power since the Fukushima disaster. Recently, Abe has faced setbacks caused by various influence-peddling scandals, as well as the loss of the Tokyo elections to the charismatic Gov. Yuriko Koike. But neither of these things has impacted his nuclear plans. Even the Liberal Democratic Party’s few but prominent anti-nuclear voices, such as ex-Prime Minister Junichiro Koizumi and former party head Taro Kono, are outnumbered by those supporting nuclear power. It’s also worth noting that nuclear energy has been a potent issue in local elections, leading to anti-nuclear wins in prefectures such as Niigata, even if the same is not necessarily true in national elections. (Even Koike supports nuclear power.)

Meanwhile the Democratic Party, the successor to the Democratic Party of Japan, has grown far weaker and has alternately supported and opposed nuclear power. The Komeito party, a Liberal Democratic Party ally in the national parliament, is anti-nuclear in principle. But in practice, it has acted more as a brake on the most ambitious plans for nuclear expansion, rather than urging a complete change in the status quo. The Japanese Communist Party, for its part, has been consistently opposed to nuclear power, but the party has essentially no influence in Japanese politics at the national level.

Abe’s 2015 energy plan estimated that nuclear power would account for 20-22 percent of Japan’s net electricity generation in 2030, far from the 53 percent projected by the Democratic Party of Japan government in 2010. It also predicted that renewables would make up some 22-24 percent. Assuming this goal is achieved, the plan would rely on fossil fuel imports for more than half of Japan’s electricity and most of its transportation needs. So, Japan’s quest for energy independence will remain largely unrealized until 2030. In the years beyond, breakthroughs in renewables such as lower-cost storage and scalable hydrogen solutions could change the country’s outlook dramatically.

Interestingly enough, the Abe government has allocated quite a bit of funding to the renewables program. Apart from the generous solar feed-in tariff, the program presently includes firm support for hydrogen fuel cells, greater energy efficiency gains, biomass and geothermal power, and smart grids. It appears that the Japanese government, led by Abe, is deeply committed to both nuclear and renewable energy. And these are the areas where the future of Japanese electricity lies.


— Six Years After Fukushima, Japan Tries to Quell Its Energy Angst originally appeared at Stratfor.