falls on Tokyo
economist.com -From The Economist print edition,
FUKUSHIMA, ROKKASHO AND TOKYO, 17 July 2003
Original address: http://www.economist.com/business/displayStory.cfm?story_id=1928646
Japan's electricity industry is in turmoil. This
may have a big impact on the world's energy markets
WALK into the Ministry of Economy, Trade and Industry
(METI), and you will find most of its lifts shut down, the corridors
dark, and—although it is hot and humid—the air conditioners
barely working. During the lunch hour, office lights are switched off,
and on rainy days (this is Tokyo's rainy season, so there are plenty)
bureaucrats can be seen straining to catch what little light comes through
the windows as they work through their break. Sometimes offices get
so dark that their solar-powered calculators stop working.
The ministry, which oversees the electricity industry,
is gearing up for a power shortage that could leave Tokyo facing unprecedented
blackouts this summer, when demand for electricity reaches its peak.
The reason: Tokyo Electric Power (Tepco), the world's largest private
electricity company, had to close its 17 nuclear reactors after it was
caught last September falsifying safety records to hide cracks at some
of its power plants. Three have now restarted, but it is unclear when
the local authorities will allow others to do so.
As these nuclear reactors usually supply almost
half the electricity for the region centred on Tokyo, Tepco reckons
that it may fall short of expected demand by almost 10% this summer.
It is begging the public to conserve energy. Companies such as Honda,
Nissan Diesel and Toshiba have agreed to shift some of their factory
operations to weekends or nights. Big shops, banks, brokers and even
the Tokyo Stock Exchange are using dimmer light bulbs and setting air
conditioners to higher temperatures. Workers face a sticky summer, though
some bosses are letting them take off their ties. Sadly for bureaucrats
at METI, its minister has decided that, as they also oversee the tie
industry, they will not be allowed to do this.
Less well-known is that this summer's sweat may
be a mere prelude to much worse problems. The electricity industry faces
challenges that could undermine Japan's entire nuclear-power policy.
Japan may then have to increase sharply its imports of oil, coal and
liquefied natural gas, causing a surge in demand in world energy markets.
With few natural resources of its own and one of the lowest energy self-sufficiency
ratios among industrialised countries, Japan is already the second-biggest
importer of oil and the biggest importer of natural gas. To illustrate
the scale of what is involved, Kazuhiro Sakuma, an analyst at Daiwa
Securities SMBC, reckons that, if Japan closed its 53 nuclear reactors
and switched entirely to oil (in practice, it would probably switch
also to coal and gas), oil imports would rise by 30%.
Japan's nuclear reactors were built as part of an
environmentally “clean” energy policy developed after the
oil shocks of the 1970s. (They may also play a covert security role,
giving Japan an option, subject to constitutional change, to use nuclear
material for military ends.) Critics now liken this policy to “building
a house without a toilet”, for there is no coherent strategy for
disposing of spent nuclear fuel.
Nuclear power plants are running out of capacity
to store the stuff. Japan used to send spent nuclear fuel to France
and Britain to be reprocessed. But the latest contracts with these countries
have ended, and the government has no plans to send more fuel abroad.
It would face big political obstacles were it to try. America—which
has considerable clout with Japan's government—might oppose the
shipping of radioactive material halfway across the world on security
grounds. Instead, the government is pinning its hopes on Japan's first
big reprocessing plant, now being built by Japan Nuclear Fuel (JNFL),
a consortium including nine of Japan's ten electricity firms, in Rokkasho,
a village on the northern tip of mainland Japan.
Some nuclear power plants have only enough storage
space for another two or three years' worth of spent fuel. Strict regulations
bar transfers of spent fuel from one plant to another. The earliest
a temporary storage facility can be built is 2010. Only if the reprocessing
plant starts operating in July 2005, as JNFL insists it will, can nuclear
plants avoid prolonged closure.
But as one bureaucrat in METI's Agency for Natural
Resources and Energy admits, that is unlikely. Delays could last months,
if not years. The ¥2.1 trillion ($17.5 billion) reprocessing plant
is already six years behind schedule. Although most of the construction
is now finished, only the first of four stages of testing has been completed.
And this has raised more than 1,000 problems that need to be fixed.
Worse, the third stage of testing, using uranium,
requires approval from local authorities. Yet JNFL recently discovered
that one of the three pools used to store spent nuclear fuel, built
by Hitachi, is leaking. Kenji Furukawa, the mayor of Rokkasho, insists
that, until all leaks are repaired, the uranium test cannot go ahead.
Even then, the reprocessing plant may be unable
to open unless the politically charged problem of what to do with the
plutonium produced during reprocessing is solved. Normally this is combined
with reprocessed uranium to make mixed oxide (MOX) fuel. In principle,
this could be used in two ways. The one that would use up the most plutonium
would be to deploy it as fuel in a fast-breeder reactor. Alas, Japan's
efforts to develop the world's first commercial fast-breeder reactor
were halted earlier this year by a court ruling criticising “serious
and unforgivable mistakes” by the government over safety regulations
at a prototype plant.
The second option would be to use MOX as a substitute
for enriched uranium at existing nuclear plants. But this again requires
local approval, and already some regional governments are refusing to
allow the use of MOX on safety grounds. This follows a series of scandals,
ranging from Tepco's cover-up and government failures to disclose safety
problems, to data falsification by British Nuclear Fuels over tainted
MOX shipped back to Japan, to a disaster when two workers died after
using buckets to load a uranium-processing plant. Eisaku Sato, the governor
of Fukushima, where Tepco generates 25% of its electricity, says his
prefecture has scrapped all plans to permit the use of MOX fuel.
Add to this the vexed, and so far largely unaddressed,
question of the cost of reprocessing, should it ever happen, and of
disposing of the radioactive waste it generates. High-level radioactive-waste
disposal costs alone, now estimated to be ¥3 trillion, could balloon,
while other, as yet unquantified, disposal costs could add tens of trillions
of yen more, declares Tetsunari Iida, a director at the Institute for
Sustainable Energy Policies. Some electricity companies are said to
be so concerned that they are privately reluctant for the reprocessing
plant to start operating.
Japan's electricity prices are already the highest
in the industrialised world, even without these extra costs. The outlook
is further complicated by the government's plans to deregulate the market
to lower prices, so as to help other industries become more competitive
globally. Last month, parliament approved a bill that will deregulate
electricity for all large and medium-sized users by 2005. Gas, steel
and oil companies are entering the market, putting pressure on incumbents.
Deregulating the market, but at the same time pushing nuclear power,
which has high start-up and looming, unquantified back-end costs, makes
no sense, says Hiroaki Fukami, a professor at Keio University.
If the incumbent electricity companies, as generators
of nuclear power, have to foot the bill, they will pass these costs
on to households, the only part of the market that will not be deregulated—resulting
in a public outcry. Yet imposing some of the burden on new entrants
would lead to price hikes across the board, defeating the purpose of
One solution would be for the government to follow
most others and nationalise the nuclear industry, or at least underwrite
its long-term costs. Whether Japan's politicians will do this is debatable.
So far they seem to be in denial that there is even a problem, at least
in public, and, for the most part, in private as well. That they have
already temporarily shut a large part of the country's nuclear industry
once is a sign that they may be unable to avoid further temporary, or
even permanent, closures in future—with nasty consequences all